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.
 The Power Conservation Program (PCP) was developed as a
mitigation strategy.
Power Conservation
Program (PCP)
•
•
Energy Conservation Scheme
(ECS):
Voluntary or price driven
Mechanisms
10% Load reduction
Energy Growth
Management (EGM)
• New connection
management
• Network planning
Demand Side
Management
(DSM)
Pricing
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
ECS procedure
1. Baseline negotiations
2. Allocation of electricity quota:
reduction target 10%
4. Settle bill and penalties if
needed
3. Reallocate electricity according to
ECS rules
Baseline negotiations
Baseline consumption options
Reference period A :
Consecutive 10/2008 -10/2009
Reference Consumption A:
0.97 x sum ( Ref period A)
Reference period C :
12 Consecutive 10/20069/2007
Reference Consumption C:
sum ( Ref period C)
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)
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%
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
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
3. Average winter electricity tariff (2011)= R0.66 per
kWh




1.
2.
Scenario A
 Default allocation – no late rephasing
Scenario B
 Avoiding high winter month penalties
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
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
Questions
Goals of ECS
 Improved management of South Africa’s electricity
system
 Enhancing information exchange between
A. large industrial commercial customers
B. System Operator
 Sustained reduction arising from improved energy
efficiency
 Promotion of energy efficient growth in electricity
consumption.