OUR JOURNEY TOWARDS 2030 NELISIWE MAGUBANE DIRECTOR GENERAL, DOE, - - PowerPoint PPT Presentation

OUR JOURNEY TOWARDS 2030

NELISIWE MAGUBANE DIRECTOR GENERAL, DOE, RSA

Overview of the RSA electricity industry sources of power

Outline of presentation

• 1. Macro-Economic Overview of South Africa
• 2. Overview of the South African Electricity

Industry

• 3. Summary of the Policy Adjusted IRP
• 4. Implementation of the IRP2010

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• 4. Implementation of the IRP2010
• 5. SAPP Future Energy Outlook

• 1. Macro-economic overview of South Africa

Macro-economic overview of South Africa

Key macro economy indicators

Key facts Nominal GDP vs Real GDP growth

South Africa is Africa’s largest economy and the 25th largest economy globally Real GDP is expected to grow at 3.7% in 2011 South Africa’s Net Public debt to GDP ratio (33%) is relatively low compared to comparative countries. In addition, the Government expects the fiscal deficit to narrow to 5.4% of GDP in 2010/11, and 4.7% in 2011/12 The state plans on investing $114.31bn over the next three years on economic and social infrastructure

4,483 4,041 3,635 3,266 2,941 2,659 2,396 2,274 2,016 1,767 1,571 4.5% 4.4% 4.2% 3.8% 3.4% 2.8% (1.7%) 3.6% 5.6% 5.6% 5.3% 1,000 2,000 3,000 4,000 5,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

ZARbn

GDP contributors Main trading partners

Electricity, gas and w ater 1.9% Agriculture, forestry & fishing 2.3% Construction 3.2% Personal services 5.7% Mining and quarrying 5.3% Transport, storage and communication 9.1% Manufacturing 15.0% Finance, real estate and business services 21.2% Genral government services 13.6% Wholesale, retail, motor trade and accomodation 12.0% Taxes less subisidies

• n products

10.6%

Main share of exports Main share of imports

Other 42.2% Japan 7.6% United States 9.0% European Union (27) 26.5% China 10.5% Sw itzerland 4.2%

Other 37.0% Saudi Arabia 5.0% United States 7.8% European Union (27) 32.2% China 13.1% Japan 4.9%

Macro-economic overview of South Africa

Key macro economy indicators

Current account deficit is expected to widen to 5.5% of GDP in 2011 (2010: 3.9%) as exports fail to keep up with imports owing to fragility in OECD markets Gradual depreciation of the currency is expected during 2011 because of indirect action by the authorities to weaken the Rand (by building foreign-exchange reserves) Interest rates are currently at a 35 year low Outlook of South Africa’s economy is rated stable, Fitch cited the smoother than expected recovery from the recession

Reserves and external debt Exchange rate forecasts

25,587 32,943 34,069 39,675 43,829 45,633 46,559 30,053 38,346 37,389 34,916 40,131 41,811 41,811 10,000 20,000 30,000 40,000 50,000 2006 2007 2008 2009 2010 2011 2012 Intl Reserves

• Ext. Debt

9.3 10 12.9 10.6 8.8 9.7 10.4 10.8 11 11.3 7 6.9 9.3 7.4 6.6 8.1 8.8 9.3 9.4 9.6 2 4 6 8 10 12 14 2006 2007 2008 2009 2010 2011F2012F2013F2014F2015F R/€ (av) R/US (av)

Spot Exchange(1): R/US 7

Credit ratings

Intl Reserves

• Ext. Debt

R/€ (av) R/US (av)

Credit ratings

A-1 A BBB+ A-2 NR A3 A3 P-2 NR A BBB+ F2 Foreign Currency Long-Term Debt Local Currency Long-Term Debt Foreign Currency Short-Term Debt Local Currency Short-Term Debt

1,201.2 1,023.5 832.5 646.9 532.0 500.1 525.5 517.9 35.5% 33.7% 30.3% 26.1% 22.9% 24.0% 28.7% 32.1% 200 400 600 800 1,000 1,200 1,400 2005 2006 2007 2008 2009 2010 2011 2012 20% 24% 28% 32% 36% 40%

