NOMPU SIZIBA: Sasol has joined forces with another private-sector player to procure substantial renewable energy resources. This as the company looks to take a greener path in the future. My colleague Ryk van Niekerk caught up with the CEO of Sasol.
RYK VAN NIEKERK: Sasol and Air Liquide have issued a request for proposals for what could be the largest private-sector renewable energy project in the country. The parties want to establish a massive renewable energy plant near Secunda to supply 600 megawatts (MW) of electricity to their respective operations. The primary recipient will be Sasol’s massive oxygen plant in the area, which Air Liquide is currently buying from Sasol for nearly R10 billion.
On the line is Fleetwood Grobler, Sasol’s chief executive. Fleetwood, thank you so much for joining me. This is a very, very ambitious project. Tell us about it. What are your plans?
FLEETWOOD GROBLER: I think the point of departure is to say it is a key area that we will focus on by introducing renewables into our operational needs for electricity. If I can just give you context, today in our Sasol operations in South Africa we use around 1 500 MW of electricity, of which we buy in between 600 MW and 800 MW, thereabouts, from Eskom. The goal here is that we would replace some of that Eskom electricity – which comes with a Scope 2 CO2 footprint, because it’s generated from coal power stations – with renewable energy. By replacing that with renewable energy we’ve got a definite but also significant reduction in our greenhouse gas CO2 footprint. When we initially announced the renewable quantum last year, we said the magnitude was going to be 600 MW this year. We’ve updated that by more than 50%.
It’s now around 900 MW, and that would mean it will have the effect of mitigating or reducing our Scope 2 carbon footprint in Secunda by at least around 2.4 million tonnes of CO2.
That’s the driver behind this.
RYK VAN NIEKERK: To reduce CO2, carbon dioxide, is that the main driver? It’s not a cost strategy or to become less dependent on Eskom?
FLEETWOOD GROBLER: The primary driver is definitely sustainability in terms of our commitment to greenhouse-gas roadmap reduction. The secondary benefit which – to our surprise – came along is that it seems that we can procure electricity on this basis in terms of the interest that we received, the feedback we received, after we had our first request for information last year. It seems that we can get bits in at a lower price than the current Eskom electricity, and that is encouraging.
Of course, we are in the market now. We will see what the real market is and what the market offers. But yes, it is a benefit as well that it comes in at a lower cost.
RYK VAN NIEKERK: The first phase will generate 600 MW and the second one will be increased to 900 MW by 2030. That is a lot of electricity for renewable plants to generate, and I know the land in the area is quite valuable. There’s also a lot of development near the Secunda area. Do you have the land for these projects?
FLEETWOOD GROBLER: The premise is not that it will be near or in Secunda. It could be in the region. And so there would be wheeling via a current Eskom infrastructure, because we would not be able to directly link up. Of course, renewables are not rateable 24/7. So we still have the Eskom backup and supply and, during those times that there is no rateable power, we need to supply it via Eskom or our own generation capability, which is either gas-generated electricity or coal-fired-boiler generated electricity, which we do today to the magnitude of 600 MW to 800 MW as well.
RYK VAN NIEKERK: With ‘wheeling’ do you mean that you have a plant off-site, and then the electricity that plant generates actually goes into the Eskom network, and then you at your manufacturing facilities in the area just get that electricity from Eskom directly? That is a pretty contentious problem for many private companies, because Eskom has been very, very reluctant to allow wheeling on its network. Have you met with Nersa and Eskom to see whether this is viable, especially within the timeframes of this project?
FLEETWOOD GROBLER: We are collaborating closely with Nersa, so we are in discussions with the regulator; we are taking it along. We also know that there is no specific already legislated framework to get this in its full context allowed. But we go out from the premise that there is merit in a project-by-project basis, case-based, and that’s how we are going to pursue this. But we are fully in discussions and we are taking the regulator along.
RYK VAN NIEKERK: It seems like you’re not looking for one supplier, you are probably looking for many suppliers. What type of suppliers are you looking for and what technologies would you prefer?
FLEETWOOD GROBLER: The key here, Ryk, is that for renewables it is about the availability of the so-called load factor. I would think that a combination of solar and wind would give you the highest load factor that you can harness from those two energy sources. So we hope that the offerings that we get will be a combination of both. I must say we were overwhelmed by the quantum of offerings that we received last year. When we went out with a conceptual 600 MW, we got back offerings almost approaching six gigawatts of electricity. So the market is ready. There are many, many IPPs [Independent Power Producers] that want to partake, and we look forward to how the market responds.
RYK VAN NIEKERK: You would like these projects to be close to Secunda because, if you do manage to sign a wheeling agreement with Eskom, the potential exists for you to have solar farms in the Northern Cape and wind farms in the Eastern Cape. Is the idea to have the development there in the area around Secunda?
FLEETWOOD GROBLER: It could be anywhere in the country. The wheeling cost is not going to be determined by the distance from the use of source. I think you need to see it in the system that Eskom manages, and the electrons that you generate via the renewables are not necessarily going to go to your operation. It would be in the network and you would tap off the network again. That’s the wheeling concept. So I don’t think it has to be near or in our facility, I would say, area. It could be anywhere in the country.
RYK VAN NIEKERK: That 600 MW is a lot of electricity. What type of investment would that attract?
FLEETWOOD GROBLER: We are not looking at the capital costs for this, but I have heard it mooted that a value of around R10 billion to R14 billion would be required to deploy capex to build these facilities for that type of number. We have not done a check on that. We look at the delivered cost, and that’s what we are interested in, in the buying of that type of quantum.
RYK VAN NIEKERK: This is an interesting model because government is busy with an IPP rollout, and tenders are on the horizon. How do you think this type of project or projects would impact the more official government tender process for renewable projects because, if this project is granted or approved by Eskom for the wheeling aspect of it, it seems like you’ve bypassed government’s official project or strategy.
FLEETWOOD GROBLER: We are working with government in all aspects of this. It is part of the tranches. If you think about the various bid rounds that are being developed and implemented by government, this could form part of such a rollout that they are envisaging. But remember it is Nersa that will determine the regulatory framework, not Eskom. Nersa is the regulator in this case. So, as I say, we are working with Nersa. We are in touch with DMRE (the Department of Mineral Resources and Energy). That relationship is in place. And we are working this project now on a case-by-case basis.
RYK VAN NIEKERK: What are the timelines?
FLEETWOOD GROBLER: We would like to establish this first round by 2023/24. That means two to three years from now, and then the last runs soon thereafter. In terms of the timelines to establish a wind or solar farm, it is in the region of 24 to 36 months to get it hooked up. So it’s quite feasible within those timelines, given that everything goes smooth with the regulatory support that we need, to implement it in that time.
RYK VAN NIEKERK: Thank you. Fleetwood. That was Fleetwood Grobler, Sasol’s chief executive.