Sasol starts on huge green energy project

Synfuels producer Sasol and industrial gas and services provider Air Liquide have launched a tender to procure a massive 900MW of renewable energy, representing the largest green power procurement deal in SA’s private sector to date with an estimated value R13bn.

In a collaborative effort to reduce carbon emissions, the two companies have called for bidders to participate in a tender to procure 900MW of renewable energy by 2030 to supply Sasol’s SA operations.

The effort could ease some pressure on Sasol, the country’s second-largest polluter after Eskom, as an expanding number of investors dump companies with weak environmental track records. It will also help Sasol reduce its reliance on erratic power supply from Eskom.

To put it in perspective, 900MW is enough to power 600,000 average households and dwarfs other private sector renewables procurement in SA. Gold Fields’ 40MW solar plant, which was awarded a licence by the energy regulator in February, is the biggest renewable self-generation plant in the country to date.

And Sasol and Air Liquide’s requirements are big even in terms of the government’s green power procurement, with the largest utility-scale wind farms in SA having an installed capacity of 130MW.

Sasol was unable to provide a price tag for the procurement but Meridian Economics estimates the investment value, if split between wind and solar, will be between R12bn and R13bn. This excludes the financing costs during construction.

Sasol’s world-scale Secunda and Sasolburg facilities produce a range of high-value product streams, including liquid fuels, and chemicals. Secunda, where coal is used in the manufacture of synthetic fuels, is the single largest point of greenhouse gas emissions in the world.

The polluting nature of

Sasol’s SA operations has made it persona non grata for environmentally orientated investors. Last year it was one of 15 companies blacklisted for investment by Norway’s $1.3-trillion (about R19-trillion) sovereign wealth fund. The group is the largest payer of carbon tax in SA, a regime that is expected to become more onerous for emitters over time.

Sasol responded to growing investor pressure with a

roadmap to reduce the greenhouse gas emissions of its SA operation by at least 10% by 2030 – working off a 2017 baseline. The introduction of renewable energy will be a significant contributor to Sasol’s decarbonisation efforts, it said.

Subsequent to setting the 2030 target, Sasol entered into an agreement with Air Liquide for the sale of the 16 air separation units at the Secunda site, constituting the biggest oxygen production site in the world.

Air Liquide also committed to greenhouse gas emission reduction interventions over and above those committed to by Sasol.

The 900MW is a significant increase from Sasol’s original intention to procure 600MW of renewable power. The allocation will be split, with 500MW allocated to Sasol and 400MW to Air Liquide.

“Due to the highly integrated nature of the Secunda site and the footprint associated with the air separation units, collaboration between the companies is necessary to ensure optimal [greenhouse gas] emission reduction benefits,” said Lebelo Lukhele, chief procurement officer of Sasol’s energy business. “We are targeting the procurement of the first 600MW of capacity this year, of which 400MW will be allocated to Air Liquide and 200MW to Sasol, with the envisaged commercial operation dates commencing in 2023,” Lukhele said.

The two companies plan to finalise the signature of longterm power purchase agreements before the end of 2021.

To align with the government’s electricity infrastructure roadmap, the Integrated Resource Plan 2019, Sasol said wind and solar PV technologies are favoured for this first tranche of the programme.

The individual projects must demonstrate a generation capacity of at least 70MW, which is utility-scale projects.

It remains to be seen how quickly and easily these projects will obtain licences from the

National Energy Regulator of SA. As Eskom continues to seek tariff hikes in response to dwindling electricity sales, major industrial power users have been keen to generate their own power but have been hamstrung by red tape. Generating anything more than 1MW requires a licence from the regulator, and the process has proved long. Gold Fields, for example, waited three years for the licence for its 40MW project.

While industry has called for the licensing threshold for selfgeneration to be lifted to 50MW, with even Eskom CEO André de

Ruyter supporting the idea, energy minister Gwede Mantashe last month said the threshold will be lifted only to 10MW and advised that Eskom should “stay in its lane”.

Sasol said it is committed to further reduction opportunities to accelerate its decarbonisation efforts, aligned with its 2030 roadmap and with a focus on green hydrogen, the introduction of natural gas and improved energy efficiency.

The closing date for submissions of expressions of interest is April 23 2021.

TO PUT IT IN PERSPECTIVE, 900MW IS ENOUGH TO POWER 600,000 HOUSEHOLDS