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VW to take its Uitenhage plant off the grid

Set to invest in a R3.5bn biogas facility.

Volkswagen Group South Africa (VWSA) is poised to implement a plan to move its manufacturing plant in Uitenhage, plus some of its component suppliers in an adjacent supplier park, off the national electricity grid.

Thomas Schaefer, chair and MD of VWSA, has confirmed that a planned project for the company to invest in a biogas facility that uses organic waste to produce electricity is in its final phase and that the Uitenhage plant would be off the electricity grid within the next two to three years.

Schaefer says an entire biogas facility, including a waste separation set-up, would cost about R3.5 billion, but usually achieves break-even after 28 months – and would create about 1 000 jobs.

Parental approval

He says VWSA already has approval from its German parent company for the project, which would see it getting a company to operate and manage the biogas facility that will feed electricity directly into its plant.

Schaefer says the company has almost completed the analysis of the project, with the funding package expected to be completed by early next year.

He says it will take about 18 months to build the biogas plant.

Once operational, the plant will also produce fertiliser – some 600kg per ton of organic waste used – which could be sold for up to $400 a ton.

“We are thinking of investing in it rather than going to get the World Bank to do it and get an off-take agreement,” says Schaefer.

‘Cool idea’

“We think it’s quite a cool idea that we spend a couple of million and be a shareholder in it, but have somebody else running it.

“It’s better than throwing money into reforestation in Zimbabwe where we don’t know what is going on.”

Schaefer confirms that VWSA would need sign off from the minister of energy as well as a permit for the project, but is confident that approval will be forthcoming because electricity supply in Uitenhage is a problem.

He says there is a sustainable supply of organic waste for the facility from the abattoirs and chicken and fish farms in the area, together with the organic waste generated by food companies.

Power supply issues

Many businesses in the Nelson Mandela Bay Metro have been experiencing problems with the supply of electricity from Eskom.

Schaefer says electricity spikes experienced by VWSA are “like a heart attack to the body shop”.

“The robots are in the welding process, which takes about 30 seconds. If you get a spike in between, the robot forgets where it is. It’s an immediate shock and everything comes to a standstill.

“For safety reasons, you have to bring everything back into zero position but have potentially lost all the bodies in the body shop that are half welded or damaged, which is a complete disaster.

The high cost of electricity spikes

“The spikes happen at least once a week,” he adds. “The cost of these lost bodies is easily into the double digit million rand and impacts our profit margins.

“We are spending a fortune on inverters that keep the spikes out of the system but we can only do so much.”

Attempts to obtain comment from the Nelson Mandela Bay Business Chamber on the electricity problems in the region were unsuccessful.

Schaefer says a further problem is that Volkswagen allocates production volumes according to the cost per car. The exact cost per vehicle from the Uitenhage plant is tightly tracked every month and compared to producing the same car in the group’s plant in Pamplona in Spain.

“If the cost is not favourable, the next volume from sales gets allocated to Spain,” he says.

Production cost

With government’s Automotive Production and Development Programme and VWSA’s own cost saving measures, its cost per vehicle is currently 2% below that of the plant in Spain, says Schaefer.

“This is great, and [explains] why we are chock-a-block, with 160 000 [annual production]. But if more of this nonsense happens, you lose the volumes so quickly,” he says. “We need a fully utilised factory to compete.”

If the biogas project comes to fruition, VWSA will be following in the footsteps of BMW South Africa, which in October 2015 started receiving power from biogas renewable energy company Bio2Watt from its first plant at a Beefcor feedlot in Bronkhorstspruit.

At the time this was the first viable commercial biogas project in South Africa.

The bulk of the power produced by Bio2Watt went to BMW SA for use in its production plant in Rosslyn in Pretoria in terms of a 10-year off-take power purchasing agreement signed in 2014.

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Great Idea and break-even after 28 months is spectacular.

They will save billions in the long run.

F Eskom.

Having worked in the biogas and energy industry this is an odd article.

R3.5 billion would be at least a 35MW biogas facility- that is enormous. Are you sure your figures are correct

Also 1000 jobs that has to be in the construction not operating

Lastly $400 per ton for compost mmmh. In Gauteng that’s R3000 retail for 10m3 which would be about 3 tons. So unless they can convince farmers this is special fertiliser I think Not.

Great news though that this is happening and VW are serious about sustainability.

Across VW and the supplier park, 35MW sounds possible.

Since you worked in this, do you have an idea what the levelized cost of energy would come out at?

Levelised power tariff is tricky on this. Most biogas projects need fees as follows
1. Waste processing fee – which is often the fee that they avoid – e.g. municipal effluent costs or landfill dumping fees
2. Some form of heat recovery fee
3. Then electricity fee if a gas engine is installed.
4. Fees for other benefits e.g. in VW consistent good quality electricity with no spikes

If one only sells electricity the price of the electricity is at a guess R1.70 to R2 per kWh.

