Impact of Diminishing Generation Surplus Capacity on Integrated Energy Plans for Southern Africa

Transcription

1 诲诲ㅈ眿睁 睁 Έ Έ ΈThe Impact of Diminishing Generation Surplus Capacity on Integrated Energy Plans for Southern Africa Dr. Lawrence Musaba Mr. Alison Chikova Mr. Pat Naidoo Coordination Centre Manager Chief Engineer Senior General Manager Southern African Power Pool Southern African Power Pool Eskom Abstract - The SAPP Integrated Energy Plans of 2001, commonly known as the SAPP Pool Plan of 2001, had indicated that the SAPP would run out of generation surplus capacity around the year 2007/8. The Pool Plan is now under review by SAPP with the help of a Consultant. It is hoped that the Revised Pool Plan would prioritise and optimise the projects and would give an agreed implementation programme that would (i) be based on least-cost development to reduce the overall cost to SAPP (ii) ensure that the SAPP does not over investment, and (iii) coordinate the implementation of the projects to achieve a good generation mix and a geographical balance. Because of the diminishing generation surplus capacity, SAPP members are now rushing to implement priority projects not exactly following the agreed programme. Thus, the diminishing generation surplus capacity will have a major impact on any future SAPP Integrated Energy Plans. The aim of this paper is to present the impact of the diminishing generation surplus capacity in the development, review and implementation of the SAPP Integrated Energy Plans. The paper will present and suggest the best way forward for the SADC region and a solution that would be least-cost to the region. Index Terms Diminishing generation surplus capacity, SAPP Pool Plan, project optimisation, leastcost implementation, generation mix. 1. Introduction The Southern African Power Pool (SAPP) was formed in 1995 through a Southern African Development Community (SADC) treaty to optimise the use of available energy resources in the SADC region and support one another during emergencies. The SAPP is now an association comprising of twelve member countries represented by their respective national power utilities. The scenario will change, as more members will be admitted into the SAPP following the completion of the SAPP restructuring exercise that started in Of the twelve members, nine are operating members and three are non-operating members. Operating members have their power systems interconnected to the SAPP grid and have signed the Agreement Between Operating Members (ABOM). The ABOM is one of the four legal documents covering the rights and obligations of SAPP Members. The four documents are: Inter-governmental memorandum of understanding (IGMOU) which grants permission for the utilities to participate in the SAPP and enter into contracts, and guarantees the financial and technical performance of the power utilities; Inter-utility memorandum of understanding (IUMOU) between participants, defining ownership of assets and other rights, e.g. provision for change in status from participating to operating member; Agreement between operating members (ABOM), which determines the interaction between the utilities with respect to operating responsibilities under normal and emergency conditions; Operating guidelines (OG), which defines the sharing of costs and functional responsibilities for plant operation and maintenance including safety rules. A major feature of the SAPP is the combination of long- and short-term arrangements, providing increased scope for reduction in supply costs to participating members. Such contracts govern the specific commercial arrangements within the SAPP framework. In case of inconsistency, the first document has precedence over the second document; the second document over the third document and the third document over the fourth document. No other document can be construed as governing the establishment and administration of the SAPP.

2 The basis for the SAPP as defined in the IGMOU is the need for all participants to [1]: (a) Co-ordinate and co-operate in the planning and operation of their systems to minimise costs while maintaining reliability, autonomy and self-sufficiency to the degree they desire; and (b) Fully recover their costs and share equitably in the resulting benefits, including reductions in required generating capacity, reductions in fuel costs and improved use of hydroelectric energy. Table-1 shows the installed and net capacity of the SAPP as at December The SAPP has an installed capacity of about 53,000MW but only around 45,000MW is available. Of the total installed capacity, about 79% of it is South Africa and 5% each for the DRC and Mozambique as illustrated in Figure-1. In terms of generation mix; about 74% is coal, 20% hydro, 4% nuclear and 2% gas/diesel [2]. Most of the coal generation plants are in South Africa. Because coal is independent of weather, this kind of generation mix has helped to mitigate drought that is now becoming a problem for southern Africa. Table-1 SAPP Installed and Available Capacity No. Country Utility Status Installed Capacity Available Capacity 1 Angola ENE NP Botswana BPC OP DRC SNEL OP 2,442 1,170 4 Lesotho LEC OP Malawi ESCOM NP Mozambique EDM OP HCB 2,250 2,075 7 Namibia NamPower OP South Africa Eskom OP 42,011 36,398* 9 Swaziland SEB OP Tanzania TANESCO NP Zambia ZESCO OP 1,632 1, Zimbabwe ZESA OP 1,990 1,825 Total Interconnected SAPP 51,206 43,865 Total SAPP 52,844 44,998 * Gross installed capacity excluding mothballed plants OP = Operating Member NP = Non Operating Member