Government net debt (total and as % GDP) Prime interest rates forecasts

1 3.6 1 1 .2 1 0.5 1 1 .7 9.8 9.2 9.7 1 0.1 1 0.5 1 0.5 2 4 6 8 1 1 2 1 4 1 6 2006 2007 2008 2009 201 201 1 F 201 2F 201 3F 201 4F 201 5F

Prime Interest Rate (End Period; %) ZAR m

• 2. Overview of the South African electricity industry

Overview of the South African electricity industry: Sources of power

Electricity consumption

Transportation 2.7% Commercial 11.4% Industrial Segment 40.9% Residential Segment 36.8% Other 8.1%

Electricity production(1)

Hydroelectric 0.5% Pumped 1.2% Nuclear Pow er 5.7% Gas Turbine 0.1%

Overview

• Electricity market grew by $1.4bn in 2009 to reach $5.6bn
• Electricity generation dominated by state-owned power company Eskom(2),

which currently produces over 96.7% of the power used in the country

• Eskom has a current nominal installed capacity of 44,175MW
• Government addressing electricity supply issues with Eskom and Independent

Power Producers (“IPPs”)

• South Africa needs over 40,000 MW new generation capacity by 2025
• Eskom is part of Southern African Power Pool, a group of utilities in the region

aiming to create a common market for electricity in the region

Coal-Fired 92.6%

Electricity market

10.3 9.3 8.5 7.8 6.5 5.6 291.2 286.2 280.5 273.3 240.6 221.2 2 4 6 8 10 12 50 100 150 200 250 300 350 2009 2010 2011E 2012E 2013E 2014E

Market Volume (Twh) Market Value ($bn)

Transmission and Distribution Overview

• Currently, the transmission of electricity in South Africa is undertaken by

Eskom

• The company has over 28,000km of transmission lines spanning the

entire country

• Electricity distribution is the final stage in the delivery of electricity to end

users, currently undertaken by Eskom, together with 187 municipalities

• Municipalities account for c.40% of the total electricity sales and c.60% of

the customer base

Overview of the South African electricity industry:

Sources of power (cont’d)

Eskom Power Grid(1)

Coal power

• c.93% of power in South Africa is generated from coal fired power stations
• South Africa is the 5th largest coal producing country in the world with coal

reserves of 30,408mt (3.68% of world total)

• Coal accounts for 86% of Eskom’s nominal current capacity (37,755MW)

Nuclear power

• Only one nuclear power station (Koeberg), a base-load station with a nominal

installed capacity of 1,930MW (c.5%)

• Construction for the plant began in 1976 and full operation in 1985

– Produced 12,806 GWh electricity in year ended 31 March 2010

• Uses c.30tpa of enriched uranium
• Uses c.30tpa of enriched uranium
• Government authorized contracts in place to supply Koeberg for the next 8

years

• It is intended that nuclear will comprise 17% of South Africa’s base load energy

mix by 2030 Hydro-electric, Gas fuel and Renewable Projects

• Hydro-electric power stations account for less than 2% of nominal installed

capacity, while the gas/liquid fuel turbine accounts for c.6%(2)

• With assistance from the World Bank, plans currently in place for the

development of a 100MW Sere wind power project, as well as the Upington concentrating solar thermal power (CSTP) project, covering 4km2

• Should the CSTP project prove to be commercially feasible, a larger facility

could be constructed

Overview of the South African electricity industry:

Regulatory environment

National Energy Regulator

National Energy Regulator (NERSA) regulates the South African electricity industry NERSA licences electricity generation, transmission, distribution and trading activities in South Africa NERSA sets tariffs based on its Multi-Year Price Determination Methodology (MYPD) – Annual revenues are set for a three year period currently from 1 April 2010 to 31 March 2013

Electricity Pricing Policy

In November 2008, the Government approved the Energy Pricing Policy (EPP) which sets the determination of regulated

revenues going forward

– Future regulated revenues will be based on the replacement value of its assets – Ensures long-term sustainability of the industry to fund future capacity expansion requirements EPP aims to reach cost-reflective tariffs that will reflect the full economic cost of supplying electricity to a customer – EPP determines a 5 year transition period that will end in FY2015 to reach cost-reflective tariffs – EPP determines a 5 year transition period that will end in FY2015 to reach cost-reflective tariffs

Department of Energy

Department of Energy is mainly responsible for electricity generation planning via Integrated Resource Plan (IRP), which

determines electricity generation capacity expansion requirements in South Africa

