Integrated Resource Plan 2 (IRP2) public hearings outcomes: Departmental briefing

Energy

25 January 2011
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy briefed Members on the outcomes of the public hearings on the second Integrated Resource Plan. South Africa was rated as one of the largest emitters of carbon, and must reduce its emissions greatly. Democracy was intended to flourish by engaging the population on the assumption that people could assess what was in their best interests. If the information on which people made those assessments was wrong or driven by a narrow lobby-group or of poor quality, democracy could not work. This Integrated Resource Plan consultation process was designed to allow the Department to arrive at a plan for the country based on knowledge, data, reason and consultation - and not on ideological convenience or the needs of a narrow constituency. The Integrated Resource Plan was not the Energy Plan – it was a National Electricity Plan. It was a subset of the Integrated Energy Plan. The Integrated Resource Plan was also not a short or medium-term operational plan but a plan that directed the expansion of the electricity supply over the 20 year period. The Integrated Resource Plan needed to answer questions such as the electrical energy requirements for South Africa to achieve the aspiration of sustainable economic growth, when the capacity was needed, and the appropriate mix of technologies to ensure that South Africa could meet its commitments to climate change initiatives, ensure adequacy of supply, create a local manufacturing base, maintain a competitive position in the global arena and ensure sustainable use of local and regional resources. South Africa could not focus on affordable electricity at the expense of climate, or sacrifice employment for commitments that developed nations were loath to make.  Affordability, economic demand, security, and “externalities” must be accommodated. First consultation feedback comprised 81 submissions received, with 831 specific inputs. Most respondents were impressed and satisfied with the process and congratulated the Department on transparency. Many raised concerns about insufficient time to respond adequately, and lack of input from civil society and communities, especially rural communities. Most respondents called for a “low carbon economy” and for a thrust to be on renewable energy (wind; solar; geothermal, and others) in future, with a range of 20–75% of total energy supplied (from renewable sources) by 2050. Many respondents were strongly opposed to nuclear and coal as energy solutions.

It was clear that the public relished the participation process and its continued use in long-term planning must be ensured. Funding remained a serious issue. The majority of projects could be privately funded– this removed the risk from the Government. However, it was unlikely that nuclear generation would be funded privately. Renewable energy generation had massive land requirements. The footprint of nuclear power was much smaller than that of solar and wind. A 1 000-megawatt nuclear plant required less than two square kilometres of land. Comparable solar and wind plants would require, respectively, 130 and 500 square kilometres of land. The international order book for nuclear was long. Between now and 2030, it was estimated that there was an order book for over 600 reactors globally. The risk adjusted scenario needed to have a production study to determine its suitability and impact. As to cost/price, the obligation to protect the environment prohibited the lowest cost scenario. Growth and job creation demanded that South Africa protected the competitiveness of the economy. All scenarios equalised adequacy of security of supply. Scenarios were simply a test of input options, in particular policy options, and were not a reflection of expected real-world conditions. Scenarios were neither plans nor real futures. A scenario was simply a representation of one possible future state by modelling the effect of a few key decisions that were assumed to affect the future state. The actual Integrated Resource Plan 2010 was derived by selecting specific aspects from the various scenarios that best fitted the realities of known physical constraints, prescribed specific objectives or desired future conditions. The Department recommended that the “Balanced Scenario” represented the best fit of the realities of known physical constraints, prescribed specific objectives or desired future conditions. In this scenario, by 2030 South Africa would have a contribution of electricity generated by coal-fired power stations of 48% of the country's total energy supply, a contribution of electricity generated from renewable resources of 16%, a contribution of electricity generated by nuclear power stations of 14%, and the balance made up of imported hydro-electricity, gas, and "pumped storage" amounting to about 22%.  South Africa faced a period of tough choices. No economy could grow in an energy constrained environment. The Integrated Resource Plan had to provide insight into how South Africa could deliver the requisite electricity to fuel growth in the economy and, what’s more, do so in an affordable manner- one which would ensure that South Africa remained internationally competitive. The 5 000 written comments received would be processed by the end of January 2011. A scenario based on “no nuclear” was being modelled. The socio-economic impact study would be completed only in April 2011. The Integrated Resource Plan would be presented in Cabinet by the end of February 2011.

