South Africa will soon embark on large new-build gas Independent Power Producer’s (IPP) programme for 3,126 MW in accordance with the IRP2010 and Ministerial Determinations, the majority of which will likely be initially supplied using imported Liquefied Natural Gas (LNG).

To understand the impact of having both flexible and inflexible Gas Supply Agreement’s (GSA’s), we introduce into the model two Gas Supply Agreements (GSA) structures which represents both flexible and inflexible LNG supply options. In the inflexible GSA, we have a 100% take-or-pay agreement priced at 10 USD/GJ and for the flexible option, an unconstrained LNG volume (or 0% take-or-pay) agreement priced at 15 USD/GJ. The results prove that even with a significant premium for flexibility built into the GSA, the overall power system operating cost is lower than for the cheaper, inflexible, GSA option. Over the ten year period, this total system savings accumulates to 4.7 billion USD.

In conclusion, our findings reveal that it is the flexibility requirements of the power system which should be prioritised over any project level cost optimisations and that flexible LNG project solutions should hold greater value than inflexible solutions to the system. The integration of this flexible capacity will also support the improvement of system reliability and sustainability by enabling greater levels of renewable energy to be introduced onto the grid.

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Wayne Glossop - Contact

   Wayne Glossop

   Sales Manager, Africa East
   Wärtsilä Energy Solutions
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