Integrated Resources Plan (IRP) briefing: Department of Energy

Energy

08 March 2010
Chairperson: Ms E Thebethe (ANC) and Mr F Adams (Western Cape, ANC)
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Meeting Summary

The Department of Energy, presented the Integrated Resource Plan 1 (IRP1) to the Select Committee on Economic Development and the Portfolio Committee on Energy.

The Department explained various scenarios, considered when planning future energy requirements, which would include the best energy mix for South Africa.

The Committee asked what was done about as renewable energy sources such as water heating panels and renewable energy that could be produced by households for their own consumption.  The department said it was working on these issues. 

The Department was asked what the financial implications for the IRP1 plan would be should Eskom not receive the loan from the World Bank. The Department said the budget trajectory would be impacted because loan funds had already been considered as part of the budget for the year.

Concerns were raised about the omission of a budget plan in the IRP1 and if the plan would be complete by the end of the year.

Meeting report

Ms Nelisiwe Megubane, Director General, Department of Energy, presented the Integrated Resource Plan (IRP1).  It was established to give effect to national policy as defined in the Electricity Regulation Act No.4 of 2006. The IRP seeks to identify the future energy demand and energy mix that would meet South Africa’s demand.

The IRP1 had established a base case scenario to find the best energy mix for South Africa. The base case scenario is simply an analysis of cost without any other externalities, purely financial cost. Once the base case scenario had been ascertained, scenarios, which are informed by policy, can be considered. There are various criteria for the different scenarios, which would be considered as part of IRP1.

The intention of IRP1 was to assist NERSA in decision-making based on government policy. It also ensured that NERSA only licence those power stations that are outlined by the plan. With regard to the long-term intentions for the country’s built program, the Department looked at it’s own long-term mitigation scenarios.

Focusing on load forecast, Ms Megubane emphasised the need to determine what kind of electricity demands could be expected for the country. Therefore, certain assumptions were made around the growth prospect at the time. This was the most difficult area of study and quite a number of people had to be gathered to assist in making these predictions. These growth predictions include electricity supplied to our neighbouring countries.

There are four different scenarios, which were considered for the load forecast: a low growth scenario, moderate growth scenario, a scenario, which shows no growth, and a high growth scenario. A base cost is then calculated for each possible scenario.

In terms of what was relevant to the Department and what would happen to the future IRP1, the Department had decided to introduce 10 000GWh (Gigawatts) of renewable energy mix by 2013.  1 million solar water heaters were introduced as a specific intervention. In addition, a decision had not been made about the next base load power plant.


In terms of renewable energy, Eskom was supposed to build a 100MW (Megawatts) power plant call Sere. Eskom would also need to build a Concentrating Solar power plant of about 50MW. The Renewable Energy Feeding Tariff (REFIT) and cogeneration projects could be done almost immediately and will contribute 1100MW.

The Department acknowledged that consultation in terms of IRP1 could have been better and was limited to government departments, Eskom and NERSA.

Discussion       
Mr L Greyling (ID) asked when the IRP1 would be ready. He added that South Africa has been particularly bad at predicting electricity demand and matching generation capacity with that. He asked how the Department would ensure that it could provide electricity to the capacity in demand and what the growth sectors were in terms of future demand.

Mr Greyling said that although a renewable energy-feeding tariff was established with good prices, it had been reduced to a tendering process, which has limited the amount of renewable energy that could actually come forward. He also asked why the Department was silent on the generation of renewable energy under 1MW for households throughout the country who produce or could potentially produce their own electricity.

Ms Megubane acknowledged that this was an area of concern and answered that the Department had reached out to many other institutions to assist in this area. The Department had also sought assistance from the industrial policy action plan which dictates what growth sectors in the economy will be. On the issue of the tendering process, the Department is trying to diversify their energy mix which is why there are criteria which determine which projects go ahead and which projects do not.

Ms Megubane said that there could be an improvement in renewable energy generation of 1MW electricity, which households could produce themselves.  She said smartmeters or smartgrids necessary for household to produce renewable energy was not available in South Africa The Department was working to achieve this.

