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ADDITIONAL POINTS TO ADDRESS PROGRAMME 6 : PROGRAMMES AND PROJECTS Dr W Barnard Deputy Director General 29 October 2013. PROGRAMMES AND PROJECTS. A. ENERGY ADJUSTED BUDGET SUMMARY, VOTE 29
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ADDITIONAL POINTS TO ADDRESS PROGRAMME 6 : PROGRAMMES AND PROJECTS Dr W Barnard Deputy Director General 29 October 2013
PROGRAMMES AND PROJECTS A. ENERGY ADJUSTED BUDGET SUMMARY, VOTE 29 5. There was also a roll-over of R 28 million. Why was there a problem here with non-grid electrification? • The non-grid programme is a negotiation process -wall-to-wall grid licences to either municipalities or Eskom. Neither were interested in non-grid programme until recently, since it was seen as a pilot. The negotiations between the communities, Municipalities, Eskom and the private implementers are a very complex and time consuming process. Since one year contacts have been issued to the concessionaires the last two years, the areas been identified to implement non-grid are only secured 4-6 months into the financial year, which leaves a very short period to do the physical implementation. • Long procurement process in the re-appointing of non-grid service providers. • Critical shortage of INEP staff working on non-grid programme. Examples: • In 2011/12 for 2012/13 period INEP was requested to roll-out non-grid in Nqutu municipality. These areas were agreed upon by all stakeholders for non-grid electricity i.e Eskom, Municipality and Municipality. • At the time when implementation was supposed to have happened, the service provider was stopped by Eskom from installing the Solar Home System, since they had changed their grid roll-out plan.
PROGRAMMES AND PROJECTS (cont.) 5. There was also a roll-over of R 28 million. Why was there a problem here with non-grid electrification? (cont.) • DOE had to find an alternative area to roll-out the non-grid allocations in order to honour our contractual obligation with the service provider. OkhahlambaMunicipality was interested and the whole negotiation process had to be started all over again. • By the time this process was finalised it was near the end of the financial year 2012/13 and the service provider was only then able to order material which also had some kind of delay to be delivered. • The project is continuing well in Okhahlamba and will be completed in January 2014 • An additional challenge was that the contracts of the non-grid service providers expired at the end of November 2012. The process to extend their contract was only concluded in January 2013, making it difficult to organize themselves to complete some of the connections in time. • The New Household Electrification strategy was not been approved at the time the non-grid contacts expired, hence no clear strategy exist regarding the non-grid programme. As a result the last two years DOE had to go through a procurement process to procure the non-grid service providers. This process also added to the time delay before the non-grid projects could been roll-out, since the BAC needed more information in terms of the contract extension, as well as legal advise on the long history the Department had with the non-grid service providers concerned.
PROGRAMMES AND PROJECTS (cont.) A. ENERGY ADJUSTED BUDGET SUMMARY, VOTE 29 7.1. The DoE is also to give reasons for underperformance as declared in the “mid-year performance status”. Here focus on • Electrification and energy programme management Response • The achievements for Q2 of Programme 6 is as follows: • 10 quarterly targets been achieved • 5 partially achieved and • 2 not achieved. • A total of 92 085 connections have already been completed, which is about 21 000 more than has been achieved in Q2 of last year. • Q2 is only the first quarter of the municipal programme. • The first few months is always the ‘slow’ period and the majority of connection are completed in the latter part of Q3 and in Q4. • The performance is a vast improvement on the similar quarter last year, when the Branch was just been established.
PROGRAMMES AND PROJECTS (cont.) B. BRIEFING BY THE DEPARTMENT OF ENERGY ON THEIR 2ND QUARTERLY PERFORMANCE REPORT 2013/14 Update on the progress of the non-grid electrification programme Response • See response in A 5 above • Current non-grid progress:
PROGRAMMES AND PROJECTS (cont.) B. BRIEFING BY THE DEPARTMENT OF ENERGY ON THEIR 2ND QUARTERLY PERFORMANCE REPORT 2013/14 Under programme 6: Programmes and Projects, the DoE reported that six out of the nine planned targets were not achieved. How is this being addressed in the current financial year to ensure there is no repeat of this situation? Response • See comments under 7.1 above. • The achievements for Q2 of Programme 6 is as follows: • 10 quarterly targets been achieved • 5 partially achieved and • 2 not achieved.
PROGRAMMES AND PROJECTS (cont.) B. BRIEFING BY THE DEPARTMENT OF ENERGY ON THEIR 2ND QUARTERLY PERFORMANCE REPORT 2013/14 (cont.) • The Branch was established in July 2012. The approved structure at that stage was not fully funded and therefore didn’t had enough staff to perform all the functions necessary to complete the responsibilities of the Branch. However, with the new financial year and “matching and placing’ process been implemented from April 2013 this situation is in the process of improving. BRANCH: ENERGY PROGRAMMES AND PROJECTS REGIONAL ENERGY OFFICES ELECTRICITY INFRASTRUCTURE/INDUSTRY TRANSFORMATION PROGRAMMES AND PROJECTS OFFICE COMMUNITY UPLIFTMENT PROGRAMMES AND PROJECTS INEP
PROGRAMMES AND PROJECTS (cont.) D. UPDATE ON THE CONSTRUCTION OF WINDOWS 1 AS WELL AS WINDOWS 3 BY THE DOE • BW1 construction is progressing well and most of BW2 developers are busy with site clearance and development. BW3 has not been announced, will be done in the next few days. as been
PROGRAMMES AND PROJECTS (cont.) C. BRIEFING ON THE PILOT PROJECT ON ADAM BY THE DOE, SALGA, FFC AND MISA Response Briefing on Mini ADAM programme will be made to this Committee on 1 November.
