Presentation on IRP2 by Ompi Aphane and Discussion Earthlife hosted - - PDF document

Presentation on IRP2 by Ompi Aphane and Discussion Earthlife hosted Energy Caucus Elijah Barayi Memorial, Johannesburg 14 May 2010 Mr Ompi Aphane introduced himself as DDG of the Department of Energy (DoE) to the Energy Caucus and explained how important this public consultation was for him as much as it was for civil

• society. He intended to keep presentation on the second Integrated Resource Plan (IRP2) short so

that questions could be answered and discussion could follow. He explained that government has limited capacity in many regards, so he claimed that it is doing its best to perform its consultative duties. The Electricity Regulation Act 2006 necessitated the compilation of an IRP and accompanying

• process. Since 2006 Eskom was required to only do certain things that were congruent with national

policy; this necessitated some forward-thinking plan to provide a planning platform for Eskom. IRP is a policy instrument that was only introduced in October 2006. This IRP applies to electricity planning

• nly, and it does not attempt to build in policy on energy end-use, such as cooking with gas.

Municipalities are treated differently from utilities. At the end of 2008 a regulatory framework for municipalities was introduced. Western Cape in 2006 experienced Koeberg-related black-outs; this initiated DSM initiatives by Eskom to keep the lights on – these were largely unsuccessful and ineffective. Eskom had been advocating the need for new generation capacity prior to the black outs in the W Cape, which continued until early 2008 when nationwide blackouts commenced. The MYPD at that stage was a 3yr cycle coming to an end, which necessitated a renewed assessment of measures addressing the gap between demand and supply. After two years of single-year price determinations, rather than Eskom undertaking its new build programme outside of a policy framework, government wanted to provide an immediate, but iterative, policy foundation for Eskom’s infrastructure plans. This is what IRP1 sought to provide. The IRP2 process will address some of the identified weaknesses in IRP1 and make a future plan that balances supply and demand. The IRP2 is also not set in stone and will be revisited going forward. Around 2013, when the current infrastructure programme and tariff regime envisaged in IRP1 and MYPD2, respectively, are due to end, and 2018 when some existing generation capacity will be decommissioned, there’s going to be serious imbalance in electricity supply and demand; therefore by the end of 2010, cabinet needs to make decisions about the future in the electricity sector.

Generally one needs 18 months to complete an IRP, after which the process of public engagement can begin again for IRP3. The IRP2 process involves certain parameters that give rise to assumptions that need to be made. The assumptions are used in a modelling process, which tries to balance supply and demand in the next 25 [ie 20] years. By law, Nersa is required to be involved in this

• process. There may be further opportunities for public consultation when Nersa undertakes its

licensing hearings. The IRP2 consultations will happen around the assumptions now before the modelling process, and again around the scenarios after the modelling has been completed during

• June. Among the scenarios, there is the reference BAU scenario; there are also scenarios that

accommodate emissions targets in accordance with Copenhagen commitments, and others. Getting stakeholders to align is critical for the DoE. Government is required to engage with all stakeholders, and is doing so bilaterally with many of them, including business labour and civil society groups. He noted that many stakeholders in industry and the government are of the view that that South Africa will not be able to reduce its emissions unless we build new nuclear capacity. There are 3 things one is required to keep in balance: keep the lights on; ability to implement (economically sensible funding and pricing); our future survival (CC, environment, using emissions proxy). However, it is government’s priority to create jobs; this precedes narrow financial considerations. September 2010 is the deadline for the adoption of a Cabinet-approved IRP2. Considering that June 2010 is a ‘dead’ month for availability and consultation, therefore technical modelling is planned to take place during June. Certain critical decisions need to be made by the end of this year, for example, determining baseload decisions that need to be made timeously (eg if there is a need to construct transmission networks from Cahora Bassa). Discount rate on Eskom’s WACC came with a bias of a higher overnight capital cost and a longer time

• ver which to pay back the loan. The current 9% rate used by Eskom renders both nuclear and RE

impractical. A team in Cape Town (ERC) and a team in America (Nexant) will peer reviewthe modelling for IRP2 so that it is replicable and there are no discrepancies. Questions were opened to the participants and Ompi responded after the lunch.

