State-owned power utility Eskom is casting a wide power buy-back net as part of efforts to close a possible supply/demand shortfall of 6 TWh this year and 9 TWh in 2012/13, without having to resort to rotational load shedding– 9 TWh is equivalent to the electricity consumed by a large city such as Cape Town in a year.

CEO Brian Dames indicated on Thursday that the utility was even going so far as to approach large shopping malls and hospitals with generation capacity to offer them short-term incentives to use their capacity should the system become overextended during the next two years.

Power demand is expected to expand by 2% during 2011 and Eskom is forecasting a winter peak of around 38 000 MW – with imports, Eskom has a nominal capacity of nearly 43 000 MW, and views anything less than 2 000 MW of reserves as potentially problematic.

Engineering News Online understands that deals could be concluded with mega malls in Gauteng, KwaZulu-Natal and the Western Cape in the not too distant future and that the incentive would probably be higher than the R2 800/MWh it costs Eskom to run its open-cycle gas turbines, in the Western Cape. However, these contracts would only be triggered in instances of dire system stress.

Eskom is also in talks with the Johannesburg and Tshwane municipalities in a bid to secure an additional 200 MW of coal-fired capacity in the near term, as well as with those municipalities that have installed gas turbines, which could add 100 MW of peaking capacity.

These contracts would be additional to the 287-MW of cogeneration and own-generation capacity that it had already secured from Sasol, Ipsa and Sappi, as well as the additional 88 MW that will be contracted with two other generators in the coming weeks. These contracts were concluded under the medium-term power purchase programme, which was now closed.

DEMAND AGGREGATOR

Senior GM for integrated demand management Andrew Etzinger added that the utility was also close to finalising commercial negotiations with an international ‘demand response aggregator’, which could facilitate the purchase of as much as 500 MW from small industrial and commercial entities during the 2011 winter peak and beyond.

The aggregator, whose identity should be made known within weeks, would supplement the direct work Eskom was doing with the municipalities, shopping centres and hospitals, as well as its already established demand-market participation (DMP) scheme, which incentivises large consumers to reduce demand and/or to shift loads.

Eskom was currently revising the DMP incentive, which had been made less attractive following successive tariff increases over the past few years. At present, only 300 MW of DMP was contracted, far lower than the 600 MW contracted in recent years. But Etzinger said that he was confident that, once restructured, the scheme would once more secure 600 MW of participation.

All told, Eskom is hoping to lock in buy-backs worth 2 000 MW for the coming two years as part of a larger ‘virtual power station’ concept unfolding at the power-stressed utility. Further components involve residential demand-management solutions, energy efficiency programmes, demand-side management programmes, as well as a mandatory energy conservation scheme (ECS).

The ECS, which when first mooted caused widespread alarm among domestic businesses, would target South Africa’s 500 largest electricity users and would act, Eskom says, as a further “safety net”.

The objective was to achieve a 10% reduction against agreed 2007 baselines from industrial customers consuming more than 25 GWh a year. Currently, the scheme is voluntary and about 5% worth of savings had been recorded against the baselines. But Eskom and the Department of Energy would seek to make it mandatory in the coming months.

Operations and planning division MD Kannan Lakmeeharan reported that the discussions would take place at the National Economic Development and Labour Council and that savings achieved against baseline would be recognised.

Eskom argues that all three mechanism are required, owing to its internal calculations showing that South Africa’s electricity shortfall could peak at 9 TWh, the equivalent of 1 000 MW, in 2012.

“The supply/demand balance will be tight for the next two year and we are taking action to keep the lights on. But we cannot do it alone,” Dames concluded.