3 Percentage of SAPP Installed Capacity 3% 4% 4% 5% 5% Rest of SAPP DRC Mozambique South Africa Zambia Zimbabwe 79% Figure-1: SAPP Member country contribution to the total installed capacity Generation Mix 4% 2% 20% Coal Hydro Nuclear Gas/Diesel 74% Figure-2: SAPP Generation Mix

4 At the time of formation of the power pool, the SAPP had over 20% of generation reserve capacity. However, in the last 10 to 15 years, the region has been experiencing a diminishing generation surplus capacity caused mainly by: (i) (ii) (iii) Increase in power demand as a result of economic growth in the SADC region, Increase in regional population requiring increased power supply due to increased electrification projects, Lack of corresponding investments in both generation and transmission infrastructure to meet the rising power demand resulting in accelerated diminishing generation surplus capacity. The SAPP has developed an agreed programme aimed at reversing the diminishing generation surplus capacity in the SADC region. The implementation of this programme is key to resolving a power crisis in the SADC. Priority projects have been identified by SAPP, but some of the projects so classified as priority by SAPP have not been optimised. The new projects also differ from those given in the SAPP Integrated Energy Plans of 2001, commonly known as the SAPP Pool Plan According to the SAPP studies conducted in 2001 [3], the SADC region will run out of generation surplus capacity around the year 2007/8. The impact of this diminishing generation capacity surplus, if not reserved, will be negative on the economies of the SADC region and Investors may be frightened. The big challenge for SAPP is to be able to implement the projects according to the set priorities and ensuring that there is no over investment as a result. SAPP members are answerable to their governments and also have an obligation to customers at large. Governments would want their national power utilities to implement generation projects to avert a crisis in their countries. Customers are worried that without sufficient generation capacity, expansion would be difficult. Utilities do not have all the finances required to implement the identified projects on their own without government and external assistance. The result is that the projects are not being implemented at a desired pace, but the demand continues to increase nevertheless. 2. SAPP Peak Demand and Demand Growth If the SAPP were to strictly operate according to the SAPP Operating Guidelines, the average operating reserves required is 10.2% of the available capacity and this gives around 4,500MW. Thus the combined, non-coincidental, peak of the SAPP should not exceed 40,500MW in order to maintain the prescribed operating reserve margin. In 2006, the SAPP Coordination Centre carried out a study to assess the performance of SAPP members for the years from 2001 to 2006 [4]. This is also the period that the SADC region experienced maximum economic growth. Table-2 shows the SAPP peak demand growth from 2001 to It is seen from Table-2 that peak demand in the SAPP has been increasing at a yearly average rate of 2.8%. Angola, Botswana and Zambia recorded the highest rate of increase of 9.7%, 8.1% and 6.0%, respectively. The table also shows that in 2001, the peak demand of the interconnected SAPP grid was 35,781MW and this increased to 40,587MW in 2006, an increase of 13% over the period. The available capacity for the interconnected SAPP was constant at 43,865MW giving reserve margins of 18.5% in 2001 down to 7.5% in 2006, thus verifying that the reserve margins are diminishing in the SAPP. Figure-3 shows the historic and projected load demand growth up to Figure-4 shows the corresponding reserve margins, and both figures do show that the SAPP will run out of generation reserve capacity around the year 2007/8, confirming the 2001 study.