There seems to have been inadequate consultation with some local municipalities regarding the bidding process, bidding criteria and the scope of the IPP projects. • There are challenges in managing expectations of local municipalities and communities. IPPs have to implement relevant SED/ED programs in the communities. More awareness/education at municipal/community level is required. • The SED programmes to start during operation phase, not construction phase. • There is a need for an engagement and communication between different government departments and municipalities to clarify roles. Communications from national to province to municipal are lacking. • The biggest challenge the project managers are facing is the non-responsiveness from responsible municipal departments in certain municipalities. • Some IPPs have alleged incidences of destructive and inappropriate interference at the local government level, which may hinder project completion. • Emergency response infrastructure and resources appear inadequate in most far-flung municipalities. • There is at times an impasse on hiring of labour between the municipality and the developers. The labour broker issue, if not handled properly could be problematic. • Labour rates sometimes differ for different disciplines in the same area resulting in discontent among workers, which could lead to unwanted industrial action. BW1 Community Issues
The IPPs should ensure that they engage municipalities and most specifically the LED officials. • IPPs should try as far and possible to ensure that SED is sustainable (as opposed to being a tick box exercise to achieve a target) in the locality of their project and that expectations are sufficiently managed. • IPPs need to ensure that through their processes they source as much as possible locally and more specifically in the locale of the project. This should not only be limited to labour but also services that are necessary for project development and maintenance. • IPPs must ensure that local people are part of skills development and there is a skills transfer process to enable locals to participate in the process rather than bringing in all skilled workers from outside South Africa. • Clearer guidelines with respect to local content and local content targets. Should also consider the introduction of more specific local content targets related to the local manufacturing of components, particularly associated with solar PV, solar CSP and wind technologies. • Future bid closure dates should be non-negotiable, as this will provide certainty to foreign and domestic investors, and continuity of renewable energy investments. The certainty so provided will also allow supplier industries to adjust their plans accordingly, as well as facilitate the promotion of localisation and skills development. BW1 Community Recommendations
It should be noted that Window 1 and 2 reflect fairly low thresholds for local content based on what the DOE deemed to be achievable during the first phase of the renewable energy construction programme . Thresholds reflect the minimum local content achievable, whilst the targets provide the upper band of what the DOE determined to be achievable. • Local content as stipulated by the dti should not be confused with localisation. The dti defines local content as “The local content of a product…,is the tender price less the value of imported content, expressed as a percentage.” • Local content therefore includes services such as consultations and transportation, and is based on percentage of total spend. In many large projects the civil works and rest of plant comprise of a significant percentage of total cost, and thus can be easily used to meet any local content thresholds. This is evident in the Solar and Wind REIPP projects where local content thresholds have been largely met by the civil and rest of plant costs. The impact on local manufacturers of solar and wind components has therefore been limited. • Localisation however is focused on the development of domestic production capacity and capabilities in order to assemble/produce parts, components and/or finished goods. Not with respect to the local area where the development is taking place. Localisation vs. Local Content
Environmental Impact Assessment - it is the responsibility of the Bidders to conduct Environmental Impact Assessment and the approval thereafter. However, as the department we look at the conditions attached to such Environmental Approval and the impact of such conditions to the RE project. There were number of conditions noted, but did not warrant any concern especially in relation to the preferred bidders. However, it should be noted that as the department we do not have sight of EIA related to Eskom's portion of the projects (building or transmission or distribution connection lines). Eskom – Is involved in the final evaluation process with regards to grid constrains. No bidders are appointed if there is capacity constrains on the grid, Eskom is required to give confirmation before the appointment. For BW1 the Eskom interconnectivity projects are on track. In the majority of cases the developers are constructing their own sub-stations, but under Eskom’s supervision and standards. Update on BW 1, BW2 & BW3
It is not possible to address in detail at this stage the improvements from BW2 to BW3, but between BW1 and BW2 there already has been improvements with regards to the following: • The IPPs had to provide their Economic Development (ED) plans as part of their bid submission in BW1. However, in BW2, we have allowed the IPPs to submit their ED plans after Financial Close. These plans also then need to be updated yearly in order to take into account any changes within the community. • An increase in local content from BW1 to BW2 to BW3 • Lessons learnt from site visits for BW1 in dealing with the community, has helped BW2 approach their communities differently and with more foresight. • In general for BW3, the prices and the ED offering are much better compared to BW1 and BW2. What Areas in BW 2& BW3 were improved?
Solar park.pdf Kaxuconsentrated solar September 2013_DoE.pdf
PROGRAMMES AND PROJECTS (cont.) B. BRIEFING BY THE DEPARTMENT OF ENERGY ON THEIR 2ND QUARTERLY PERFORMANCE REPORT 2013/14 Update on the progress of the non-grid electrification programme Response See response in A 5 above