Members questioned the Department's apparent failure to obtain comments on the Integrated Resource Plan process from the rural communities, noted that the rural communities were vulnerable and that  translators should be made available if needed to enable them to engage, asked when the Department would put its database of comments on a website, asked it was not feasible for energy generated from renewable resources to contribute 75% to the country's energy supply by 2050 given that there might be advanced technologies by then, asked if the aim for energy generated from renewable resources to form part of the base load supply would be realised or if there would there still be a challenge of variable supply, asked if concerns on nuclear energy were because of safety or costs, referred to the interesting case of Denmark, wanted South Africa to have sufficient electricity, with no fears of blackouts with suggestions raised in the consultations implemented, said rural electricity continued to play a vital role in society, referred to engagement in China with other countries in 2010 on climate change, and noted carbon storage as a means of reducing emissions and the possibility of using waste as an energy source.

A Democratic Alliance Member noted the shortfall in the capacity of renewable resources in relation to the total capacity needed and that much more effort was needed in terms of renewable energy in order to reach the target of 16%. The Member also remarked that it was strange that South Africa had a funding model that assumed the absence of nuclear generation. An Independent Democrats Member acknowledged that public participation and processing 5 000 comments were a difficult process; there was much cynicism around the public participation process, and the Department must show that it was taking very seriously the comments from ordinary South Africans. This Member also commented that it was not just the financial aspects of the low cost scenario that mattered, but the cost to society as a whole over the next 20 years; there were certain additional costs in renewable resources, but this was money that could be raised. Energy efficiency was absolutely crucial to the Integrated Resource Plan- it was not good enough to look at the low emissions scenario and claim that nuclear generation was necessary while not taking account of the potential savings from the efficient use of energy. An Inkatha Freedom Party Member noted the effect that emissions and climate change were having on the country at the moment- such as flooding in the midst of a water shortage, and that it should educate people about nuclear energy; coal was also dangerous, but the country should use appropriate technology to reduce the emissions from burning it.


Meeting report

Introduction
The Chairperson welcomed Members, delegates, and the many observers, including members of the diplomatic corps. He instructed that only Members of Parliament, delegates and officials sit at the table.

Apologies included those of the Minister of Energy, who was attending the World Economic Forum in Davos, Switzerland.

The Chairperson observed that Members could expect "a tough year ahead", with elections in the near future, and that there had been a flurry of articles on the issues of climate change.

Integrated Resource Plan 2 (IRP2) public hearings outcomes. Department of Energy briefing
Ms Neliswe Magubane, Director-General, Department of Energy, said that South Africa was rated as one of the largest emitters of carbon, and must reduce its emissions greatly. The Department had asked for inputs and assumptions on the basis of which it had produced the first draft of the Integrated Resource Plan (IRP). The Department had taken the plan to the National Economic Development and Labour Council (NEDLAC).

Mr Ompi Aphane, Acting Deputy Director-General, Department of Energy, introduced the presentation by saying that democracy was intended to flourish by engaging the population on the assumption that people could assess what was in their best interests. If the information on which people made those assessments was wrong or driven by a narrow lobby-group or of poor quality– democracy could not work.

This IRP consultation process was designed to allow the Department of Energy (DoE) to arrive at a plan for the country based on knowledge, data, reason and consultation and not on ideological convenience or the needs of a narrow constituency.

The Integrated Resource Plan in the South African context was not the Energy Plan– it was a National Electricity Plan. It was a subset of the Integrated Energy Plan. The IRP was also not a short or medium-term operational plan but a plan that directed the expansion of the electricity supply over the 20 year period.

