An alternative approach for sustainable industrial DSM in South Africa

Abstract

Eskom generates 95% of the electricity consumed in South Africa. As a result of insufficient generation capacity, Eskom is struggling to meet the growing electricity demand. Load shedding had to be implemented during 2014 and 2015, which had damaging effects on the economy of South Africa. In addition to the electricity supply shortages being experienced, it recently also became public that Eskom has financial constraints. Several generation capacity expansion projects have been implemented as a long-term solution to the electricity supply shortage. Due to the immediate nature of this problem, Eskom also had to implement short- to medium-term solutions in an attempt to avoid load shedding. The Department of Energy estimates that load shedding costs the economy of South Africa approximately R75 000 per MWh of unserved electricity. Eskom uses gas turbine power stations to generate power as a short-term solution to avoid load shedding. These power stations are expensive to operate and are only used in times when demand threatens to exceed the available supply capacity. It was found that the net operating cost of using gas turbine power stations is approximately R1 941 per MWh. During 2014, Eskom spent R10 billion on diesel to operate the gas turbine power stations while they only had an approved budget of R3 billion. The Demand Side Management (DSM) programme was another short- to medium-term solution implemented by Eskom. The operating cost of the DSM programme can be calculated by considering the funds spent, the savings achieved and the sustainability of the savings. With the existing performance of the DSM programme, this study found that the DSM programme is a more feasible approach than using gas turbine power stations. Due to the immediate impact of using gas turbine power stations, their use is still required when demand threatens to exceed the available supply capacity. However, by implementing more DSM projects and improving the impact of the DSM programme, the required use of gas turbine power stations and load shedding can be reduced. This will result in cost savings for Eskom and it will also have a positive impact on the economy. Although the DSM programme is a more feasible approach than load shedding and using gas turbine power stations, this study revealed that it is not performing to its full potential. A case study consisting of 37 industrial DSM projects revealed that 41% of industrial DSM projects did not achieve their initial project targets during the performance assessment period. It was also found that the savings of industrial DSM projects deteriorated an average of 17% per annum. Previous studies focused on separate aspects of industrial DSM projects such as the measurement and verification (M&V) and maintenance of projects. Since it has been found that industrial DSM projects do not perform optimally, the need for an alternative industrial DSM Energy Services Company (ESCO) model was identified. By improving the performance of industrial DSM projects using an alternative approach, the impact of the DSM programme can be improved. A novel, alternative approach to the industrial DSM ESCO model was developed. The alternative approach specifically focused on resolving challenges during different project phases to improve the overall performance of industrial DSM projects. The project phases included were the investigation, procurement, implementation, M&V and project maintenance phases. It was found that by implementing the alternative approach, the performance of industrial DSM projects could be improved. By improving the initial impact and the sustainable savings with 6% and 9% respectively, the expected required use of gas turbine power stations from 2016 to 2018 can be reduced by 381 GWh. This will result in a net cost savings of R740 million for Eskom. The expected required load shedding can be reduced by 10% from 2016 to 2018, which can have an estimated positive impact of R51 billion on the economy of South Africa.