• Q1. Choices made through the IRP2 are going to have non-optional future costs – nuclear waste,

disposal costs and the consequences of mining for fossil fuels. Have these considerations been taken into account? (Lifecycle issues of nuclear) Ai. Yes Aii. Discounted decommissioning and waste management

• Q2. Intention to consult properly queried as registration was closed within 1 week from the date of

advertisement. Ai. Will open up registration again. [Until what date?]

• Q3. We need a longer timeframe for consultation on assumptions – need at least 30 days as required

by PAJA, not 1 week. Ai. Yes, will convey that to principals in the IRP 2 process including within the Department of Energy (and see further below)

• Q4. A different type of engagement is required for NGOs that are part of broader constituencies. The

people in this room are not representative of civil society. Ai. We need your suggestions about who DoE should reach out to and talk with.

• Q5. EDI Holdings’ involvement in the distribution of information about IRP2 public participation is
• worrisome. What is their role?

Ai. The budget vote for DME has not carried over to DoE. Therefore the department is under-resourced and is borrowing resources from different places. Hence Angelique Kilian, Ria Govender and Moira … have been seconded from EGI Holdings to support administration of the IRP 2 process. Aii. The process is still underway – an IRP2 doesn’t exist yet; (ie it has not been predetermined?). UCT’s ERC and American consultants Nexant are also undertaking the input and modelling in order to provide a peer review function. The system

• perator, in terms of Nersa’s licensing, is currently embedded within Eskom (based

in Germiston). The Minister’s budget speech proposed establishing ISMO (Independent System and Market Operator), which means that the System Operator functionality has been ring-fenced and will ultimately be taken out of Eskom (by the end of this year). With the same assumptions, anyone should be able to replicate the modelling with the same software (Plexos). Aiii. There are many advisors to the IRP process including Glyn Morris, Anton Eberhard, ERC, Mark Rossouw (EIUG), Kannan Lakmeerahan and Callie Fabricius (SO, Eskom), Doug Kuni (IPP Association) ....a full list of committee members will be made available.

• Q6. I don’t want to be a prophet of doom, but much consultation is just paying lip service to public
• engagement. How is this process going to be different?

Ai. See below

• Q7. Will you allow for a referendum as a deadlock-breaking mechanism on the question of nuclear

power? Ai. See below

• Q8. In principle, an IRP is possible without using nuclear power. Do you accept that it could be

strategic to choose RE instead of nuclear to avoid long term lock-in of enormous external costs? Is it possible to consider RE beyond Medupi and Kusile, instead of nuclear? Ai. We should not preclude the outcomes of the IRP process, and these scenarios are possible. Aii. Policy decisions are political matters, so the IRP is the incorrect forum to query existing government policy. Aiii. If you want to reopen debate on existing government policy, it needs to be taken to the policymaking community which is beyond the DoE, and includes NEDLAC

• Q. IF DoE doesn’t have capacity to implement a stakeholder engagement plan for IRP. If DoE is

serious about public consultation, is DoE open to proposals from this Caucus regarding improved (ie legal and meaningful stakeholder engagement? Aiv. Will advise DG and Minister of the request to extend the period for comments.

• Q9. In the IRP2 consultation process there are roles and responsibilities that are allocated to

different departments – this has an institutional implication of control – Eskom as operator? DoE?

Ai. A provision in the electricity regulations prescribes the mandate for planning is within the system operator, if you want to change that you must take it up with the custodians of the law. Eskom is not responsible for that. Q10. Much emphasis has been made of the “emergency”, a or “crisis” situation in the electricity sector, but we must keep in mind the choices and processes that led ot this crisis surrounds

• Eskom. There have been many crisis before: for example it was in a context of crisis that the

PBMR program was taken on by Eskom. However, implementation of the program has been a real problem. All the equipment that Eskom attempted to procure is now being scrapped, at a cost of R2 bn. Do we do the same again without contesting this “crisis”?We must not compromise the integrity of decision-making processes because there is apperception of a crisis.