The IRP needed to answer the following questions: what were the electrical energy requirements for South Africa to achieve the aspiration of sustainable economic growth? By when was the capacity needed?
What was the appropriate mix of technologies to meet these needs that ensured South Africa could meet its commitments to climate change initiatives, ensure adequacy of supply, create a local manufacturing base, maintain a competitive position in the global arena and ensure sustainable use of local and regional resources? What were the linkages and dependencies on other resources such as water, primary energy sources, skills, sorbents, transmission infrastructure and land?

The IRP also needed to address the following aspects: what was the role of Government, NERSA, Eskom, IPPs and other stakeholders in meeting these needs whilst building a sustainable industry? What would it cost to meet these needs and how would it be funded? What would be the impact on future electricity prices and would they remain competitive? What was required to implement this plan, what was the level of confidence in achieving this, what were the commitments required and who were these required of?

The IRP process was output focused. It did not start with an end in mind and used a fact base to determine the most cost effective mix of generation options given the constraints imposed (nationally and internationally). Scenarios were produced to allow the decision makers to chose which options would be accepted. That became the policy and risk adjusted plan.

Most likely demand, capacity available to be dispatched, and new generating capacity (Gx) required in the short term versus longer term were illustrated in a graph (slide 7).

The IRP needed to balance economic, social and environmental concerns. The country could not focus on affordable electricity at the expense of the climate. Equally, it could not sacrifice employment for commitments that developed nations were loath to make.  Affordability, economic demand, security, and “externalities” must be accommodated, as illustrated in a triangular diagram (slide 8).

The three major IRP consultation points were illustrated by way of a chart (slide 9). First consultation feedback comprised 81 submissions received, with 831 specific inputs based on the parameter sheets captured and analysed. Inputs received were very diverse, for example, requests for policy change, recommendations, concerns, comments, questions, observations, critique, supportive of the process, and requests for information.

Major contributors were non-governmental organisations (NGOs) and civil society (67 organisations), academics and consultants (63 organisations); industry and business (70 organisations). An analysis of the consultation was given according to 12 IRP parameters; for example, 200 inputs on renewable generation, 78 on climate change, 68 on non-Eskom generation, 52 on security of supply, and 22 on water (slide 12).

Most respondents were impressed and satisfied with the process and congratulated the Department for being transparent. Many raised concerns about insufficient time to respond adequately; lack of input from civil society and communities, especially rural communities; lack of capacity building (especially communities) thus making it difficult to respond to complex technical issues; inability to influence existing government policies or decisions already in place; and the process was not accessible countrywide and internet driven. Some respondents said that the Electricity IRP should not be completed in isolation from the Energy IRP.

Major themes of the responses were: most respondents called for a “low carbon economy” and for a thrust to be on renewable energy (wind; solar; geothermal, and others) in future; a range of 20–75% of total energy supplied (from renewable sources) by 2050; many respondents were strongly opposed to nuclear and coal as energy solutions in future; the costs of financing the expansion plan were a key driver and the difficulty of getting funding for coal and nuclear. Respondents who included references in support of their energy preference were often contradicted by other submissions, for example, the debate on wind versus CSP; the need to consider new technologies on the horizon in the IRP process, such as solar hydrogen technology, and sugar cane fibre as a renewable energy source; the need to resolve the structure of the electricity market debate and put in place incentives, for example, tax policy, to encourage non-Eskom generation into the sector; general confusion and lack of discrimination between inputs, outcomes, policy, regulating instruments (for example, tariffs), and constraints and remedies to unblock constraints (for example PPAs, MTPPP, and others); and calls for water and other infrastructure (such as roads) and other potentially serious constraints or determinants of electricity choices to be considered.

