Producing power independently in South Africa goes beyond a purely renewable energy solution. The Government’s energy policy’s primary objective – stated in the Integrated Resource Plan (IRP) – is to secure electricity while minimising costs. The high price for renewable energy calls for a hybrid approach to power generation with Liquified Natural Gas (LNG) playing a significant role in the transitional process for industry.
A globally traded commodity LNG is one of the most stable resources available with demand expected to grow steadily at 3.4% per annum to 2035. The war in Ukraine has created a “gas rush” in which Africa has become a key investment source for Europe. New gas fields have been touted with existing supply sources across Africa shifting focus to domestic markets such as South Africa while maintaining the growing export market.
The Cost of Renewables
According to the Daily Maverick, the cost of electricity supplied into South Africa’s grid by the 25 preferred renewable bidders bidding in window five of the REIPPP programme has plummeted to its lowest levels ever. This may bode well for billion-rand projects feeding the national grid, but for medium to large-sized industrial businesses, sourcing or producing power independently costs are very much dependent on the location, accessibility, and infrastructure requirements.
In the grand scheme of things, renewables seem to tick all the boxes, but this is really for large-scale rollout with development plans spanning 10 years and more. In the short term can businesses afford to move completely over to renewables? We don’t think so and judging by the country’s appetite for coal, neither do South African industrial clients.
Don’t get us wrong, renewals are great, the silver bullet, with a single wind turbine generating up to 2.77 MW. On average, in an industrial setting, 300 solar panels will generate an approximate 100kWh. All clean energy. The problem sits in consistency and dependence on internal and external factors such as access to the right weather conditions, storage and localised crime versus the demand requirements for industrial businesses.
Renewable technology is young tech and although it is projected that up to 97% of global power production will come from renewables by 2030, long-term testing under South African economic and climate conditions leaves more questions than answers.
So where does this leave industrial businesses that want to move off-grid? We believe, the answer lies in using LNG in the mix. We are not alone, Cabinet’s plan (IRP) for electricity encompasses a 2030 goal to create a mix of coal (33.36 GW), renewables (26.63 GW) and Peak Power Generation (PPG). This includes LNG as a key component in PPG.
Reliability is what South African businesses need. LNG has fuelled the top 3 biggest economies for over 30 years. Using LNG, power generation during peak and off-peak times can remain consistent with little need for extensive battery storage or renewable infrastructure reducing overall investment costs and risk.
LNG is by no means a croc-wearing lobbyist. LNG is a transitional player, assisting businesses to move off-grid with mitigated risk and sustainable supply. Considered a biogas natural gas has a market value of over $30 Billion and is consumed by 113 countries. The “L” in LNG stands for liquified, a process of cooling, converting and storing natural gas. This makes it easily accessible to virtually any location worldwide. Theft is also reduced due the technology used to store and extract the liquefied gas.
Perhaps not as sexy as renewables, LNG still packs a punch when it comes to lower emissions. LNG to power solutions provide 20% lower CO2 emissions, 90% lower NOx emissions, 97% lower particle emissions and a 100% reduction in SOx emissions.
LNG Supply Since the 1950s
LNG is a globally traded product with a strong resale value. Australia is the largest exporter, exporting over 87.6 million metric tons in 2021. Algeria and Nigeria are within the top 8 exporters. This is important to note, as Africa sits on 7% of the world’s gas reserves. Africa has become a key exporter to Europe, creating an opportunity for further global investment in countries such as Mozambique and Senegal. European fuel giant Eni is looking at deploying a second LNG production vessel to Mozambique to help with Europe’s demand.
All these factors give South African industrial clients access to LNG with stable pricing contracts available from 2024 onwards. Whether it’s firing furnaces or powering boilers, through a modular supply system, LNG Hub can guarantee the supply of LNG, regardless of demand. Come rain or shine, onsite storage hubs give customers the flexibility to tap into supply when power generation is required.
