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Briefing to the Portfolio Committee on Energy Date : 08 May 2018 Venue: Parliament; Cape Town Time : 10h00. Presentation Outline. Background and Introduction Independent Power Producers (IPPs) including signing of Power Purchase Agreements ( PPAs)
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Briefing to the Portfolio Committee on Energy Date : 08 May 2018 Venue: Parliament; Cape Town Time : 10h00
PresentationOutline • Background and Introduction • Independent Power Producers (IPPs) including signing of Power Purchase Agreements (PPAs) • Implementation Plan for the National Solar Water Heater Programme, including implications of moving the installation phase of the programme to CEF and IPP Office • Update on the investigation into the sale of strategic fuel stock • Update on the Integrated Resource Plan (IRP) and the Integrated Energy Plan (IEP) • Update on the Nuclear New Build Programme • Restructuring of Central Energy Fund and its subsidiaries • Legislative Programme • Responses to questions raised during the Budget, APP Strategic Plan briefing on 17th April 2018. • Challenges • Conclusion
Background And Introduction Established in May 2009 – outcome of the split of the Department of Minerals and Energy into Department of Energy and Department of Mineral Resources AIM: Formulate energy policies, regulatory frameworks and legislation, and oversee their implementation to ensure energy security, promotion of environmentally friendly energy carriers and access to affordable and reliable energy for all South Africans. MISSION: To regulate and transform the energy sector for the provision of secure, sustainable and affordable energy VISION 2025: Improving our energy mix by having 30% of clean energy by 2025.
Policy Imperatives POLICY IMPERATIVES -The White Paper on Energy Policy, 1998 supported by a number of pieces of legislation remains the guiding document for decisions being undertaken and gives effect to policy aspirations. NDP 2030- “Produce sufficient energy to support industry at competitive prices, ensuring access for poor households, while reducing carbon emissions per unit of power by one-third”
Independent Power Producers (IPPs) including signing of Power Purchase Agreements (PPAs) (Presentation)
BACKGROUND AND INTRODUCTION • The Solar Water Heater (SWH) Programme is comprised of three Components, namely, Social Component, Repair and Replace, and the Load Reduction. • The Department is responsible for Social Component, CEF / IPP implementing the Repair and Replace with Government Technical Advisory Centre (GTAC) appointed to support the Department on the Load Reduction • In 2015/16 financial year, Pursuant Cabinet’s decision to note the revised National Solar Water Heater Programme Contracting Model with respect to the implementation of the NSWH Programme, the Department appointed the Service Providers to Manufacture, Supply, Delivery and Warehousing of Solar Water Heater Baseline Systems for a period of three years starting from 2015/16, 2016/17 and 2017/18 financial years. • Twelve Suppliers were contracted and participated in different categories based on their ability to deliver as per the timeframes provided. • The Bid was divided into 5 categories each with a specific date and quantity of the Baseline Systems to be delivered, that is, A1/B1; A2; A2/B3; B3; and B4.
SWH IMPLMENTATION PLAN FOR 2018/19 FY AND PROGRESS UPDATE • Draft SWH Implementation Plan 2018/19 Financial Year • An Implementation Plan has been developed to guide the execution of the project on all activities, who has do what by when and how much is budgeted for each activity. • The draft Implementation Plan provides a detailed listing of activities, costs, expected deliverables, and schedules that are required to achieve the objectives of this programme. • This draft Implementation has taken into account the roles and responsibilities of all key role players. • Refer Draft Implementation Plan separately for details to an Annexure .
