Regional renewable power play in East Africa

Hydragas plans a 400-600 MW power project series based on Lake Kivu. Our plan is to develop much of the lake’s potential into a regional energy powerhouse. The power output is highly dependent on the gas extraction method in use. The lake’s production potential is 600 MWe of negative-carbon, gas-to-power for 50 years. This is the highest of any of the competing gas extraction and power plant options. Most others produce less than 20% of this capacity. The gas-to-power option earns $40 B in lifetime energy revenues. 

But newly identified constraints on the lake’s safety planning suggest that power output needs to last over a longer time frame to maintain lake safety. Dr. Finn Hirslund of COWI, has discovered a need to constrain output. He recommends that resource usage should be stretched out over hundreds of years. His revised plan is to ensure that gas-fired power is available to stabilize the lake’s density structure for longer. The authorities need to constrain resource usage and power output, to keep the lake safe in the short term and the longer term. They should have the ability to plan a higher output for 20-25 years, then decrease output to 15-20% of that.

But Hydragas’s potential output is higher than competitors. Our design produces more gas, of better quality, than any other operator. Its smart process innovation enables 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.

Hydropower as a complementary energy source

In addition to gas-based energy, the Ruzizi River outflow cascade potentially adds 576 MW of hydropower with billions of dollars invested in a cascade of run-of-river hydro plants. 

But adding its hydro potential can expand the maximum output to almost 1.2 GW. The hydro output potential continues indefinitely, although it is limited seasonally during the dry seasons from May to September. Power revenues can reach $100 Billion over these 50 years, based on current feed-in tariffs. We expect average feed-in tariffs to trend lower than before, by replacing diesel-fired temporary power.

The project series & Rwanda’s power mix

Diesel-fired temporary power presently supplies 25% of demand in 2022, down from 50% in 2016. Diesel, therefore, has historically governed 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 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 standby or peaking-power only.

Hydragas can continue to make similar investments, up 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 beneficially extract 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 4000-6000 MW of temporary diesel power has been in use for over a decade. It costs in the range of USc 25-40/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 the country’s needs, it can export the surplus very profitably.

The East African Power Pool (EAPP) grid connects Rwanda to a large regional market. The region suffers from chronic supply shortages of power and weak interconnection capacity. The shortfall of permanent power supply often exceeds 2000 MW, made up by expensive rental power.

The region’s power balance is a problem.  Unreliable inter-country grid access exacerbates it. Correction requires the 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 has completed high-level planning for these regional 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 grid network’s 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 Rwanda’s 50% share of the resource in producing 100 MW. The experts proposed a different format of concession terms.

The license would control and limit KivuWatt’s resource inputs. This was to promote maximum power efficiency and thus maximum output. Instead, the government lost control over the use of gas-rich water inputs from the resource. The resource is thus wide open to abuse.

Deviations from the proposed concession policy

This KivuWatt concession deviated from 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.

The developer secured concession wording, in the case of (1), giving an unlimited right to use the resource at will. This allows them to exploit it as inefficiently as its process design allows. The impact of over-use of resources is thus “allowed” under the concession. This effectively means that KivuWatt has secured the sole right to use Rwanda’s concession-able resource.

Arguably, expansion to 100 MW, as proposed, would result in poor plant inefficiency consuming 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 permitted to build out the full 100 MW concession. An expansion project to 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 problem comes 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 the recommended sanctions levied on developers for non-compliance.

Degrading the resource and potential output

There is a demonstrable risk of continually degrading the delicate resource structure in the lake. The long-term result of this is to reduce 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 on both countries from these effects. The impact will be highly significant if the 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 drop to just $10-15 B. While the developer’s return on investment is down by 80-90%, government tax revenues may drop from say $24 B to near zero. This reduction represents 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 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. The regulator requires a demo facility, built to full scale for this proof. Hydragas prefers to prove convincingly that we have complete operational and performance compliance with the MPs.

Investors commonly require proof of performance as a precursor 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 $35 million. This will be at 25 times the scale of our pilot testing. It can be in production as early as Q4 2023. We would start up 12-15 months from the funding close.

Our demo-plant capital cost can be reduced by using existing power plants. Two power installations exist onshore from 2008/9, that were fitted with ~7 MW of generators, now standing idle with a lack of 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 passed an advanced state of pilot testing and design development. We expect to be able to commission the demonstration project within 12-15 months, from financing close and permitting. The demo plant is a required proof-of-performance test in the MPs.

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 delivers a respectable 12% 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 multi-project series at a commercial scale. The technology and design can be applied using several commercial models. Models include the following options for 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 exceed concession capacity. Hydragas prefers this route, raising funds through debt and equity instruments for its project series.
• 3rd Party Concessions: We develop or refit gas extraction facilities for concession holders where they lack viable technology. We can execute on a BOO basis, or provide a turnkey plant. Royalties and O&M will apply to support operations. Refits may be possible to replace equipment on existing barges. Operational control will be through SCADA. In this case, Hydragas can centralise expert-led control onshore with field technical support.
• 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 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 for 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 for 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.of