If one has other fees (waste processing etc about 50 – 60% of the revenue) then the electricity fee can match Eskom megaflex / ~R1 – R1.20 / kWh

The 35MW is completely possible – I am just not aware of a biogas installation that is as big as that anywhere in the world. The logistics to move waste of the right quality and quantity to the plant becomes the limiting factor

Thanks, Raw Sewerage flowing into Gauteng (& other dams) In a city conglomeration like Jhb, Pta surely sufficient wastage can be collected to make even more than one of those plants viable?

Ok thanks.

if one takes what megaflex costs after all the bits and pieces, not just the kWh energy, 150c or so for a stable uninterrupted supply is a bargain

It sounds early stage so they are probably going to nail down the details as they go.

I’ve seen a lot of noise about munics using waste water/land fills for energy generation. Would be a fantastic move but at R2/kWh, I can’t see how that will be economic.

Agree,

Too good to be true almost.

The anaerobic digestion technology used for biogas is fine for waste reduction, however stable power generation is another story.

Also when you have to transport biomass needed for the digestor the “wastes” becomes pricey input costs
$400 per ton for compost sounds very high.

I hope they took some notes from the flagship New horizons biogas setup in Athlone.. it hit a wall after only a year online..

This is the first good news I have seen in SA for a long time. VW must have done the sums carefully if competing with Spain in production costs.

By the time the ANC fools are going to get Eskom sorted, it will have no cutomers left

#Eskom & Customers, they haven’t lost their core customers, problem being, they don’t want to pay.

Yip Eskom will end up supplying Soweto and defaulting municipalities for free. Go Eskom.

…agree. Supplied for FREE by the SA taxpayer 🙁

Hopefully, I’m of the view that smart grids and distributed energy will be the future eventually. There will always be some central generation but covering buildings in solar and using waste to generate energy will mean Eskom won’t be the overwhelming energy producer in the future.

Once electric cars become standard then that will really unlock that reality as you then have a huge fleet of batteries for flexibility.

Escom will never be sorted out. Treasury is paying local municipalities to pay their debt to Escom. That is another R23 billion on top of what has been given so far this year.
Furthermore is Medupi and Kusile designed for a different type of coal than what we use in SA. Boilers, mills, ash removal, poor workmanship, etc. all wrongly or too small designed. They can only fix that partly, with unnecessary wear and tear, plus additional costs for maintenance. Good luck for whoever will be able to fix Escom ever.

To the socialist fools pretending to run this country – listen to what Thomas Schaefer says and learn. Anything and anybody can only remain globally competitive, if there is a laser-like focus on continuous improvement over time. There is no place in the universe where ruinous legislation, shocking incompetence, suicidal policies and empty rhetoric on every subject from education to economic development can lead to progress, or even to just maintaining SA’s global competitiveness. We are headed for the bottom of the pile.

wonder what this useless government’s reaction would have been especially towards the unions if vw would announce: ” eskom’s electricity supply is too unreliable, together with the strict labour laws, to economically operate a motor assembly – we are closing down in south africa”

Relevance to this? You really think they are reading this? Is this something new?

“VWSA would need sign off from the minister of energy as well as a permit for the project, ….” And how many years will that take? Vested interests (the Corrupt Eskom and the unions) will attempt to thwart any initiative. But well done VWSA. We all need to follow suit and let the Corrupt Eskom supply all its remaining, non-paying customers.

“Schaefer says an entire biogas facility, including a waste separation set-up, would cost about R3.5 billion, but usually achieves break-even after 28 months – and would create about 1 000 jobs.”

Trust the Germans to turn adversity into opportunity, we need more of these people in our country.

It’s alot of money, but they did they’re calculations.

If this works good they can even sell electricity to others.

Well done Eskom and the ANC.

The sad part… Everybody will still vote for cANCer in the next election…

Is it actually still worth it to have cars manufactured here in SA ?
Acc to this art mg.co.za/article/2019-02-01-00-sa-motor-industrys-sweet-deal
The SA car industry produces about 600,000 vehicles and has about 112,000 employees, subsidised by the APDP, soon SAAM from Gov with R 27 B a year. Meaning every car has a R 45,000 state subsidy, every job in the industry a R 240,000 subsidy from the taxpayers.

Marcan:

Last I looked the “subsidy” was basically an offset on imports. To me it makes sense all around that say for BMW they get R10b worth of duty free imports (of models not made here and parts used locally in production) if they export R10b worth of cars they make locally for other markets.

Specialization and scale of economies matter. The days of a plant in SA making 6 models are looong gone.

I suppose either way tho, the tax payer is carrying the cost. If you buy a duty free import car, you still pay the same price as a normally taxed car thereby generating the extra benefit for the manufacturer, they hire a lot of people which is the main driver but not sure how sustainable that is.

I know the DTI/gov love these guys however, despite the high subsidies.

In the Eskom meetings they were convinced we could not do without them. If ever there was a debt default coming, this is it.

Hate to live in the surrounding areas, the cost of electricity will go through the roof when the municipality needs to increase cost to the average customer to off set the revenue lost!!

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