Regional renewable power play in East Africa
Hydragas plans a 600 MW power project series. Our plan is to develop half Lake Kivu’s potential into a regional energy powerhouse. The lake’s optimal production potential is 600 MWe of negative-carbon, gas-to-power for 50 years.
In addition, the Ruzizi River outflow cascade has potential to add 576 MW of hydro power. The gas may earn $60 B in lifetime revenues before it begins to deplete.
But adding its hydro potential can expand the output to almost 1200 MW. The hydro output potential continues indefinitely. Power revenues can reach $100 – 120 Billion over these 50 years, depending on tariffs. We expect feed-in tariffs to be 50% lower than before, when replacing diesel-fired temporary power.
But Hydragas’s potential is higher than competitors. Our design produces more power than any other operator. Its smart process innovation has better methane recovery. The efficiencies of extraction are key. So efficiency enables the company to reduce the cost of power. It places it among the lowest in the region. However, Hydragas can sell power to the grid at under half Rwanda’s retail price, with good returns.
The project series & Rwanda’s power mix
Diesel-fired temporary power presently supplies 50% of demand. Diesel therefore governs Rwanda’s retail power price calculation. This is true as long as it remains Rwanda’s main power source. But Hydragas can build 2-3 x 50 MW projects in five years. These would produce 150 MW to the grid. In the five years gas power can displace all the temporary diesel and HFO-fueled generation. This temporary power is presently the most expensive source. Gas should relegate diesel/HFO to a standby or peaking-power only.
Hydragas can continue to make similar investments, to the limits of the lake’s capacity. This project series can fulfill the balance of new power demand, for up to 20 years. Rwanda and DRC each hold 50% of the rights on the lake’s resource use. Each country can benefit by 300 MW from its share. This depends on several key equipment choices.
This incremental supply would come from an internally-sourced, renewable, bio-genic, low-carbon methane resource. Thus both economies can cut their import bill for liquid fuels by 50% in the process. Hydragas plans to similarly develop gas concessions and power supply agreements in the DRC. The DRC development should be able to parallel that of Rwanda in terms of output.
Project series & East Africa Power Pool
In East Africa, some 2000-3000 MW of temporary diesel power has been in use for over a decade. It costs in the range of USc 25-30/kWh. We may assume that Kivu power enters that export market soon. If so, it can benefit from exporting power at premium rates. For as long as power generation exceeds country needs, it can export the surplus very profitably.
The East African Power Pool (EAPP) grid can connect Rwanda to a large regional market. The region suffers with chronic supply shortages of power and weak interconnection capacity. The shortfall of permanent power supply often exceeds 2000 MW. The region’s power balance is a problem. Unreliable inter-country grid access exacerbates it. Correction requires completion of missing segments of the proposed EAPP ring-grid. The grid requires new links. Dashed lines in the map above show planned additions.
Expanding the EAPP grid to connect & distribute
EAPP hzs completed high-level planning for these grid expansions. The plan comprises numerous HV (>220 kV) inter-connector projects. One of these projects connects 2000 MW of hydro-power from Ethiopia. But this grid expansion plan requires coordination with the build-out of generation capacity. Ethiopia is leading the eastern additions of supply. But balancing the grid east-west requires a strong western supply source too.
Lake Kivu’s combined methane gas and the lake’s outflow hydro may achieve that need. Kivu gas-to-power with the Ruzizi River cascade can supply about 1400 MW. Together, these projects can anchor the western end of the grid. Balancing the grid east-to-west reduces line losses by as much as 30%.
Overuse or abuse of Lake Kivu gas resource
Power developers are currently planning or have built other projects on Lake Kivu. KivuWatt built 26 MW of gas-to-power plant from 2008-15. This was their first phase of a 100MW concession. Their GCA (gas concession agreement) expressed the limit in terms of power output instead of resource applying a limit on resource use.
Unfortunately this grant of an output concession creates a problem for both countries. With its low efficiency plant, KivuWatt would use all of Rwanda’s 50% share of the resource, as measured in 2004. The experts proposed a different format of concession terms, licensing and controlling KivuWatt’s resource inputs. This was to promote maximum power efficiency and thus maximum output. Instead, the government lost control over use of gas-rich water inputs from the resource. The resource is thus wide open to abuse.
Deviations from proposed concession policy
This KivuWatt concession deviated on two significant elements of the proposed concession policy. (1) The concession granted was expressed in terms of power output (in MW). It was not defined by resource input (volume of resource water used per year, per zone). (2) It did not apply the safety-driven need to fully comply with the 2009 final issue of the MPs.
In the case of (1), the developer secured concession wording an unlimited right to use the resource. This allows them to exploit it as inefficiently as its process design allows. The impact of over-use of resource is thus “allowed” under the concession. This effectively means that KivuWatt has secured the sole right to use Rwanda’s concession-able resource.
Arguably, their plant inefficiency can see them use up to a third of the DRC’s rights too. The full impact of this problem has not yet arisen. It would be felt if the company was to build out the full 100 MW concession. 100 MW will include the three additional gas extraction plants built to the same design.
Safety impacts of non-compliance to the MPs
But for (2), Kivuwatt’s impact on the lake’s sub-structure, there is a major safety concern looming. It is being raised by the monitoring authority, LKMP. Certain developers have persistently avoided full compliance. It appears that proper application of regulations, as set out in the MPs, are seen as optional. But these require adherence to specifications on the control of re-injection water density. They further require the levels of re-injection to be into the same zone from which water was drawn.