• ur confidence now when Eskom says again that there is a crisis?

Ai. Disagreement about the ‘facts’ with PBMR; it never attempted to procure a nuclear power station. Aii. The rationale around “emergency” is purely around the timeframe given to DoE [but what is the motivation?] Q11. What is the power balance in the state – is it empty or does it work? Policy is set in line

• departments. DoE has control over nuclear, electricity,... DPE has control over PBMR and Eskom

– where is the alignment here? Civil society is dealing with symptoms of problem not the actual problem Ai. Political questions cannot be answered by DoE Aii. The “rushing” around the issue is not to appease anyone Aiii. The point about the lights going off is very important – the balance between supply and demand is crucial Aiv. SWH are to be rolled-out to mitigate increased demand and create jobs Q12. The electricity act of 1997 that created the institutions of Eskom... Where is the integrated act on electricity? All these misalignments are disabling civil society to effectively propose solutions to symptoms.?? Q13. The next phase of industrialisation begins with energy policy that we are deciding upon now. Q14. This whole process seems quite rushed and flawed Q15. Please specify what are these important major infrastructure decisions that are supposedly meant to be decided urgently – by 17 September? You mentioned transmission lines from Mozambique, but what about nuclear plants; is the early conclusion of contracts for the supply

• f nuclear power stations the real reason for the apparent haste to conclude IRP2? It seems as

though a political decision has been made to listen to one constituency over another. Ai. It is common knowledge that the reserve margin is well below what constitutes a safe level. Forget about (demand and economic growth) forecasts. Aii. Medupi will only slightly increase the cushion of that reserve margin. If one generation unit malfunctions, we will have blackouts. Aiii. Electricity sales growth as a result of the improving economic situation is increasing much faster than what was expected. Aiv. These two points necessitate immediate action. DSM is the only option we can implement because there is not enough time to build another power plant by 2013. EE in public buildings will also be invested in. At an industrial level an energy conservation scheme is implemented involving about 44 large users, representing 25% of all electricity consumption, with targets, penalties and reward incentives (ie Energy Efficiency Accord, and NERSA’s Standard Offer). Av. The only way to address the gap in the immediate term, in addition to DSM, and on the supply side, is cogeneration. Q16. Why cannot IRP2 be delayed a few months? Ai. You can... you need to make a proposal to the principals & make the case. Q17. You mentioned timeframe. Why is the IEP secondary to the IRP?

Ai. IEP does not address all issues; IRP addresses electricity generation, not for transmission or distribution, nor water...IEP will be concluded by January 2011 (in terms of the Minister’s budget speech?). Q18. Research showed that these black outs were largely manipulated – can you elaborate? Ai. Not manipulated other than that they were rolling – for technical system reasons Q19. Internet users are the only people being reached – this is discriminatory Ai. Please suggest how else we can engage Q20. Prudent investment decisions should be made by Eskom, but the 3 aluminium smelters are clearly not prudent – surely we should be dealing with the Eskom..not sure what this question was aimed at?? Ai. Comes in the micro-economic impact assessment Aii. There is a legacy in this country – the existing contracts are inherited as a result of decisions made many years ago. Q21. In the interests of transparency, who has been used as consultants in the drafting of IRP documentation? Q22. Nuclear compares poorly to other technologies in terms of job creation potential, yet nuclear is still the chosen technology despite government claims to be pro-jobs pro-poor. Is there any consideration of community based enterprises in decentralised power generation? Q23. Government is trying to use nuclear to earn a profit??? Q24. A generation capacity to meet 70-80 000MW of demand has been thrown about and generation has been thought through, but not much thought appears to have been given to distribution costs in the IRP2 documentation? Q25. 8 days to give comments, website has only just been made available – this doesn’t say much about the commitment to consultation... Q26. Costs and keeping the lights on are heavily weighted criteria, but surely water and health are equally weighted criteria? How heavily does “more mining” weigh in DoE’s decision making? Q27. Government has not been asking the community what they want