Other inputs comprised the constitutional issue- many respondents referred to state’s constitutional obligation towards safe energy choices; socio-economic effects of decisions (being done through the IDC economic modelling); externalities (already being addressed); the GDP impact – to which should be added the Human Development Index and population growth factors; transmission Infrastructure (as a potential constraint or risk); and the cost of inaction on climate change.

The Department had dealt with input comments thus: each of the comments had been incorporated into the analysis for each parameter; for each of the parameters the inputs given were analysed and a response provided on the update input parameters; several critically important aspects of technology costs and viability (e.g. BioMass) were very helpful and provided fantastic insight; it was clear that the public relished the participation process and its continued use in long-term planning must be ensured.

Other renewable energy (RE) assumptions for the Base Case were described (slide 18).

It was to be understood that scenarios were not likely plans. Scenarios were the output of the model’s attempt to optimise the mix given the scenario objectives at the least cost. From the scenarios a risk adjusted (balanced) scenario was developed by tweaking the major parameters to achieve a realistic balance. An economic impact study should be done on this scenario.

The critical dimensions of the IRP were electricity prices or tariffs, carbon and emissions, regional development, generation mix, and implementation timeframes and costs.

Key scenarios that required investigation were demand scenarios, supply option scenarios, economic impact scenarios, climate change scenarios, and regional development scenarios (electricity import and export).

IRP 2010 Scenarios were listed (slide 23). Scenario selection criteria were listed (slide 24). Scenarios developed were listed (slide 25). Graphs illustrating price curbs, the reserve margin, emissions, and adequacy were provided (slides 30-33).

As to funding considerations, funding remained a serious issue. The majority of projects could be privately funded– this removed the risk from the Government. However, it was unlikely that nuclear generation would be funded privately (slide 34).

Generation mix considerations were firstly that RE Generation had massive land requirements. The footprint of nuclear power was much smaller than that of solar and wind. A 1 000-megawatt nuclear plant required less than two square kilometres of land. Comparable solar and wind plants would require, respectively, 130 and 500 square kilometres of land. The international order book for nuclear was long. Between now and 2030 it was estimated that there was an order book for over 600 reactors globally. Another consideration was implementation scales – using the Spanish lessons. The risk adjusted scenario needed to have a production study to determine its suitability and impact (slide 35).

Draft IRP 2010 balanced scenario results for affordability or price, Republic of South Africa (RSA) beneficiating competitiveness, electricity price comparison with assumption of no exchange rate movement and no decay of capacity, eroding South Africa’s export competitiveness, carbon intensity and emission trends, balancing affordability, price and carbon – diminishing returns on carbon reduction, and water – total water consumption trends - were indicated by means of graphs (slides 37-43).

Relative to the low cost scenario, coal was required. If you were to build no coal-fired power stations, it would be necessary to build an additional 22 000 megawatts of renewable energy capacity to achieve the same level of supply adequacy. This was where the additional costs occurred.

As to cost/price, “this was not business as usual.” The Department recognised its obligation to protect the environment. It was not as if narrow financial costs would determine the Department's direction.  The obligation to protect the environment prohibited the lowest cost scenario. Growth and job creation was a very serious consideration and demanded that South Africa protect the competitiveness of the economy.

As to carbon/affordability, South Africa could not afford Copenhagen but, it could get to Long-Term Mitigation Scenarios (LTMS) by 2025. Very critical was the issue of adequacy of supply. As a model, it does not consider any options that did not keep the lights on. It was the balanced scenario that the Department proposed.

Mr Aphane noted, as per the presentation document, that scenarios were simply a test of input options, in particular policy options, and were not a reflection of expected real-world conditions. Scenarios were neither plans nor real futures. A scenario was simply a representation of one possible future state by modelling the effect of a few key decisions that were assumed to affect the future state and, that the actual IPR2010 was derived by selecting specific aspects from the various scenarios that best fitted the realities of known physical constraints, prescribed specific objectives or desired future conditions.

