Minister for Energy Media Briefing before Budget Speech


19 Apr 2010

The Minister of Energy briefed the media before the Department's budget vote.


Journalist:  On page 6 of your speech you mention a financial incentive scheme will be introduced. When will that be introduced? Is this the first time you are announcing it and what will be the cost to Government of that lost electricity. What will the estimated cost be?

Journalist:  On the same page you mentioned it was unfortunate that the hospitality industry is not fully embracing the spirit of the campaign. I wondered if you could outline how they have failed you.

Minister Dipuo Peters: In the briefing session after the State of Nation of Address we indicated that the
Department of Public Works, working together with the Department of Trade and Industry, will be introducing
regulations related to the built environment as to make sure that any new building going forward is made energy
efficient. As we speak we should have been having what we call “low hanging fruits” in terms of the retrofitting of
the hospitality industry, in particular of their water heating system but also making sure that the buildings, hotels
and guests houses and all else that is related to the hospitality industry is retro fitted to be energy efficient. You
can still go into a hotel and find that the systems do not operate in a way that indicates to you that the hotel is
energy efficient. If you leave your lights on, if you leave your TV on and you leave everything on it will be on
forever. So it meant that for us, it is an area that hotel should already have been investing in. We have also lost a
golden opportunity in terms of the process of the infrastructure improvement in relation to preparation for 2010
by making it possible that we regulate that all the supporting infrastructure around 2010 should be energy
efficient. This is why we say we would be able to say that in this area we benefit from the low hanging fruit. The
issue of the incentive for the standard offer is that we believe that within the tariff increases this year; you would
have noted that there is a particular percentage that has been set aside for demand side management. We also
believe that if we can all save, you could then be able to get a rebate but it would also enable us to get the
benefit in terms of the saving of the money instead of paying for electricity by using less electricity. We also
believe that it is important that people be reimbursed and I will give the DG an opportunity to give the details of
how this standard offer operates.

Nelisiwe Magubane:  From what NERSA allowed for in the tariff, we are going to be making sure that we provide a rebate for each and every efficient or demand side management function. You are going to get paid for the megawatt saved and this allowance is sitting at about R5.3 billion as we speak so that is where we are going to utilize this. We have developed the rules and NERSA is going to be calling for a public hearing on this to discuss how it’s going to operate. This should be operational before the end of May.

Journalist:  If I’m putting up a factory and I can show that I am going to save then I will not only save but get money paid to me for. But, how will that payment be made in terms of the investment that I am making and the equipment that I am investing in? Or how will you calculate the rebate?

Nelisiwe Magubane: We are saying that for every megawatt-hour that you are going to be saving, you will get paid for that. The standard offer is going to be indicating those levels so that is why NERSA is going to have a public hearing to say that these are the levels of those kind of rebates and the public should comment on those just like they’ve done with the tariff.

Minister Dipuo Peters:  It also gives us an opportunity to invest in what is called international smart metering and peak monitoring system or peak controls. For example, if you have your household that needs electricity at particular times and you have your systems running all of them, this system would then allow for switching off the pool pumps and switching off the other areas that you are not utilizing at a particular time. That would be the type of metering that we are talking about.

Journalist: Minister, in your speech you say that you are working with the Minister of Cooperative Governance on the issue of making the impact on the poor less. However, the Minister told us the other day that he is going to take on NERSAs decision to cap municipalities profit at 18%. He said he wants municipalities to be viable and even to go up to 35%. Are you at loggerheads and how is this to be resolved? Is the Government also preparing to do energy efficient RDP houses? Will this apply to all projects?

Journalist:  Also, on the impact of the NERSA determination on the poor. Before the electricity tariff was formally announced, the Government was continually saying that they will put in place measures so that it does not have to impact on the poor. I am guessing you are doing this in terms of the inclining tariffs. Can you outline exactly what they so that one can make a calculation that the poor definitely won’t pay more for electricity? You also mentioned using solar water heaters to save electricity but, obviously the vast majority of the people still won’t have these by the end of this year?

Journalist: Minister, I have seen in your speech and we have now heard in the statement that you have read that you refer to the National Planning Commission (NPC), as planning is central to what you are doing. But, we haven’t heard much from the NPC. We know that the application date closed on the 10th of February and we know more than 1000 people applied. We are now in April and it is heading towards May. Are you going to wait for them? How does this affect your work?

