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Sasol joins South African renewables push with 900-MW RFP

15 April 2021 Keiron Greenhalgh

South African chemicals to energy company Sasol issued a 900-MW renewable energy request for proposals (RFP) 13 April, part of a wider push toward renewables in a country historically overwhelmingly reliant on coal-fired plants. Longer term, its investments are also set to include sustainable aviation fuel and green hydrogen.

The company's RFP followed less than a month behind a South African government RFP seeking 2.6 GW of renewable generation, split into 1.6 GW of onshore wind and 1 GW on solar PV capacity. The government's RFP was the fifth phase of a program to increase the size and reliability of the country's generation fleet as well as decreasing its GHG emissions.

Sasol's RFP is a joint venture with Air Liquide after the French industrial gas company bought oxygen production units at the Secunda complex in South Africa in 2020. The two companies are looking to buy the 900 MW of renewable capacity by 2030, with Sasol responsible for 500 MW and Air Liquide the rest, they said. Before the sale, Sasol had said it would buy 600 MW of renewable power for the Secunda site in the province of Mpumalanga.

Deals for some 600 MW of the overall total will be inked in 2021. The projects that produce the power Sasol and Air Liquide will buy are expected to be online by 2023. In line with government plans released in 2019 and the 2.6 GW RFP issued in March, Sasol said the projects in the first phase of purchases would largely be wind and solar PV facilities. Individual projects should have a capacity of no less than 70 MW, it added.

The 2.6-GW RFP announcement by the Department of Mineral Resources and Energy (DMRE) sought projects with a minimum size of 1 MW and maximum capacities of 140 MW and 75 MW for onshore wind and solar PV, respectively. Bids are due 16 August.

DMRE's Renewable Energy Independent Power Producer Procurement Programme RFP was issued the same day as the ministry announced the preferred bidders for its Risk Mitigation Independent Power Producer Procurement Programme (RMMIPPPP), another key part of long-running government efforts to shore up energy security.

The RMMIPPPP tender was issued specially to fill a near-term power supply gap of 2 GW identified by 2019 government plans — the Integrated Resource Plan (IRP) 2019. The tender attracted 28 bids accounting for 5.117 GW of potential capacity.

Security of supply

The winning bidders, who must be ready to roll by August 2022, represent a heavy concentration of LNG-based power along with hybrid renewable options. State-owned utility Eskom will be the offtaker under 20-year power purchase agreements. But IHS Markit analysts Silvia Macri and George Hilton said in a 25 March report they anticipate the projects will not be able to meet the commissioning date.

LNG took the biggest share of the winning bids, with 1.22 GW across three Karpowership vessels. The lack of LNG infrastructure in the country makes offshore power ships a more feasible option, Macri and Hilton said in the report.

The RFPs are part of a longer-term ramping up of generation capacity in South Africa. IHS Markit expects 560 MW of new South African utility-scale solar PV additions on average annually through 2050 and 700 MW a year of wind newbuild, along with more than 400 MW a year of residential and small commercial systems.

The South African renewable generation push will not be unique in Africa. IHS Markit expects renewable generation to account for at least 35% of the continent's generation stack by 2050.

South Africa's push to add generation capacity comes after endemic load shedding at state-owned utility Eskom. The vertically integrated utility accounts for 86% of total power generation capacity, according to IHS Markit data.

However, a lack of investment in its operations regularly pushes plants offline and leaves the company no option but to cut service to customers, with this week no exception. On 13 April, the company tweeted that over 12.6 GW of capacity was unavailable due to "breakdowns and delays," while another nearly 4.78 GW was out of action for planned maintenance. Eskom initiated load shedding in 2007, when it said the blackouts would continue for five to seven years.

South Africa's generation stack is dominated by coal, accounting for 85% in 2019, according to IHS Markit data. South Africa produced 258.9 million mt of coal in 2019, according to Minerals Council South Africa, good for seventh in the global rankings table.

Sasol's Secunda facility includes the 160,000 b/d coal-to-liquids (CTL) facility. In February 2018, Greenpeace Africa said the Secunda CTL plant was the world's biggest single-point source of emissions. CTL was the driving force of Sasol's formative years as South Africa sought mitigate its lack of oil and natural gas reserves after the Second World War.

Hydrogen, SAF

But Sasol has moved on from just CTL, building a petrochemicals arm that accounted for 58.7% of its turnover in the six months that ended 31 December 2020. It has moved beyond just South Africa too, exemplified by a sustainable aviation fuel (SAF) announcement 14 April.

Sasol said it was forming a consortium with Linde, Enertrag, and Navitas Holdings -- the LEN Consortium -- in bidding to produce SAF under the auspices of the German government's H2Global auction platform.

SAF is part of efforts to decarbonize the aviation sector, widely viewed as one of the toughest sectors in which to reduce GHG emissions. SAF production employs a power to liquid (PTL) process, which relies on carbon feedstock (in this case biomass) and the production of green hydrogen through electrolysis using renewable energy. The carbon and hydrogen are converted to synthesis gas, a mixture of carbon monoxide and hydrogen, which in turn is converted to longer chain hydrocarbons for the production of jet fuel or SAF via the Fischer-Tropsch process -- the same technology used by its CTL and gas-to-liquids operations.

Sasol said it is exploring the feasibility of SAF production at its Secunda synfuels plant with its consortium partners.

"The decision to explore the creation of a SAF production demonstration facility at our Secunda operations is aligned with our long-term decarbonization strategy," Fleetwood Grobler, Sasol CEO, said in the consortium announcement, adding: "Green hydrogen is one of the key transitional fuel sources that we are working with via various strategic demonstration opportunities and partnerships."

Sasol is also looking further downstream in the hydrogen sector, it said 14 April in a separate statement. It has teamed up with Toyota South Africa Motors to explore development of a "green hydrogen mobility" ecosystem in South Africa. Sasol already produces grey hydrogen from fossil fuels, it said in the statement.

The companies plan to develop a "mobility corridor" for hydrogen fuel cell-powered heavy-duty long-haul trucks. A Toyota hydrogen fuel truck is currently in development.

"Green hydrogen can help tackle various critical energy challenges, and is positioned for rapid global growth as the pathway of choice to decarbonize sectors such long-haul transport, chemicals, and iron and steel, where it is proving difficult to meaningfully reduce carbon emissions," Grobler said in announcing the partnership with Toyota.

South Africa has "exceptional renewable energy resources making the country ideal for green hydrogen production," added Grobler, noting how much potential it had for contributing to energy security and trade for South Africa.

Investor criticism

The clean energy initiatives also come after pressure on the company from investors and environmental activists.

The company was kicked off the investment list of Norway's sovereign wealth fund in May 2020 and South African non-governmental organizations Just Share and the Raith Foundation filed shareholder proposals in 2019 and 2020 calling on Sasol to set Paris Agreement-aligned targets.

And in March the company was named and shamed by investor coalition Climate Action 100+ for failing to meet any of its climate engagement metrics, which prompted a swift retort 24 March from Sasol ahead of a scheduled meeting between the two on 26 March.

The investor coalition seeks to ensure the globe's largest corporate GHG emitters take action on climate change. It comprises over 570 investors with over $54 trillion in assets under management.

Sasol fired back, saying: "We … submit that that the scoring is not representative of Sasol's performance, context (due to the lack of assessment criteria that takes into account the developing country context Sasol largely operates in), the reduction journey we are on, and our associated efforts to Justly Transition." The company added that it had cut its emissions by 16% since 2004 and had set a 2030 GHG reduction target.

Posted 15 April 2021 by Keiron Greenhalgh, Editor, Energy and Natural Resources Group, IHS Markit

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