Small MW allocation not viable, lament gas firms

Matthew le Cordeur

Cape Town – Independent power producers (IPPs) said the requested 3 126 MW of gas-fired power generation is not enough to make it a viable investment in South Africa.

Speaking at the Gas Options meeting in Cape Town, Aldworth Dzunisani Mbalati, executive chairperson of Delta Gas, said scale remains a critical component of the gas IPP programme.

The Department of Energy is procuring 3 126 MW worth of gas-fired power generation to go live between 2019 to 2025.

Mbalati said lessons from the successful renewable energy IPP programme suggested that the department won’t hand out the full 3 126 MW to one company to diversify its risk.

He said government would likely split it up between three companies. If 1 000 MW is then given to each company, it won’t be “sufficient to justify boiler issues and the level of investment, unless there is another industry to supply to”.

Energy Minister Tina Joemat-Pettersson hinted at an increase on Tuesday, saying that there “may be (an) increase; I am not saying it will increase, but maybe".

Paddy Padmanathan, CEO of Acwa Power, agreed that the size of programme “is possibly too small”.

“We will actively participate in this programme and we will see very competitive pricing coming through,” he said.

“We are all complaining it is too small, but we can also see that there is a 50 000 MW capacity need going forward. It won’t be fulfilled in renewables and coal.”

Padmanathan warned that regulations could easily be abused during the procurement process.

“The private sector is very efficient in most things it does,” he said. “It is also efficient at abusing rules, so the (department must not) change rules mid-process.”

He advised the government to set the rules and administer them rigorously and then to only change them ahead of the next stage.

Padmanathan also said it was a huge challenge working with state-owned entities. “(They) are challenging because they don’t deliver on time or to rules,” he said.

“If rules of engagement are not well defined and the risks are not mitigated, then we won’t participate,” he said.