Energy Security Masterplan - Phase 2 Presentation

1. Energy Security Masterplan – Phase 2 Presentation to the Parliamentary Portfolio Committee on Minerals and Energy 18 June 2008

2. Introduction - Energy Masterplan • Cabinet approved Phase 1 of the Energy Masterplan • Phase 1 • Energy Security framework • Energy planning approach • Liquid fuels short to medium plan • Phase 2 • Electricity industry short, medium and long term plan • Integration areas between electricity and liquid fuels industries

3. Introduction – Masterplan (Phase1) • The Masterplan seeks to: • achieve goals that have been set for the sector • Address current challenges • set security of supply standards • Set appropriate reserve margin • Incorporate climate change challenges

4. Presentation Outline • Energy security framework • World electricity • RSA electricity • Development of the masterplan • Goals • Situational analysis • Demand forecast • Decision making • Interventions • Implementation matrix • Recommendations

5. World Electricity Generation: Primary Energy Mix 2005 Source: World Nuclear Association, 2007.

6. South Africa (2004) vs. Eskom (2006/7) Primary Energy Mix

7. Map of Power Stations

8. South Africa: Electricity Demand Profile Shape (National Electricity Grid) Source: Eskom Holdings Limited Annual Report 2007

9. Security of Supply: Eskom Weekly Peak Demand (2006 vs. 2007)

10. Definition: Generation Reserve Margin • The installed capacity of a power system must exceed the expected demand to allow for: • Generator breakdowns (forced outages) • Planned maintenance. • Load forecast uncertainty. • Security across the whole system, taking into account location of plant, location of load and regional transmission capacity. • The reserve margin is the amount of reserve capacity, expressed as a percentage of the annual peak load. • Example: If peak load = 40 000 MW and installed capacity = 44 000 MW, the reserve margin = 10%. • Smaller reserve margin increases the risk of supply interruption. Too large a margin results in unnecessary investment expenditure. Security vs. Cost.

11. South Africa (National Electricity Grid): Capacity and Maximum Demand at Winter Peak (1996 – 2006) Source: Eskom Holdings Limited Annual Report 2007

12. Electricity Masterplan

13. Overview of masterplan • Sets goals for the sector • Sets key assumptions • Demand projections • Economic outlook • Formulated based on • White Paper on Energy • Regulatory policy framework

14. Goals • Supporting economic growth and development • Improving the reliability of electricity infrastructure • Providing a reasonable priced electricity supply • Ensuring the security of supply as set by the security of supply standards • Diversifying primary energy sources • Increasing access to energy services • Meeting renewable energy targets as set in the White Paper

15. Process followed • Generation • Adoption of a security standard for electricity supply • Appropriate investment level • Reserve margin • Transmission • Removal of transmission constraints WC, EC, KZN • Distribution infrastructure • Universal access • Bulk infrastructure

16. Process followed • Acceleration of DSM and energy efficiency

17. Planning assumptions • Detailed studies to be undertaken • Integration opportunities of electricity and primary energy sources • Nuclear energy is not considered • Imported electricity is not included • Assumed economic forecast • Consideration of driving forces and supply chain challenges

18. Decision making considerations • Environmental Impact Assessments (EIA) • Site selection • Climate change • Renewable energy • Funding and resourcing • Skills management and development • Research and Technology • 2010 FIFA World Cup

19. South Africa: Electricity Demand/Capacity Forecast (4% Growth Rate related to 6% AsgiSA GDP Growth Rate) Source: Eskom

20. System demand focus

21. Planned interventions

22. In summary… • In the short-term • Demand side management • Peaking plants • Cogeneration projects. • In the medium to long-term • Mix of base load and peaking plants • Demand side management • Appropriate reserve margin

23. South Africa: Electricity Demand Profile Shape (National Electricity Grid) Source: Eskom Holdings Limited Annual Report 2007

24. Energy use by the residential sector Source: Energy outlook for South Africa - 2002

25. Households of South Africa - 2001Main Energy Source for Cooking by Region Source: Stats SA - Census 2001

26. Households of South Africa - 2001Main Energy Source for Heating by Region Source: Stats SA - Census 2001

27. Facts on domestic consumption • Geyser – 4 kW • 10 million households of electricity • 2.5 million households own an electric geysers • This is equivalent to 10 000 MW (at peak)

28. Planned Interventions • Short term • Demand side management • Energy efficiency • Fuel switching • Metering

29. Planned interventions cont./ • Medium term • Generation • Cogeneration • Capacity expansion plan programme • Additional peaking power plants • Transmission • Expansion plans • Total system capacity and reliability plan

30. Intervention plans cont./ • Medium term cont./ • Distribution • Maintenance and refurbishment • Expansion of distribution network • Electrification of households • Restructuring of the distribution sector

31. Long term Plan

32. Implementation matrix

33. Summary of recommendations of phase 2 Masterplan • Reserve margin – 19% • Performance standard • “1 day in 10 years” • N – 1 transmission contingency • Regulation of the investment in maintenance and rehabilitation of infrastructure • Regulation of the quality of supply of electricity

34. Summary of recommendations • Cabinet also noted: • Electricity price path, to finance the implementation of this plan; • Import/export of electricity; • Cogeneration, DSM and other energy efficiency measures; • Leveraging private sector participation (IPPs) in generation; • Supply of gas for primary energy diversification; • Attraction of energy intensive investments as a strategy for development

35. Consultation • NERSA • Eskom • Municipalities • Organised labour • Organised business

36. I Thank You