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Background of study

Electricity cost risk modelling of the Energy Conservation Scheme (ECS) for the Gold mining industry of South Africa Lodewyk van der Zee 16-08-2012. Background of study. Load shedding from 2008 cost the South African economy an estimated 50 billion rand.

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Background of study

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  1. Electricity cost risk modelling of the Energy Conservation Scheme (ECS) for the Gold mining industry of South Africa Lodewyk van der Zee16-08-2012

  2. Background of study • Load shedding from 2008 cost the South African economy an estimated 50 billion rand. • The Power Conservation Program (PCP) was developed as a mitigation strategy. Power Conservation Program (PCP) Pricing Demand Side Management (DSM) • Energy Growth Management (EGM) • New connection management • Network planning • Energy Conservation Scheme (ECS): • Voluntary or price driven Mechanisms • 10% Load reduction

  3. Motivation for the study >10%: R11.91 per kWh(3500%) >2 %≤ 10% : R3.97 per kWh (1100%) ≤ 2% : R0.99 per kWh (290%) No penalties Summer (2011)= R0.34 per kWh Winter electricity tariff (2011)=R0.66 per kWh

  4. ECS procedure 2. Allocation of electricity quota: reduction target 10% • Baseline negotiations 4. Settle bill and penalties if needed 3. Reallocate electricity according to ECS rules

  5. Baseline negotiations Baseline consumption options Reference period C : 12 Consecutive 10/2006-9/2007 Reference Consumption C: sum ( Ref period C) Reference period A : Consecutive 10/2008 -10/2009 Reference Consumption A: 0.97 x sum ( Ref period A) Reference period B : 12 Consecutive 12/2002 -10/2009 Reference Consumption B: sum ( Ref period B) up to maximum of 107.5 % of Ref consumption A Total energy allocation : A = B + C + D + E A: ECS customer total annual energy allocation B: ECS customers annual energy allocation in respect of reference loads. C: ECS customer's annual energy allocation in respect of post reference loads D: ECS customer's new connections and/or additional loads, if applicable E: ECS Customer's Investment Allocation(s)

  6. Allocation management • Default daily allocation : • Divide total annual allocated energy by 365 and allocate to 366 days evenly. • User defined: • Throughout the ECS year the customer may redistribute the previously allocated energy provided that: • Not less than 14 days ahead • Not more than 126 days ahead • The maximum monthly adjustment of 0.167%

  7. Present situation of ECS • Consultation draft by NERSA • Negotiations with 40 top consumers have started • Baselines have been put in place • Voluntary partaking have started • Safety net

  8. Cost Risk for Gold mining industry • Impact on direct mining cost • Large loads are essential for production • Electricity supply vital for safety • Simulation assumptions • No transgression penalties • Average summer electricity tariff (2011)= R0.34 per kWh • Average winter electricity tariff (2011)= R0.66 per kWh

  9. Scenario A • Default allocation – no late rephasing

  10. Scenario B • Avoiding high winter month penalties

  11. Mitigation strategies • Invest in optimal load prediction • Install required monitoring equipment • Mine personnel must be trained • Invest in EE loads and DSM • Avoid penalties during winter months • Identify and isolate non essential loads • Communicate ECS rules with mitigation strategies

  12. Conclusions • ECS is uncertain but remains a risk • If not well managed mining group could incur serious financial losses • Investment in allocation management will lead to additional benefits

  13. Questions ?

  14. Goals of ECS • Improved management of South Africa’s electricity system • Enhancing information exchange between • large industrial commercial customers • System Operator • Sustained reduction arising from improved energy efficiency • Promotion of energy efficient growth in electricity consumption.

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