5 Table-2 SAPP Peak Demand and Demand Growth [2001 to 2006] YEAR 2001 to Country % Increase Average Yearly Increase Angola Botswana DRC ,012 1, Lesotho Malawi Mozambique Namibia South Africa 30,599 31,621 31,928 34,195 33,461 34, Swaziland Tanzania Zambia 1,087 1,118 1,255 1,294 1,330 1, Zimbabwe 2,013 2,028 2,007 2,069 2,066 1,904 (5.41) -1.1 Interconnected 35,781 36,981 37,468 39,893 39,341 40, Total SAPP 36,749 38,021 38,577 41,003 40,511 41, Available Capacity SAPP Demand 60,000 50,000 40,000 30,000 20,000 10, Year Figure-3: SAPP historic and projected demand growths

6 Reserve Capacity 15,000 10,000 5, (5,000) (10,000) Year Figure-4: SAPP historic and projected reserve capacity 3. SAPP Operating Reserves In respect to the operating reserve obligation, the SAPP Operating Guidelines specifies that: Every Operating Member in SAPP shall be obliged to maintain their calculated portion of Operating Reserve sufficient to cover 150% of the loss of the sent out capacity of the largest generating unit in service in the Interconnection at that time. Furthermore, this operating reserve shall be sufficient to reduce the Area Control Error (ACE) to zero within ten (10) minutes after a loss of generation. The Operating Reserve shall be made up of Spinning Reserve and Quick Reserve. At least 50% of the Operating Reserve shall be Spinning Reserve that will automatically respond to frequency deviations. Interruptible load may be included in the Quick Reserve provided that it can be interrupted remotely in less than ten (10) minutes from the Control Centre. The above shall establish the minimum amount of Operating Reserve that each Operating Member will be obliged to carry and indicates the level below that a Member is at fault. The SAPP Coordination Centre has calculated for 2007 the operating reserves for members as indicated in the Table-3 below. In total, the interconnected SAPP is expected to carry an operating reserve of 1,380MW. Utility ame Largest Generator Table-3 Operating Reserve Requirements for 2007 Maximum Demand Spinning Reserve e Quick Reserve f Operating Reserve g = e + f Eskom , ,065.2 ZESA ZESCO BPC EdM NamPower SNEL LEC SEB TOTAL 1,523 40, ,380

7 4. SAPP Planning Guidelines, Principles and Criteria 4.1 Planning Guidelines The Pool Plan of 2001 is now being reviewed by SAPP with the help of a Consultant. It is hoped that the new Pool Plan would prioritise and optimise the projects and would give an agreed implementation programme that would (i) be based on least-cost development to reduce the overall cost to SAPP (ii) ensure that the SAPP does not over investment, and (iii) coordinate the implementation of the projects to achieve a good generation mix and a geographical balance. Because of the diminishing generation surplus capacity, SAPP members are rushing to implement the priority projects, and are not exactly following the agreed programme. In order to be consistent and to guide members, the SAPP has agreed to the following planning guidelines for members: The SAPP requires coordinated, open, and transparent transmission planning on both a local and regional level. Each member utility is required to submit, as part of a compliance filing, a proposal for a coordinated and regional planning process that complies with the SAPP planning principles and other requirements set by the SAPP Planning Sub-Committee. Alternatively, SAPP members are required to a compliance filing describing their existing coordinated and regional planning process, and show that their existing process is consistent with or superior to the requirements. The whole set of planning guidelines including the definition of the SAPP Pool Plan are contained in the Agreement Between Operating Members. 4.2 Planning Principles In terms of planning principles, the SAPP encourages members to apply the following Transmission Planning Principles, also approved by FERC [5] in the USA: Coordination: The transmission provider must meet with all of its transmission customers and interconnected neighbours to develop a transmission plan, including the standing SAPP Planning Sub-Committee. Stakeholders must be included at the early stages of the development of the transmission plan and not merely given an opportunity to comment on transmission plans that were developed in the first instance without their input. This is the process being used in the review of the SAPP Pool Plan of Openness: The transmission planning meetings must be open to all affected parties. While some circumstances require planning efforts of smaller working groups, the process must remain open. In SAPP, stakeholders such as the Regional Electricity Regulatory Association (RERA) have been invited to be part of the Working Group responsible for the review of the Pool Plan. Transparency: The transmission provider is required to disclose to all customers and other stakeholders the basic criteria, assumptions, and data that underlie its planning, in order to ensure that standards are consistently applied. Transmission providers are also required to make available information regarding the status of upgrades identified in their transmission plans and reiterates that non-public utility transmission providers should abide by the Standards of Conduct with regard to managing non-public transmission planning information obtained through the planning process, consistent with their reciprocity obligations. Information Exchange: Transmission customers are required to submit information on their projected loads and resources on a comparable basis as used by transmission providers in planning for their native load at regular intervals, and the transmission provider must allow market participants the opportunity to review and comment on draft transmission plans.