Minister Dipuo Peters: Maybe I must start with the one of the NPC. Those who have started the green paper on planning that the Minister responsible for planning released, including the one that actually led to the decision about the establishment of the NPC, would have realised that anchored in that NPC example is issue of energy planning. We indicated that we believe that if we could as a country master energy planning, we would actually have crossed the hurdles of planning challenges in South Africa going forward. You would know that energy is central to everything from child birth to a person dying. You will need energy to get a building up and running, from planning it to everything that happens, be it socio economic and other areas. That is why we believe energy should be anchored or central to the first tasks of the NPC. The issues about the appointment of the NPC are another matter that we believe the Minister is involved in. If you have to choose from a list of more than 1000 and you want the most competent and best people to serve the country in a planning capacity, you would really have to go through those resumes that have been presented before you, be able to select the best and go through the processes of interviewing all those people. These are the types of things that need to be done. So you can understand the challenge that the Minister is having in relation to finally setting up the team of men and women that South Africa needs to do the planning work for us. In terms of the impact on the poor, you would remember that on the 24th February when NERSA released their determination after the application, there was an indication that if you use 0-50 kilowatt-hours per month you are going to realise about a 10% decrease of the tariff. If you used about 50-350 kilowatt-hours it came up to about 5% and then using 350-600 kilowatt-hours it came to the amount of about 25%, which then indicates that the principle that the user pays is applied in this instance. There has been research indicating that the poorest of the poor are not intensive energy or electricity users, they are not the ones that have air-conditioning or heaters that run all day. They cannot keep the type of appliances that people who think they can afford them are keeping. So, they are actually the category of people that are going to make it possible for us to realise energy efficiency.

The other thing that we have done is that we have engaged with various Departments, including COGTA. I am happy to indicate that because of the platform that COGTA provided for the Department of Energy, we would be able to consult with SALGA as well as the MEC's for Local Government or for Co-operative Governance and Traditional Affairs in Provinces. We have already had an opportunity to discuss electricity distribution infrastructure and we are going to be engaging COGTA in different areas The Minister is worried about electricity being one of the key revenue basis of municipalities and one of the areas that municipalities bank on to be able to have resources. If they are unable to increase their electricity tariffs to the levels that they believe will be sufficient to cushion their budgets then they are going to have funding or revenue challenges. That is why my speech stated that there is an indication that together with COGTA, we will be engaging with National Treasury to be able to get to a stage where we could look at a proper funding model for municipalities. As long as there is no proper funding system and model for municipalities then issues like electricity would be key for municipalities as revenue generators.

You would also realise that the issue of municipal charges on electricity being the key revenue base for municipalities is actually working against energy efficiency because municipalities would necessarily need people to use more electricity so that they can have more revenue. That is why we say we need an integrated comprehensive plan to be able to deal with those particular issues because we need to be able to deal with energy efficiency but, at the same time understand that municipalities believe that electricity is their revenue base. In terms of housing, my colleague Human Settlement Minister, Tokyo Sexwale and I agreed that going forward; RDP houses should be energy efficient. It is not only in the suburbs where we should know that north facing is actually an indication of a house that is warm in winter and cool in summer and therefore it means the way that we build houses going forward will be informed about issues of energy efficiency including the fact that houses with ceilings are warmer than houses without ceilings, the type of roofing and the type of building material is important, as well as all those essential things that need to go into building and creating a human settlement. Energy is one of the Departments or one of the sectors that is integrated because our work depends on the work we do with other Departments and other sectors. Also, we believe that you don't have to be rich to have warm water from a tap and that is why we believe that RDP houses also qualify for solar water heating.

Minister Dipuo Peters: On the 28th we are asking the media to join President Jacob Zuma in launching the massive solar water heating programme in South Africa. You would be able to realise what we mean when we say that you don’t have to have particular resources to be able to have access to warm water. We will be going to Winterveldt to launch that particular program and we are inviting all of you to attend the launch.

Journalist: Sorry Minister, my question on the NPC specifically was that you are planning to align your plans with the commissioner. If we are waiting for the commissioner are you putting your plans on hold? What is happening with that?

Minister Dipuo Peters: I’m happy you brought me back to that one. As early as last year the Minister in the Presidency responsible for the NPC, my colleague Mr Trevor Manuel, convened a meeting where all of us who are a necessarily part of the Inter-Ministerial Committee were part of that planning meeting where we identified the building blocks towards a proper planning process for energy. I want to indicate to you that we have already started as the Department of Energy to work on issues of planning. If we had been waiting for the NPC, we would not be talking about the IRP2. We would not be talking about the integrated energy plan that we are going to work on and release towards the end of the year. It is important to realise that when the NPC starts working we will need to bring all these plans together. The Science and Technology sector would be able to bring their plans about RND that they have done in relation to technology support, including the utilisation of renewable energy in South Africa. They would also look at how to make it possible that the Department of Trade and Industry can create the incentives for localisation, issues of nuclear planning, issues of all other things related to energy. If we have to “massify” solar water heating for example, we really have to localise the technology for solar water heating. We are going into concentrated solar power, wind energy and biomass. All of these components are going to be imported, so it is important that all Departments work on it. Water Affairs is working on a process to integrate their planning for building of dams into making sure that when we design a dam we consider the needs of the country in relation to hydro power schemes and all those so that we can then benefit from the power of the water of the dam to generate energy.