– Objective is to develop a sustainable electricity generation capacity over the next 20 years – Sets capacity requirements by energy source that will be provided by Eskom and other IPPs – NERSA can only license a power station that is built in accordance with the IRP

• 3. The Integrated Resource Plan 2010

Overview of the IRP 2010

The policy objective of the IRP is to determine South Africa’s long-term electricity demand and detail how this demand should be met in terms of generating capacity, type, timing and cost the 1st draft of the IRP was the Revised Balanced Scenario (RBS) of energy supply options published by the department in 2009 The Final IRP2010 is a result of modelling changes to the RBS as a result of extensive public participation processes The Final IRP2010 (Policy-Adjusted IRP) represent a trade-off between: – Least investment cost and consideration for economic growth – Least investment cost and consideration for economic growth – Climate change mitigation – Diversity and security of supply – Job creation – Sustainable development

Objectives of the IRP 2010

The objective of the IRP is to develop a sustainable electricity investment strategy for South Africa over the next 20 years Strategy encompasses both implications from demand-side management and pricing as well as capacity provided by generators The intent of the IRP is to: – Improve the reliability of electricity generation – Ascertain South Africa’s capacity investment needs – Consider environmental impacts and the effect of renewable energy technologies technologies – Provide a framework for the Ministerial determination of new generation capacity

IRP is a “living” plan, which will be updated on an ongoing basis to reflect the changing needs of South Africa and to learn from the inevitable changes in South Africa’s economical, social and technological environment

Policy-Adjusted IRP South Africa’s generation mix

RTS Capacity Medupi Kusile Ingula DOE OCGT IPP Cogeneration, Own Build Wind CSP Landfill, Hydro Sere Decommissioning Coal (PF, FBC, Imports, own build) Gas CCGT Peak-OCGT Import Hydro Wind Solar PV CSP Nuclear Fleet Total New and Committed Build MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW 2010 380 260 640 2011 679 130 200 1,009 2012 303 200 100 100 300 1,003 2013 101 722 333 1,020 300 25 300 2,801 2014 722 999 100 500 400 300 3,021 2015 1,444 100 (180) 500 400 300 2,564 2016 722 (90) 400 300 100 1,432 Committed Build New Build Options

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Firm commitment necessary now Firm commitment in IRP 2012

2016 722 (90) 400 300 100 1,432 2017 722 1,446 400 300 100 2,968 2018 723 400 300 100 1,523 2019 1,446 250 237 400 300 100 2,733 2020 723 250 237 400 300 100 2,010 2021 (75) 250 237 400 300 100 1,212 2022 (1,870) 250 805 1,143 400 300 100 1,128 2023 (2,280) 250 805 1,183 400 300 100 1,600 2,358 2024 (909) 250 283 800 300 100 1,600 2,424 2025 (1,520) 250 805 1,600 1,000 100 1,600 3,835 2026 1,000 400 500 1,600 3,500 2027 250 1,600 500 2,350 2028 (2,850) 1,000 474 690 500 1,600 1,414 2029 (1,128) 250 237 805 1,000 1,600 2,764 2030 1,000 948 1,000 2,948 1,463 4,332 4,338 1,332 1,020 390 700 200 125 100 (10,902) 6,250 2,370 3,910 2,609 8,400 8,400 1,000 9,600

45,637

Summary of the IRP: Generation Capacity

1.0 8.4 3.0 6.6 8.4 3.9 2.4 2.6 6.3 5 10 15 20 25

Wind CSP Solar PV Import 15% 23% 6% 5% 9% 42% Nuclear Coal Gas- CCGT Hydro Renewables Peak- OCG

Policy-Adjusted IRP: New Build Programme

17.8 Share of total new GW

1 4

Committed new builds in 2010 in 2030 Σ Σ Σ Σ = 260 TWh Σ Σ Σ Σ = 454 TWh 10.1 0.0 0.05 0.0 1.0 1.0 35.5 1.8 2.1 0.0 2.4 0.0 65% 20% 5% 1% < 0.1% 9% 90% 5% 5% 0% < 0.1% 0% Existing fleet (2010)