Mr Aphane gave summary recommendations. The “Balanced Scenario” represented the best fit of the realities of known physical constraints, prescribed specific objectives or desired future conditions. The
IRP Plan included inherent uncertainties which could be reduced but never eliminated by repeating the IRP planning process going forward as and when new information became available. (Implementation of a review process)

The balanced scenario was proposed in the public consultation process as well. The issue around uncertainties was something that the Department had factored in. In other words, the Department had made a whole lot of assumptions and had gone through the IRP planning process over and over again.

Mr Aphane said that this was an analysis of the issues. This was very similar to what he had already alluded to in terms of the themes that came up. The Department was already busy modelling a scenario based on 'no nuclear' as agreed in the stakeholder consultation process. And then the issue of the socio-economic impact was somewhat tricky. The Department would not be able to produce the socio-economic impact study at the same time.

Mr Aphane said that the Department wanted to take the IRP to Cabinet; it would be at that point where the Department would have synthesised all the inputs in order to allow Cabinet to make its final input as well. Having obtained Cabinet's approval, it could then proceed with adjustiments prior to the actual promulgation.

In conclusion, South Africa faced a period of tough choices. Primarily the choice was economic growth or economic stagnation. No economy could grow in an energy constrained environment. The IRP had to provide insight into how South Africa could deliver the requisite electricity to fuel growth in the economy and, what’s more, do so in an affordable manner - one which would ensure that South Africa remained internationally competitive. The 5 000 written comments received would be processed by the end of January 2011. A scenario based on “no nuclear” was being modelled. The socio-economic impact study would be completed only in April 2011. The IRP would be presented in Cabinet by the end of February 2011.

In addition, Mr Aphane indicated what the proposal was in the balanced scenario. By 2030 South Africa would have a contribution of electricity generated by coal-fired power stations of 48% of the country's total energy supply, a contribution of electricity generated from renewable resources of 16%, a contribution of electricity generated by nuclear power stations of 14%, and the balance made up of imported hydro-electricity, gas, and "pump storage" amounting to about 22%.

Discussion
The Chairperson invited observers who had not received copies of the presentation to inform the Committee Secretary, since it was important that Parliament maintained transparency.

The Chairperson invited Members comments, inputs and questions.

Mr S Radebe (ANC) questioned the Department's apparent failure to obtain comments on the IRP process from the rural communities.

Mr Radebe noted the previous day's media reports that the Department had engaged with the Department of Cooperative Governance on the importance of saving energy, but he questioned the Department's honesty as reflected in the reports. Was it really true that the Department could not get any feedback from the rural communities?

Mr Radebe recalled a previous engagement with the Department, in which the Committee had emphasised the need for thorough consultations. The rural communities were vulnerable. Such communities should be able to engage, and translators should be made available if needed.

Mr Radebe asked when the Department would put its database of comments on a website to ensure accessibility to them. Or would enquirers have to go to Pretoria?

Mr K Moloto (ANC) asked about calls for energy generated from renewable resources to contribute 75% to the country's energy supply by 2050. Was this not feasible, given that there might be advanced technologies by this stage?

Mr Moloto asked whether the aim for energy generated from renewable resources to form part of the baseload supply would be realised, or if there would there still be a challenge of variable supply.

Mr Moloto asked what concerns people had about nuclear energy. Were these concerns predicated on concerns of safety as a result of the first generation technologies? Or were these concerns based on costs, taking into consideration that some of the advanced technologies were expected to be quite safe?

Mr Moloto referred to the interesting case of Denmark, which used some nuclear-generated electricity from France, but which had not decommissioned a single coal-fired power station. Did the Department have any comments on this?

Mr J Selau (ANC) wanted to see a scenario in which South Africa had sufficient electricity, with no fears of blackouts, but equally in which the issues that had been raised in the consultations had been taken care of.