We looking into Higher Education in terms of the skills that are necessary to make sure that the energy sector could have the skills we would need. Many people are asking if we have the necessary skills to sustain the operations of a fleet or a plant for nuclear energy or if we going to import those skills. So, it means that every sector is looking at what it is that they are doing to contribute to energy. When the NPC is established, the building blocks will be in place to try and bring everybody together including the private sector and other role players of the broader society of South Africa. Our assumptions have to be based on what the private sector will tell us about their investments and the resources that they know in terms of the reserves that are available. Are those reserves in that resource sector energy intensive? What do we need to do to make sure that we can meet their needs and the requirements? This Government was elected on an important platform. One of the key components of that platform is creating decent and sustainable jobs, so we are going to make this possible in terms of the total planning framework that we will develop with the NPC. You can see the basket is full and everybody has to make sure that they are ready to give their input. There will be lots of interaction. We are not waiting for the NPC, as people need to live, people need to work, and people need to eat.

Journalist: On the issue of the World Bank loan that has been granted to Eskom, some opposition parties in Parliament are of the view that the contents of the loan should be discussed in Parliament and thoroughly scrutinised. Do you agree with them and if yes, when is the loan likely to be discussed? Secondly, there is a question of certain companies that are buying bulk electricity who have agreements with Eskom to pay less on tariffs. I’m subject to correction but I believe it is 6c or 9c per megawatt. The recent tariff hikes do not apply to those companies. Is there an indication of the review of those agreements? Many South Africans are of the view that they are paying higher prices compared to those companies because the latest tariff hikes do not apply to them.

Journalist: You have not made a final decision on Project Mthombo of PetroSA. The existing refinery on both the multi-nationals previously asked for financial assistance to upgrade so that they would be able to produce the cleaner fuels that Project Mthombo would also deliver. I just wanted your view on what you see the role of the existing refineries is in the future energy plan.

Journalist: Minister on the solar water heaters. How many have you rolled out so far?

Minister Dipuo Peters: The ANC government is on record as being a Government that is transparent and believes in the citizens’ right to know what is happening. I believe that if there are any conditions attached to the World Bank loan other than the normal banking systems or conditions then the DPE, National Treasury and the DOA would have stipulated it. I believe that working within the Inter-Ministerial Committee is one of the key working groups that are dealing with issues of systems or the funding mechanisms of Eskom. When we have concluded that, we will also release what we term the implications of the NERSA determination implications of the World Bank loan as well as the broader funding systems or funding models of Eskom in particular. Later on we will be dealing with issues of dealing with funding of power generation in South Africa as a whole. It is important that we deal with that so I am appealing for your patience up until the time that the total package about the implications of NERSA, implications of the World Bank loan and the total Eskom funding mechanism have been dealt with.

I need to indicate that Eskom has started engaging with its key customers who are buying electricity directly from Eskom in terms of the long term agreements that they have. You would know that some of these agreements are more than twenty years and thirty years old, so there is an appeal from us as Government but also from Eskom with these companies to review these contracts.

In terms of Project Mthombo, the board of Petro South Africa on the 12th of February took a decision about Project Mthombo and referred the matter to the Central Energy Fund. The matter is now with the Department of Energy. We are now going through the business case and when we are ready we will release the statement that would give an indication as to what we are saying in relation to the front end engineering and design issues. I just need to say that as Government we are committed because we are responsible for security of supply. It is important that we can assure South Africans that 10 years, 20 years from now they would still have access to a product a liquid fuel product and it’s our responsibility to make sure we comply with our own policies and laws. You would know that South Africa is one of the countries that are part of the Copenhagen Accord. Before that, we set ourselves something called the Long Term Mitigation Scenario which means we have a responsibility to reduce green house gas emissions and if we are not going to rely on the ability of Government to intervene in this space we are going to have challenges going forward such as not being able to meet our own targets. You have said it yourself that the private sector refinery companies are saying that Government must invest in their refineries so as to enable them to convert to clean fuels. We are expecting all of us, private sector and public sector, to be responsible citizens and protect the environment for the next generations. So it is the responsibility of Government to make sure we can assure our citizens that we invest in the infrastructure supporting liquid fuels. That is why we are talking about a 20 year liquid fuels infrastructure plan that we would be releasing later this year. It would involve the private sector role players and the Department of Transport in terms of the road conditions. It would involve Transnet in order to make it possible that we can afford being able to supply the liquid fuels product. We would also remember in the speech that we are speaking about the multi product pipeline that the Minister of Finance spoke about in February. He introduced the additional levy that would allow motorists to contribute towards building this infrastructure that would take the product from the refinery to the inner centres of the country including Gauteng where a lot of economic activity is happening.