IRP 2010 Generation Mix towards 2030

40,000 60,000 80,000 100,000

CCGT OCGT Nuclear Hydro Wind CSP PV

Capacity installed EoY in GW1 1 5

20,000 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0

Coal

An increased role of IPPs in the power industry

Short – term generation capacity targeted

Independent pow er producers 10% Eskom 90%

Overview

• Independent power generation in South Africa will play a

better role going forward – Renewable energy generation – Self-generation – Cogeneration- the production of power using waste energy from industry processes in electricity generation, either for self-use or for contribution to the grid – More conventional forms of generation, such as coal-fired facilities

Independent pow er producers 30% Eskom 70%

Long – term generation Capacity targeted

coal-fired facilities

• Key benefit for IPPs include:

– The relative speed at which that they can be brought to steam – The resource burden on Eskom is alleviated (Eskom is not responsible for either financing or building the facilities) – Large part of the IPP programme is intended to facilitate the introduction of “green” power which will improve South Africa’s renewable energy profile

• 4. IMPLENTATION OF THE IRP 2010

Establishment & Objectives

• The ISMO will be an operator of the National Electricity Transmission System who buys electricity from generators and sells it to customers at a wholesale level
• Objectives:
• Leverage private capital and spread the risk appropriately amongst all parties
• Create a fair, transparent and non discriminatory trading environment between IPPs and Eskom where a credible and non-conflicted buyer handles the transactions
• Renewables to be combined with gas, coal or nuclear, though with less firmly committed nuclear new builds from first IRP (9.6GW 3.0GW)
• Mitigate a security of supply risk
• Facilitate non-discriminatory access to the Transmission Grid by all generators and distributors and ensure a fair environment for scheduling and dispatching of power from all generators
• IPP’s
• Create a platform to bring IPPs onto market as soon as possible
• Streamline the IPP procurement process
• Attract IPP’s to complement Eskom’s generation and address perceptions about conflicted role of Eskom as a simultaneous generator and buyer of electricity

Independent System and Market Operator Bill

18 Approach to Implementation

• Phase 1 (Drafting of the Bill) - March 2011 to December 2011
• The Draft Bill has been approved by Cabinet. The Bill closed for public comments on the 13 June 2011
• The Bill should be introduced to the parliamentary process before the end of the year, 2011
• Phase 2 (Making ISMO Operational) – July 2013
• Includes the transfer of functions, human resources and systems
• Phase 3 (ISMO in operation – without transmission assets) January 2014
• A fully populated and operational ISMO

Targeted Outcome

• ISMO will be a fully Public Entity legally separate from Eskom with four distinct functions:
• Planning (Integrated Resource Planning)
• Buying (from Eskom and IPP’s)
• Wholesale tariff aggregation
• Dispatch

The Department of Energy has decided to undertake a phased-in process

Renewable Energy Procurement Process

• 1st RE procurement for 3 725MW of Renewable Energy

– 1 800MW Wind – 1 400MW Solar

• Request for qualifications and proposals issued 31 July 2011
• Bidder’s conference held on 14th September 2011
• Five phase bidding process with 1st Phase closing date: 4 November 2011
• Subsequent bidding phases only available if the 1st phase is not oversubscribed

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____________________ Source: Research Channel Electricity Review South Africa, February 2011, DoE IRP Process Document

• 5. SAPP FUTURE ENERGY OUTLOOK

Energy Resources in the Region

GABON

• GEO-THERMAL

Research Agenda for IRP 2012

• Decision making under

uncertainties and risk assessment for key IPR scenarios

• Outlook for 2050- implications of

further greenhouse-gas reduction in primary energy mix for all

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• CSP

PV

sectors on the power sector

• Distributed generation and off-grid

generation (island grids)

• Grid integration of fluctuating

renewables including smart grids and role of storage

Ngiyabonga, Ngiyabonga,

Ngiyabonga Ngiyabonga Merci Merci Ke Ke ya ya leboha leboha Thank you Thank you Gracias Gracias Obrigado Obrigado Grazie Grazie Takk Takk Dank u Dank u Danke Danke schoen schoen

Ngiyabonga Ngiyabonga Merci Merci Ke Ke ya ya leboha leboha Thank you Thank you Gracias Gracias Obrigado Obrigado Grazie Grazie Grazie Grazie Takk Takk Dank u Dank u Danke Danke schoen schoen