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Cogeneration Framework201132762055

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Cogeneration Framework201132762055 Powered By Docstoc
					 60th AMEU Convention




Eskom’s Pilot National Cogeneration
                 Project


Rob Higgo, Project Development Department
Stuart van Zyl, Industry Association Resource
                    Centre
               16 October 2007
    Contents

•   Background
•   Strategic issues
•   The need for a “pilot project”
•   Objectives & Principles of the pilot project
•   Eskom’s “Pilot Project”
•   What is Eskom Offering
•   Consideration of Connection & Billing Issues
•   Network considerations




                                                   2
  What is Co-generation?

• Co-generation: a source of electrical power that
  is a co-product, by-product, waste product or
  residual product of an underlying industrial
  process.
   – Type I: projects utilizing process energy which would
     otherwise be underutilized or wasted (e.g. waste heat
     recovery).
   – Type II: Primary fuel based generation projects which
     produce other usable energy in addition to electricity
     (e.g. Combined Heat and Power projects).
   – Type III: Renewable fuel based projects where the
     renewable fuel source is a co-product of an industrial
     process (e.g. use of bagasse and/or forestry waste
     from the sugar and paper industries).

                                                         3
   The Eskom challenge
• During June 2006, Eskom’s Exco challenged the organisation to
  develop new cogeneration opportunities in South Africa
   – A target of 900MW1 was established, to be achieved within a 5 year
     window, ending March 2011
• In so doing, Eskom would:
   – Support NERSA’s initiative to established a cogeneration
     framework (guidelines) that will promote new cogeneration
   – Pursue and actively procure cogeneration opportunities that make
     good business sense
• An Eskom cogeneration workgroup was established internally to
  support the initiative
• Eskom has worked jointly with the EIUG workgroup, NERSA
  and others in industry to meet its objectives



   1) The target is not definitive, and actual cogeneration developed will be dependent on market response
                                                                                                             4
   Strategic Considerations

• Cogeneration has potential to deliver capacity “quickly”
• Cogeneration may provide electricity at lower cost than
  conventional generation (not all Cogeneration is cheaper)
• Cogeneration potentially reduces investment in networks
  and supports distributed generation
   – Transmission cost savings
• Cogeneration may improve industrial efficiency and can be
  environmentally friendly e.g. Combined Heat and Power
  (CHP)
   – Deferred investment at (possible) lower cost
   – Overall efficiency gains
• Environmental benefits
• Improved reliability and quality of supply
• Employment / BEE opportunities

   Eskom’s strategic considerations closely mirror those of the EIUG and Industry
                                                                                    5
   The need for an Eskom “pilot” project
• NERSA’s    guidelines,   regulations  and   implementation
  programme may take some time to conclude
• Window of opportunity exists between now and approximately
  2012
    – Eskom’s first new base load power plants due to come on line
      during 2012 to 2013
• The initial “pilot” will allow both Eskom and NERSA an
  opportunity to gauge the cogeneration market in SA
    –   Quantity and size of the market offering
    –   Cogeneration mix, location, profile
    –   Pricing of cogeneration options being proposed
    –   Timing of potential cogeneration projects
• Results from the “pilot” project will feed into the current NERSA
  guidelines and thinking
• Lessons learned will be carried forward into the long term model
  for SA


                                                                 6
   Objectives & Key principles
• Develop the necessary tender documentation to attract new
  cogeneration
• Obtain NERSA support and approval for the process
• Develop a standard contract for cogeneration developers which
  is bankable (PPA)
• Have a transparent evaluation process to evaluate tender
  submissions
• Implement the process in a timely fashion
• Develop a ceiling price which will be approved by NERSA
  beyond which contracts will not be offered




                                                             7
   Objectives & Key principles
• Transparency
   –   Well defined and clearly understood process
   –   Known implementation parameters
   –   Equitable treatment across projects
   –   Determination of qualifying projects
• Simplicity
   – Procedural simplicity for projects to achieve regulatory approval
   – Minimisation of transaction negotiations
   – Minimisation of transaction costs




                                                                    8
    What is Eskom offering?
• An opportunity to attract and contract new cogeneration
  into the market
• Requirements:
   – new build or re-commissioned plant of nett capacity >1MW.
   – Must be co-generation not renewable generation that
     requires renewable energy grants (i.e. must be cost effective
     as a stand alone co-generator)
• “Cheapest bids” from technically and commercially
  qualified bids win contract provided that they do not
  exceed the ceiling price set by Eskom’s avoided cost
  model
   – there are modifiers for siteing and timing (first on line)
     advantages
   – Maximum 15 year contracts are offered
• A standard contract (PPA) was developed                for   the
  Cogeneration projects which include inter alia
   – Payment profiles aligned with energy needs: support TOU /
     peaking periods; Winter vs. Summer etc.
                                                                9
   Progress to date
• Pilot project is essentially a tender process.