Ompi Aphane: The new program is premised on the incentive that has been allowed in the MYPD that was promulgated about two months ago. So, the program is brand new. It is starting now once the NERSA rules have been promulgated. Over the past three years, Eskom has been installing about 3000 solar water heating systems a year and the idea is that we must now start “massifying” the project because the barrier related to paying the capital cost would be incentivized through the tariff. The program that we will be launching at the end of the month in Winterveldt is the first demonstration of that approach and 7000 systems will be installed at that point. We intend to install about 200 000 by the end of the financial year.

Minister Dipuo Peters: One thing that we need to indicate is that we have seen an influx or a flood of solar water heating systems or technologies being imported into South Africa and we are working together with the South African Bureau of Standards to make sure that the equipment that is installed in households in South Africa is up to standard. We have also worked with the Department of Trade and Industry and that is why we believe that by next year we would have localized the technology so that we do not have to import them anymore. The other challenge has been the number of installers in the country. We have realized the challenges in terms of the number of plumbers and electricians that we have who indicate that they are not accredited to deal with the systems of installing solar water heating because it is not something that has been too common in South Africa. So you would find that they are not as widespread as we would want them to be. I just want to indicate that as we speak there are different provinces that have found plumbers and electricians. They are just waiting for the Department of Energy to give the go ahead. We said we wanted to wait until the President launches that project where the media would also be involved. There is a lot of work that has gone into the project. There was a conference on solar water heating where we developed the framework so we have had the buy-in from the importers of the technology, those who would want to establish the factories locally, but also in terms of the SETAs and the training institutions to train installers. This is a big program that we believe is going to benefit South Africans.

Journalist: Through those 200 000 water heaters you are hoping to role out, can you quantify what kind of energy saving that equals?

Ompi Aphane: Its approximately 200 000 multiplied by about 200 units a month, let me qualify that. In this country there are certain areas that enjoy more solar radiation than others, so the jury is still out on the exact number. But, in terms of our planning, the outcome is supposed to be around 200 000, which is about 200 units per month. It is approximately 50c per kilowatt-hour, which is about R200 a being saved.

Journalist: Is there any consideration being given to the deregulation of the petroleum industry?

Tseliso Maqubela: I think, currently, we don't believe that we should move with speed towards deregulation. As the Minister indicated earlier, the sector is stretched in terms of infrastructure and supply. We believe that introducing another factor into the system will actually cause more complications and may result in security of supply constraints as well. What deregulation could do is to encourage more imports and there is a limit to how much we can depend on imports. By 2015 we will be importing a quarter of our needs and that is not a comforting situation to be in because we don't know what will happen if we have had pirating incidence for example, along the routes which are used by the ships. I do not think you would want a country with an economy like ours to depend solely on imports.

Minister Dipuo Peters: Just one more thing about solar water heating. I indicated that we have different provinces and municipalities that are ready for their role out. Some of them have started. I just needed to indicate that the 3000 solar water heating systems that Eskom installed per year related to a subsidized or incentivized scheme that Ompi has spoken to. But also one thing that we are sure of is that going forward working with the insurance industry; we are advising that they should advise the consumers to revert their old geyser to the solar water heating systems when their geyser packs up. We have also said that it is important that we concentrate in particular in those provinces that have got the strongest radiation figures, such as the North West, Northern Cape, Eastern Cape, and Free State. We are also looking forward to a massive energy efficiency program where we would be re-launching the energy champions because it is important that we have those energy champions who speak to us on a daily basis about energy efficiency. The more we save the more we will be able to save the environment. We would know that the challenges that we had with the World Bank loan would not have been realised if we didn't need the amount of the electricity that we needed. We need to make sure that we can give assurance and confidence to those of our people, in particular, those in the Eastern Cape, KZN and Limpopo who still don't have electricity now.  That electricity is coming to them and we will be providing the connectivity. We are busy putting in the bulk infrastructure systems so as to be able to provide them with electricity. So we are making it possible that our people have got access to energy. We also want to say to South Africans to let us make sure that we know the engine capacities and the consumption rates and the type of liquid fuel that we need to utilize. You would know that we believe that carbon tax is not the solution but the fact that we need to restrain ourselves in terms of the utilization of the energy sources. Thank you very much.

The media briefing is adjourned.


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