Investigation into the sale of Strategic Fuel Stocks
INVESTIGATION INTO THE SALE OF STRATEGIC FUEL STOCK • Transactions occurred between 15 December 2015 and 18 January 2016 • SFF Board became aware of the transactions in January 2016 • CEF Board became aware on or about February/March 2016 when $280 million of unknown funds entered the SFF account administered by CEF. • CEF Board requested a report from SFF Board • The Former Minister Joemat-Petersson instructed that the CEF Board conduct a contract review of all transactions entered into by SFF since 2014. • The CEF Board appointed Allen and Overy to conduct the contract review as instructed by the former Minister
INVESTIGATION INTO THE SALE OF STRATEGIC FUEL STOCK (Cont.) • Reason for the disposal of strategic crude oil • Implementation of the SFF Stock Rotation. This is common practice in countries that still hold their own strategic stock reserves. • Objectives of Stock Rotation Policy – as per SFF • SFF to access fresh stock of crude oil in the market; • To improve quality integrity with new stock; • Current stock to be sold at prevailing market price and to be replenished when market price is favorable to SFF; and • To create value that will yield net margin on the selling and buying of crude oil.
INVESTIGATION INTO THE SALE OF STRATEGIC FUEL STOCK (Cont.) • Progress thus Far • The Allen & Overy Report and Financial Impact Analysis report adopted by both SFF and CEF Boards which report found that the contracts were void from inception. • Allen & Overy withdrew from the matter after completion of the Report however they could no longer represent CEF / SFF in court proceedings citing a conflict of interest with one of the parties. Cliffe Dekker Hofmeyr Attorneys were appointed to replace them. • Application to declare the Disposal Purchase and Sale Agreements invalid and unlawful launched in the Western Cape High Court in March 2018. • CEF / SFF looking into other transactions relating to strategic stock and will take appropriate legal action
Integrated Energy Plan (IEP)
Problem Statement • Energy is the life blood of the economy which impacts on all sectors as well as individual livelihoods. • Integrated Energy Planning is required to ensure that current and future energy service needs can be met in the most cost effective, efficient and socially beneficial manner while also taking into account environmental impacts. • A lack of coordinated and integrated national planning for the energy sector has led to underinvestment in much needed energy infrastructure. • There is inadequate supply in the electricity, liquid fuel and gas industries due to a lack of timely investments in new capacity. • Electricity generation is constrained due to high dependency on one primary energy source (i.e. Coal). • There is a high dependence on import of liquid fuels as the current production capacity does not meet national and export demand. No investments have been made in new capacity since the start of the new democracy. • There is inadequate supply of natural gas due to limited importation from the region and limited transportation infrastructure. • Planning at individual sectorial level is commercially driven. Investments which are required in order to ensure that the policy objectives of the country are met are not made optimally resulting in under investment. • The IEP aims to guide future energy infrastructure investments, identify and recommend policy development to shape the future energy landscape of the country.
8 Key Energy Planning Objectives 1 Ensure Security of Supply 2 Minimise Cost of Energy 8 Promote Energy Access Social Development Economic Development 3 IEP Promote Job Creation and Localisation Promote Energy Efficiency 7 Environmental Sustainability 4 6 Diversify Supply Sources Minimise Environmental Impacts 5 Minimise Water Consumption
GLOBAL PARAMETERS and ASSUMPTIONS Global Parameters (e.g. GDP, Discount rate, Exchange Rate, Fuel Costs) • Technology Costs (Capital, O&M) • Plant performance • Plant operational life • Other technology parameters • Technology Costs (Capital, O&M) • Plant performance • Plant operational life • Production slates • Other technology parameters • Infrastructure costs • Legislative framework KEY PARAMETERS IRP Liquid Fuels Gas • Electricity generation build plan • Transmission build plan • System Adequacy • Electricity Price Path • Liquid Fuel Supply Options • Liquid fuel supply infrastructure • Location and logistics • Gas development scenarios • Gas price scenarios • Gas supply and infrastructure • Legislation and policy SCOPE All primary energy carriers All primary energy carriers Indigenous and imported gas Level of maturity of national planning
IEP SCOPE The Energy Planning Framework considers all energy carriers, all technology options and all key national policy imperatives and proposes an energy mix and policy recommendations which ensures that the energy sector can help achieve these in the most optimal manner. SUPPLY ASSUMPTIONS DEMAND ASSUMPTIONS
