With many headlines focusing on the energy and power markets in Africa, and with the announcements of the conference line-ups for Power-Gen Africa 2012 and Clean Power Africa, the attention of the smart energy world is once again firmly on Africa.  Meanwhile, the natural gas gold rush in America has driven a number of speculators to seek the next bonanza.  China, now Africa’s largest trading partner, already has a number of energy investments in Southern Africa, specifically in natural gas exploration and production.

Non-Chinese producers are also moving in.  Australia based Kinetiko Energy, for example, has increased its potential in-place resources at its Amersfoort coal-bed methane gas project in South Africa to 2.4 trillion cubic feet of gas. This is up a whopping 41% from previous estimates. In mid-August state oil company PetroSA signed an agreement with Indian oil and gas exploration company Cairn India Group for crude oil and natural gas exploration in the Orange Basin on the west coast of South Africa in Cape Town.

A large increase in natural gas production in Southern Africa would have far-reaching effects in the areas of demand for coal, nuclear power, and renewable energy.  At present, South Africa relies heavily on coal for its electricity and is increasingly looking at renewable energy projects, though those plans are still nascent.  Eskom, the South African monopoly utility, is also pushing forward plans for a nuclear resurgence in South Africa. Earlier in 2012 Eskom confirmed its plans to move forward with a program to add 1.2 gigawatts (GW) of new nuclear capacity, with initial tenders expected be announced around the end of 2012.

Of the three fuels (coal, nuclear, and renewables), coal would be the easiest to replace and would provide the largest gains in terms of carbon emissions reductions.  A new wave of natural gas could also help unlock a surge in renewable energy, with natural gas plants providing base load power and renewables the peak power – assuming that reliable energy storage was also in place.  The biggest winner, though, could be fuel cells.

Fuel cells are highly efficient natural gas conversion devices, and with South Africa’s increased interest in fuel cells having an abundant supply of cheap fuel would go a long way to removing market barriers for local adoption.

In the United States, the natural gas boom is simply providing an already powerful economy with increased access to cheaper fuel.  A natural gas boom in Africa, by contrast, could have truly revolutionary impacts in terms of rural electrification, grid stability, and decreased carbon emissions.

Comverge has announced a major demand response (DR) deal of $27 million with Eskom, Africa’s largest provider of electricity.  Eskom has responsibility for 95% of the electricity in South Africa and 45% throughout the continent.  This initial 16-month pilot, to run through March 2013, calls for Comverge and Eskom to create and co-manage the first open market for DR in Africa.   As part of this deal, Comverge will aggregate 500 megawatts (MW) of load by managing Eskom’s DR program end-to-end.  In addition, the company will bring at least 100 MW of DR services – as a portion of the total MW allocated to the pilot – to the market by recruiting, training and certifying curtailment service providers in South Africa to serve as aggregators of MW for the utility.  In the first phase, the customer base will exclude residential customers and the largest industrials to focus on the next level of large commercial and industrial companies as well as mining and agricultural customers and re-distributors.  Comverge plans to open an office in Johannesburg to be close to Eskom’s headquarters.  

Comverge will deploy its intelligent energy management enterprise software, IntelliSOURCE 2.0, to register, dispatch and operate this new DR market in South Africa.  It will provide support to the Eskom Demand Response Aggregation Pilot Programme (DRAPP) to achieve improved grid reliability, balance supply and demand, and ultimately address the nation’s power supply, which is currently under strain with peak demand of around 37,000 MW.  IntelliSOURCE supports the full life-cycle of DR, from customer acquisition to demand response management and all the way to resource optimization.  According to Comverge, this deal is the 19^th deployment of the IntelliSOURCE platform, representing the first client since the company formed its new International subsidiary in March 2011.  

Thanks to this win, Comverge’s profitability and revenues, which totaled $119 million in 2010, will see a significant upswing in 2012 (when most of the revenues from the contract will be realized) and in 2013.  From a competitive standpoint, Comverge will also gain an edge against some of its toughest competitors, such as EnerNOC and Oracle, which Pike Research suspects were likely also bidding on this deal.  According to Comverge, the contract negotiations started in November 2010 with bids from a large number of vendors, including the biggest DR players, software and technology suppliers, and local engineering companies from South Arica.   

If successful, this pilot could open up an opportunity for Comverge for a larger, multi-year contract with Eskom.  It could also mark the beginning of a growing international DR business, which is one of Comverge’s key strategic goals for 2012 and beyond.  In March of 2011, the company established its new International subsidiary in order to capitalize on the global opportunities for its energy management and DR portfolio of offerings.  According to Pike Research’s report, Demand Response, the worldwide DR services market will grow at a compound annual growth rate (CAGR) of around 37% from 2010 and 2016, with emerging markets seeing much more robust growth rates, in the range of about 42% to nearly 50%, during the same period.