     Activity                                                Target date
1. Expression of interest – Pre qualified 125 projects     29 June 2007*
for approximately 5000MW
2. Request for Tender(RFT)
    Approval to issue draft PPA to market               27 September 2007*
    Issue RFT and draft PPA to pre-qualified              4 October 2007*
      bidders
    Bidders clarification conference                     7 November 2007
    Updated draft PPA released to bidders                 November 2007
3. Bid submission                                         28 February 2008
4. Bid evaluation completed                                  April 2008
5. Final recommendation on PPA’s to be offered               April 2008
6. Approval to sign PPA’s obtained from Eskom                June 2008
Board
7. Succesful bidders notified                                June 2008

  * Activities completed


                                                                              10
   Progress to date
• Summary of EOI’s received: Co-generator Types

     Combination
     of Types, 16,
         13%
                                                         Waste Energy

Renewable        Type III, 22,         Type I, 44, 35%
Energy              18%




                             Type II, 42,
                                34%



     Generation with 2ndary Process Energy
                                                                    11
   Progress to date
• Summary of EOI’s received: Generator net output




                                                    12
        Contractual vs Physical Flow*

                                                  Eskom Generation
    Physical flow

    Contractual flow


                                  Eskom Wholesaler                   Eskom Tx Network

                                                ESAa (Meter 1’ +
                                                2’)

                                        Retailer                         Dx Network
      PPA (Meter 2)               (Eskom Dx / Munic / RED)           (Eskom Dx / Munic / RED)


                                                ESAb (Meter 1 + 2)                  Meter 1



                    Meter 2


Cogeneration                                           Industrial Load



* Within embedded generation networks
                                                                                                13
                         Contractual vs Physical Flow*
                      Physical flow

                      Contractual flow                            Eskom Generation

Eskom Wholesaler
purchases Eskom
energy generated
at existing Eskom
                                                  Eskom Wholesaler                   Eskom Tx Network
 generation tariff

                                                                ESAa (Meter 1’ +
Eskom Wholesaler                                                2’)
 “purchases” gross
 energy generated                                       Retailer                         Dx Network
                       PPA (Meter 2)              (Eskom Dx / Munic / RED)           (Eskom Dx / Munic / RED)
at Meter 2 at cogen
     PPA tariff
                                                                ESAb (Meter 1 + 2)                  Meter 1



                                      Meter 2


                 Cogeneration                                          Industrial Load



                * Within embedded generation networks
                                                                                                                14
                          Contractual vs Physical Flow*

                                                                   Eskom Generation
                       Physical flow

                       Contractual flow


       Eskom                                       Eskom Wholesaler                   Eskom Tx Network
 Wholesaler bills
     for energy
     summating                                                   ESAa (Meter 1’ +
                                                                 2’)
Meters 1 and 2 at
  standard power                                         Retailer                         Dx Network
 sales tariff within    PPA (Meter 2)              (Eskom Dx / Munic / RED)           (Eskom Dx / Munic / RED)
identified and ring
    fenced area                                                                                      Meter 1
                                                                 ESAb (Meter 1 + 2)

                                       Meter 2


                  Cogeneration                                          Industrial Load



                 * Within embedded generation networks
                                                                                                                 15
                          Contractual vs Physical Flow*

                                                                   Eskom Generation
                       Physical flow

                       Contractual flow


                                                   Eskom Wholesaler                   Eskom Tx Network
 Retailer similarly
  bills for energy
     summating                                                   ESAa (Meter 1’ +
                                                                 2’)
Meters 1 and 2 at
  standard power                                         Retailer                         Dx Network
 sales tariff within    PPA (Meter 2)              (Eskom Dx / Munic / RED)           (Eskom Dx / Munic / RED)
identified and ring
    fenced area                                                                                      Meter 1
                                                                 ESAb (Meter 1 + 2)

                                       Meter 2


                  Cogeneration                                          Industrial Load



                 * Within embedded generation networks
                                                                                                                 16
   Connection & Billing Arrangements
• The “export” of energy may be physical or only a
  commercial arrangement (own use but paid for by Eskom)

• The commercial arrangement (PPA) will not impact the
  distributor’s revenue (no netting off of usage)
   – PPA will be with co-generator and ring-fenced contractually
     from the usage by the end user (load)
   – Standard tariff paid by end user (load) for energy purchased
     by consumer is that metered by the distributor plus energy
     generated by co-generator and sold to Eskom via the PPA
   – No impact on sales and revenue

• Distributor to take into account technical factors arising
  from generator connection:
   – The associated costs payable by the generator
   – Physical export will increase technical complexity and impact
     connection costs



                                                                17
  Technical Considerations

• Penetration levels of Embedded Generation are low:
  Experienced SA engineers are few.
   – Consultant(s) to be appointed to assist in evaluating
     technical impact and provide designs where required
   – Includes skills transfer on network studies

• Embedded Generator connection policy is handled in the
  Grid and Distribution codes
   – Distribution Code approved by NERSA October 2007
   – Principle of open access to Embedded Generators
   – Each Distributor to develop interconnection standards

• Detailed technical guidelines lacking
   – Eskom interconnection standard
   – Planning guideline


                                                             18
  Technical factors to be considered
• Fault level contribution
• Detection of Loss-of-Grid
   – Difficult to detect in some instances
   – Guidelines given on when dedicated protection is required
• Network earthing and earth fault protection
   – MV networks are resistively earthed at the source.
     Generator neutral to be left unearthed
• Protection and protection settings
   – Related to generator operating philosophy
• Isolation of system for safe working
• Metering
   – Installation near generator terminals




                                                                 19
  Conclusion

• Eskom’s Pilot National Co-generation project seeks to
  connect 900MW of new-build generation by 2011.

• Effectively a tender process
   – Expression of interest netted 124 submissions, 5000MW.

• Power Purchase Agreements (PPAs) and Technical
  Standards presently under development.
   – Distribution Code is a second driver for interconnection
     standards
   – Earthing, loss-of-grid protection some of the key technical
     aspects




                                                               20
ESKOM
Holdings Ltd




               Thank You

				
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