Integrated Resource Plan (IRP)
Background • The Integrated Resource Plan (IRP) 2010-30 was promulgated in March 2011; • Following public consultation, a number of policy decisions were adopted which resulted in the promulgated Policy Adjusted IRP 2010-30. • In line with S34 of the Electricity Act, Minister of Energy use the promulgated IRP to issue Determinations for new capacity; • IRP update starting point is therefore the promulgated IRP 2010-30
Next Steps 4 May 31 May • DoE Discussions on policy Considerations and preferred policy adjusted Scenario • Technical team to conclude modelling exercise taking into account Policy Considerations and directives. • Inter-Departmental Consultations including Consultation with the Regulator (in terms of section 32A of the Electricity Regulations Amendment Bill). This will include analysis of input and necessary adjustments. • Presentation to DG ESEID Cluster including necessary adjustments • Table Proposed Plan to Cabinet committee and Cabinet for inputs and publication for public comments. • Nedlac Consultations & Publish Draft IRP Review Report for public comments (Consultations and comments start after Cabinet approval = 1 month for consultations). • Adjustments of Final Plan taking into account Nedlac and Public comments • Table Final Plan to Cabinet for Gazetting 31 May 30 June 31 June 01 Aug 15 Aug
Nuclear New Build Programme • On 02 November 2016 following key Cabinet decision taken: • Cabinet approved Eskom as the Owner Operator and Procurer of Nuclear Power Plants. • Cabinet approved NECSA as the Owner Operator and Procurer for the Multipurpose Reactor and Nuclear Front end Fuel Cycle Facilities. • Cabinet affirmed the Department of Energy will act on its mandate as the policy setting and coordinating Department for the nuclear new build programme. • Following these decisions: • Minister of Energy promulgated Sect 34 Determination designating Eskom procurer of nuclear programme. • Eskom and NECSA jointly issued a Request for Information (RFI) to the market for the Nuclear New Build Programme with a RFI closing date of 28 April 2017. • The Department drafted Governance Framework in consultation with key stakeholders.
Nuclear New Build Programme (Cont.) • On 26 April 2017 the Judgment in the Earthlife Africa & Another versus the Minister of Energy & Others (Western Cape High Court) ramifications for the Nuclear New Build Programme. • The Court granted an order as follows: It is declared that: • The Minister’s decision to table the Russian IGA in terms of section 231(3) of the Constitution is unconstitutional and unlawful and is reviewed and set aside; • The Minister’s decisions to table the US and South Korea IGAs in terms of section 231(3) of the Constitution is unlawful and unconstitutional and are reviewed and set aside; • The 2013 Determination is unlawful and unconstitutional and is reviewed and set aside; and • The 2016 Determination is unlawful and unconstitutional and is reviewed and set aside.
Nuclear New Build Programme (Cont.) • The Minister of Energy took a decision not to appeal the Western Cape High Court Judgement. • Minister instructed the Department to address issues raised by the Western Cape High Court Judgement. • Department to restart the process afresh and renegotiate new Standardized Agreement with nuclear vendor countries and table these Agreements to Parliament within a reasonable time.
Wayforward on the NNBP The way forward on the Nuclear New Build Programme will be determined by the updated Integrated Resource Plan once it has been promulgated. The Integrated Resource Plan will determine the pace and scale that the country can afford for nuclear.
RESTRUCTURING OF CENTRAL ENERGY FUND AND ITS SUBSIDIARIES(Presentation)
RESPONSES TO QUESTIONS & COMMENNTS MADE ON 17 APRIL 2018(Annexure)
conclusion We thank and extend our appreciation to the Chairperson and Committee members for valuable contributions and guidance that we receive throughout our engagements and interface and would like to assure the Committee that Department will: • Expand energy access and regional advisory services. • Promote a low carbon economy by promoting sustainable and efficient use of energy & the utilization of cleaner energy and technologies. • Promote investment in the energy sector ( LNG import infrastructure, gas , infrastructure, refinery capacity expansion, power plants etc). • Identify and implement energy sector reforms. • Strengthen technical and financial capability to effectively evaluate and monitor all our energy projects. • Expedite the installations of SWH systems; Expedite the Integrated Energy Plan & Integrated Resource Plan; and • Collaborate with all key stakeholders in addressing & resolving the energy challenges.
