Eskom Considers Gas, Renewables to Repurpose Coal Plants

Eskom CEO Andre de Ruyter has outlined his vision for the utility in a series of interviews, of which the most recent was published on 21 April. Together, they show his understanding of the complex dynamics around the restructuring of the organization and the challenges of reducing its reliance on coal-fired power, which he says will be a “long passage.” In the latest interview, he pointed to the potential opportunity of repurposing Eskom’s decommissioned coal-fired power stations to gas-fired plants or using the land for renewable energy, which would support the government’s planned “just transition” to a low-carbon economy. Although at a preliminary stage, this represents a further opportunity for IOCs to provide input on ways to stimulate the development of gas infrastructure.

De Ruyter’s interview comments suggest that he has already brought new ideas to Eskom since he took office at the end of 2019. That said, it is unclear whether he will receive the necessary political support, without the accompanying interference, to implement his views. He has already come under attack from opponents for introducing new suppliers to Eskom, but this is based on a misperception of undue influence. In his most recent interview, de Ruyter acknowledged key government priorities for Eskom such as avoiding forced retrenchments and mitigating the job losses as the level of coal-fired power is reduced.

He also backed restructuring the utility into three separate divisions, which he indicated was making progress, even though Eskom has not yet seen the report of the chief restructuring officer (CRO) whom the National Treasury had appointed in early 2019. De Ruyter suggested that, in the future, Eskom could be more focused on operating the transmission grid, while increasing numbers of independent power producers generate electricity and municipalities play a greater distribution role.

Central to de Ruyter’s comments on the role that the utility could play in a “just transition” is an Expression of Interest (EOI), issued in late March, for “opportunities for innovative technology solutions to support [sic] low carbon growth, enterprise development and sustainable job creation” via repurposing decommissioned power stations. The EOI background information acknowledges the Integrated Resource Plan for Electricity (IRP) framework to diversify the energy mix and highlights the scheduled decommissioning of several coal-fired plants over the next 10 years. To address the negative economic and social impacts from decommissioning and address the considerable rehabilitation costs, Eskom hopes to find “innovative solutions with a win-win value proposition.” De Ruyter used the example of the Tennessee Valley Authority, which by repurposing an old coal-fired power station was able to save up to 35% of the capital cost of building a greenfield gas-fired plant.

The EIO invites proposals setting out a conceptual business case using components at Technology Readiness Level 6 or higher and/or a “complete ecosystem management solution” that would result in the development of a sustainable low-carbon industry. The deadline for submissions is 10 June 2020, and qualifying submissions will be invited to respond to a Request for Proposal.

Submissions are required to focus on the repurposing of the Komati, Grootvlei and Camden power stations. All have reached mandatory decommissioning after 50 years in service, and, according to the IRP, are due to be decommissioned by 2023. They are situated in Mpumalanga province, which should support the business case for conversions to gas-fired power, given that much of the country’s existing gas infrastructure is concentrated in and around province. This includes Sasol’s Synfuels plant, which is served via the ROMPCO pipeline via Mozambique and the Transnet Lilly pipeline of methane-rich gas that runs from Secunda to Richards Bay and Durban. In mid-2019, Transnet announced that it hoped to launch a tender for an LNG terminal as part of the Richards Bay Natural Gas Network (NGN), which also plans to utilize the Lilly pipeline. This followed the launch of a joint Transnet and International Finance Corporation (IFC) feasibility study for the development of the LNG storage and regasification terminal and the “repurposing” of Transnet pipelines.