The LKMP has observed deterioration of the lake’s density structure. The severity of non-compliance triggers a call for action. There is a risk that “bad-actor” developers lock up all access to gas resources in Rwanda. This is from them being neither capable nor willing to comply with regulations. The fault lay in early versions of concession agreements. These documents were not specific on key performance requirements. Nor were there sanctions applicable on developers for non-compliance.
Degrading the resource and potential output
There is a demonstrable risk of continual degrading the delicate resource structure in the lake. The long-term result of this is a reduction of current and potential output. Eventually this also leads to lake safety declining, potentially drastically. A damaged resource structure can shorten the harvesting period. The safety impact of a shortened harvest is that a significant gas inventory remains in place that cannot be removed.
There is a financial impact to both countries from these effects. The impact will be highly significant, if damage is allowed to continue. In fact the cost, relative to a complete and efficient harvest, is far too high to ignore. The potential value of the $80 B program can be reduced to just $10-15 B. While the developers return on investment is down by 80-90%, government tax revenues may drop from say $24 B to near zero. This reduction represents a huge destruction of value for both governments. Correcting the problem should be a top priority. Details can be provided.
Demonstrating new gas extraction technology
Hydragas is currently pursuing funding for the initial demonstration ahead of the commercial project series. But Hydragas completed its proof-of-concept testing in a pilot project in 2004. A demo facility is now required by the regulator, built to full-scale. For these reasons, Hydragas prefers to prove convincingly that we have operational and performance compliance to the MPs.
Investors commonly require proof of performance as a pre-cursor to initiating a project series at commercial-scale production. The demo is designed to fully justify their investment decision. Therefore Hydragas proposes to complete a demo plant installation on a budget of $23 million. This will be at 25 times the scale of our pilot-testing. It can be producing as early as Q4 2020. We would start up 12-15 months from funding close.
Our demo-plant capital cost can be reduced by using existing power plants. Two power installations exist onshore from 2008/9, with ~7 MW of idle generators. However, both currently lack any gas supply. KP1’s gas supply was taken out of commission in 2015. The REC – Data Environnement power plant never received a gas supply and may be available.
How to use a demo to confirm output capacity
Hydragas has an advanced state of pilot testing and design development. We can commission the demonstration project inside 12 months, from financing close and permitting.
In addition, we need to refine some technical design issues before full-scale, commercial installation. We plan to demonstrate the technology, by building a demo plant first, enabling us to finalize all such testing. Hence we will test issues such as our control theory and procedures for remote start-up and shut-down for safety reasons. Further, this would be a single full-scale gas production module. We can confirm its capability of producing gas sufficient for 5 MW power output during the demo.
From our financial model, this “demo” project has a respectable 17% return on investment. In addition, it provides a risk-mitigating, low capital cost, demonstration of process proof-of-performance.
Project series: commercial roll-out of 600 MW
Hydragas proposes to roll-out this project series at commercial-scale. The technology and design can be applied using several commercial models. Models include the following options to deal with the available entries to concession opportunities:
- Owned Concessions: We acquire and develop our own concessions for a project series, with each unit capable of 60 – 80 MW capacity in Rwanda. Because DRC proposes 4 concessions, these would have 75 – 100 MW capacity. If we develop efficient gas extraction and high-efficiency CCGT power plants, can meet or exceed concession capacity. Hydragas prefers this route, raising funds through debt and equity instruments for its project series.
- 3rd Party Concessions: We may develop or refit gas extraction facilities for concession holders. This applies where they lack compliant technology. We can execute on a BOO basis, or by providing turnkey plant. Royalties and O&M will apply to support ongoing operations. Refits may be possible to replace process equipment on existing barges. Operational control will be through SCADA. In this case Hydragas can centralise control onshore with field technical support by Hydragas.
- Utility Gas Provider: Hydragas can develop a gas production and distribution utility. We can thus provide a natural gas supply network in the country to service all users. We can supply to large power generators as well as industrial, commercial and domestic natural gas networks. Hydragas is uniquely equipped and funded to produce marketable gas with the best performing systems.
Feasibility assessment of the project series
Hydragas has assessed the technical and economic feasibility of the project series. The development model illustrates the roll-out options in detail. Each provides a compelling, but flexible investment opportunity. The company can create a leading gas and clean energy supply to the region. Our plan resolves the capacity and technology shortfalls of all current competitors.
Hydragas has worked for over a decade to create the technical advantage. It provides decisive technical leadership and business potential. We will create the lead player in gas extraction on Lake Kivu. Our roll-out plan is designed to finally close the technology shortfall and achieve full compliance with the MPs. Falling short on both needs has delayed all other projects by years and made their economic targets unachievable.
Building the projects
We plan to commence the project series soon. Financing may be in place by Q2 2020. We can lead the development by providing the safest and most productive gas recovery. Both countries can choose to develop their gas resource with us. In this way, Hydragas will enable attractive economic returns from gas production to both countries.
Hydragas is able to ensure optimal overall output from power generation. Economic returns will be highest for both operators and the host countries. Finally, we then achieve full compliance with the MPs. The industry can thus achieve great outcomes, making the lake communities safe.