Siseko Njobeni
27 August 2008
Johannesburg — MINING giant Anglo American yesterday said it had found negotiations with Eskom on co-generation extremely difficult, resource intensive and time-consuming.
Given SA's low reserve margins, co-generation - the production of electricity using waste heat from industrial processes - has been touted as one of the quicker ways to alleviate pressure on the national electricity grid.
Eskom was at present evaluating bids for co-generation projects that could see about 5000MW added to the national grid.
But speaking at a conference on the mining industry's response to the national electricity supply shortage yesterday, Ian Morison, head of engineering at Anglo American technical division, said companies considering co-generation faced barriers.
"Bilateral negotiations with Eskom for a fair price to ensure bankability (of co-generation projects) are proving to be extremely difficult, resource intensive and time-consuming, irrespective of the obvious need for investment in electricity generation."
Morison said companies lacked the resources to pursue opportunities.
He said co-generation was not the core business of large power users "already having to manage severe internal skills shortages. Complexities of integration into production process are often underestimated.
"Significant front-end loading and detailed engineering are required, versus matching an off-the-shelf power station to the fuel spec for a green power station."
Morison said there was an asymmetry of risk uptake between Eskom, as the future buyer of the electricity, and the co-generators.
He said Eskom's commercial and legal processes were inflexible, with requirements not necessary for projects financed directly from the balance sheets of co-generators.
In its report on load shedding, released earlier this year, the National Energy Regulator of SA (Nersa) highlighted Eskom's unsuitability to procure additional capacity from the private sector.
Nersa recommended the procurement of new private generation capacity, from independent power producers and that co-generation projects be managed and co-ordinated centrally by a professional entity independent of Eskom.
Commenting on the power supply shortage and initiatives to alleviate it, Morison said there were key areas of concern that needed government intervention. These, he said, included road repairs, the award of mining rights, skills shortages and the streamlining of environmental impact assessments (EIAs). "EIAs are a nightmare," he said.
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