Mr S Radebe (ANC) asked how far the Department was in terms of the redistribution of solar water heating panels.

Ms Megubane was unable to answer Mr Radebe’s question, as she wanted to withhold this information until it would be announced in the Minister of Energy’s upcoming speech.

Mr S Motau (DA) noted that he did not believe that the Department was anywhere near producing 10 000GWh of renewable energy by 2013 and questioned the Departments seriousness in this matter. He asked when an Independent Systems Operator would be brought on board. 

Ms Megubane said that in the past, the Department has not provided an incentive for entrepreneurs to create or find new ways of providing renewable energy and although the target of 10 000GWh might not be achieved by 2013, a strong attempt would be made. Planning was still under way for the Independent Systems Operator. The Department should have a framework for legislation on how and when this Independent Systems Operator could be established by June.

Mr K Sinclair (COPE) wanted to know what percentage increase the Department worked with in terms of the price forecast. He asked whether his assumption that nuclear energy would not be considered in South Africa for the next 20 to 30 years, was correct.

Replying to Mr Sinclair, Ms Megubane said that nuclear energy was being considered as part of IRP1.

Mr P Dexter (COPE) said that he did not see a plan but rather a statement of intent from the Department. There was also no budget and no plan for where funding would come from. He expressed his deep disappointment in the presentation of IRP1 at this stage.

Ms Megubane said that, there was a more complete and cohesive document, which in hindsight should have been published.

Mr A Lees (DA) concurred with Mr Dexter in terms of his disappointment with the presentation. With regard to solar water heating, he asked what the uptake was in terms of consumer use and how the Department planned to increase this.

In response Ms Megubane agreed that the uptake on solar water heating has been very low which was very disappointing because the use of solar water heating could reduce the electricity demand by up to 20%. A new and aggressive target of 1 million solar water-heating panels had been established.  The Department planned to achieve this target by creating an enabling environment for its use. The Department of Energy was working with the Department of Economic Development and the Department of Trade and Industry to see that these targets are reached.

Mr D Ross (DA) mentioned that the World Bank has considered a loan to Eskom and asked whether NERSA had taken into account that Eskom might be receiving a loan of R3.75 billion and whether this will have an effect on the tariff prices.

Ms Megubane stated that the loan was already considered before the tariff prices were decided upon and had been incorporated in the prices.

Mr Greyling, asked if the Department had committed to have IRP1 finished by the end of the year. He asked if the Department was planning to involve academic institutions to do some of the modelling exercises, which were required to get a more accurate prediction of electricity demand. He asked if the Department considered the externalities of energy or whether they had thoughts on potential job creation in the different energy sectors.

He also asked whether the government considered what impact IRP1 would have on the consumer or the economy and what other alternate energy opportunities were available.

Ms Megubane acknowledged that the Department had serious capacity constraints and that they had tried to use this situation as an opportunity to create capacity even at university level. She said that she believed that IRP1 was urgent and said she was committed to getting it finished by the end of the year. With regard to affordability she doubted whether electricity would ever be cheap again and that the Department planned to look into strategies on how to ensure that electricity remained affordable.


Ms Mathibela (ANC) inquired whether South Africa could use the higher-grade coal that it is currently exporting to other countries.

Ms Megubane said that although the current fleet of coal powered power plants were designed for use with cheap oil it could be modified.  South Africa could make use of the higher-grade coal, usually exported.

Mr Mnguni (ANC) said that the United Kingdom and The United States of America were against the World Bank loan to South Africa, and wanted to know if that posed a threat to the IRP1.

Ms Megubande said that if the United States and the United Kingdom opposed the loan, it would have a significant impact on the Department’s electricity trajectory, especially as the funds had already been considered as part of the budget for the year.

Ms Van Lingen wanted to know what percentage of electricity was sold between 6 and 9 per kilowatt within the industry and whether those agreements were recommended to be advised in the IRP1.

Ms Megubane said that she was not privy to such information, as it would be considered commercially sensitive information.

The meeting was adjourned.

 

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