8 Comparability: The transmission system plan should meet the specific service requests of transmission customers and otherwise treat similarly situated customers comparably. Regional Participation: The transmission provider is required to coordinate with interconnected systems to share system plans and ensure that they are simultaneously feasible and identify system enhancements that could relieve significant and recurring transmission congestion. Economic Planning Studies: The transmission provider is required to annually prepare studies identifying significant and recurring congestion and to post such studies to all SAPP members. Cost Allocation for New Projects: This principle is not intended to replace current cost allocation rules but rather to apply to projects that do not fit under the existing structure. Rather than imposing a particular allocation method, the SAPP permits transmission providers and stakeholders to determine their own criteria. 4.3 Planning Criteria In terms of planning criteria, SAPP members are encouraged to use the (n-1) planning criteria where applicable. The SAPP acknowledges that in some cases, this criterion can be prohibitive and expensive. In such case, members are allowed to use criteria that are least-cost to the utility and to the region as a whole, without compromising system stability and reliability of supply. 5. Diminishing Generation Reserves and the SAPP Pool Plan The SAPP Pool Plan identifies priority projects and recommends an implementation plan that is leastcost to the region. The aim of the plan should also be to ensure that the SAPP does not over invest and achieve a good generation mix and a geographical balance. Because the identified projects are in different countries over which the SAPP Coordination Centre has no control, the coordination of project implementation and the strict following of the SAPP Pool Plan are rather difficult. Also members have different financial capabilities to implement the projects and with different economic climates and country environments, the implementation process is a challenge. It therefore becomes difficult to follow the recommendations of the Pool Plan. The experience with the SAPP Pool Plan of 2001 showed that politicians should also be consulted in the planning process. Because the projects that were identified in the SAPP Pool Plan of 2001 centred on few countries, the plan was not widely accepted. It was then felt that each country should submit their priority projects that would then be incorporated into the plan. This method of selecting projects is not cost effective. With the reserves diminishing on a yearly basis as indicated, members are not necessary following the recommendations of the pool plan, but rather have come up with their country priority projects which if implemented would assist their countries reduce the diminishing generation surplus capacity. This is also not cost effective from a regional point of view. 6. Recommendations In future, it is recommend that: The SAPP should use the planning principles highlighted in section-4 and should involve all stakeholders at an early stage. Projects should be identified as early as possible and should be implemented according to an agreed least-cost analysis [6]. The implementation of the projects should be done in good time to avoid implementing projects in a panic state. Because the region is experiencing a diminishing generation surplus capacity, implementing projects now would be very expensive as commercial lenders are exploiting the situation and have increased their lending rates. The SAPP would have not much alternative than to borrow even at this high rate.

9 Plans are not useful unless they are implemented. Each of the SAPP members had plans for both generation and transmission projects, but these plans were not implemented and the result is that the region is running out of generation surplus capacity. If these plans were implemented, the region would not have been in this situation. National power utilities should be given semi-autonomy by their governments and should be allowed to operate commercially. Some utilities spend more money implementing politically motivated projects at the expense of investing in generation and transmission infrastructure for the benefit of the country and not the selected few. 7. Conclusion Poor planning and inappropriate investments decisions probably cause most of Africa s energy problems. Implementing plans according to an agreed pool plan and in a coordinated way is the best process for the region and is also cost effective. When projects are implemented under unfavourable circumstances such as diminishing generation surplus capacity, they tend to be very expensive. When implementing projects, it is important to adhere to good planning principles and practises. 8. References [1] Revised Southern African Power Pool Inter-Governmental MOU, 23 February [2] L. Musaba, Major Opportunities for Power in Africa, Africa Power 2003, Hilton, Sandton, Johannesburg, South Africa, March [3] SAPP Pool Plan, [4] Report on Performance of SAPP Members , September [5] FERC s Open Access Final Rule, Regulatory Alert Bulleting, February 18, [6] SAPP Planning Sub-Committee Report to Management Committee, March 2007