Mr Selau said that the question of rural electricity continued to play a vital role in society in the sense that places like Johannesburg and Pretoria, which were now becoming one city, Durban and Cape Town did not have a problem with electricity in respect to shortage of infrastructure, but they might experience shortages to the extent that they wanted to use electricity. They had manufacturing areas and so forth. Last year when the Committee had discussed rural electricity, part of what the Department had said was that in some places there was no infrastructure at all, let alone consultation. In the presentation, on the IRP, and in the scenario, Members could not clearly hear what the Department planned for those areas. One must ask electricity distributors and suppliers like Eskom what they planned to do. The Committee had asked one of the state-owned enterprises (SOEs) that had now been closed down for more information.

Mr Selau referred to a conference in China last year on climate change. One of the issues that arose in that week conference was about carbon storage as a means of reducing emissions, and finding out if it would be possible to produce electricity from it. What did the Department think?

Mr Selau said that the other issue that was raised more acutely was using waste - including bio-waste such as the trees that were cut down, the grass that was cut, and the flowers that died - as an energy source. Was there anything in the IRP to consider these options going forward or to commission some studies to inform our generation mix?

Mr L Ross (DA) questioned the target of 16% of energy from renewable resources. The total generating capacity of Eskom was 41 500 megawatts. Estimates of the potential of renewable resources for generating electricity, were, for example, the estimated potential for wind resources to generate (100 000) megawatts of electricity per year, which was the main component of renewable energy. This comparison of the generating capacity of Eskom and the estimated potential yield from renewable energy, the main component of which was wind, illustrated the shortfall in the capacity of renewable resources in relation to the total capacity needed. Much more effort was needed in terms of renewable energy in order to reach the target.

Mr Ross commented on the funding model for electricity generated by nuclear power stations. The Committee had had the privilege of visiting France, where there was a funding model for Government. The French would be pleased to assist in the building of nuclear plants. Therefore it was strange that South Africa had a funding model for the absence of nuclear generation. The present electricity supply was far from reliable. Eskom had announced that load-shedding could be a reality again. Time was definitely of the essence.

Mr L Greyling (ID) acknowledged that public participation was a difficult process. 5 000 comments were difficult to process. Without the Deputy President's push to extend the timeframe for comment, many of those comments would have been lost. It was important to get public participation right on this particular energy plan.

Mr Greyling said that on the basis of the original 871 comments that the Department had received on the IRP2, one of the complaints that had been raised was that 61% of those comments had received no response. It was not enough for the Department to say that it was capturing all the comments. The Department must give some indication that it had considered these comments and that it had given some kind of response. The Department was beginning from a poor base in terms of its advisory panel. Of course there was much cynicism around the public participation process. The Department must show that it was taking very seriously the comments from ordinary South Africans, and that it was using those suggestions that could be used in its planning process.

Mr Greyling commented on the "externalities". “When we examined the low cost scenario, it was not just the financial cost that mattered to South Africa, but the cost to society as a whole over the next 20 years. This was clearly what we wanted to be modelling. Unfortunately we lacked those kinds of externality study". Mr Greyling had asked the Department about this matter four years previously.

Mr Greyling referred to the target of 16% from renewable resources by 2050. It was interesting to read the South African Renewable Initiatives document, which was a joint production of the Department of Trade and Industry and the Department of Public Enterprises. This document projected a target of 15% from renewable resources by 2020. According to the document it was achievable. Had the Department of Energy considered what was proposed in that document? Mr Greyling acknowledged that there were certain additional costs in renewable resources, but this was money that could be raised. One could look at funding models. If the country could reach the 15% target by 2020, then it would have the building blocks; it would have the industry to reach a target of at least 50% by 2050. This was what it should be trying to accommodate in the model. "Let's look at what is possible."

Mr Greyling said that something that had not been talked about sufficiently was energy efficiency. This was absolutely crucial to the IRP. However, the IRP took little account of the potential for energy efficiency. A figure of 3 420 megawatts saved from energy efficiency by 2030 was mentioned, but this was about a quarter of the potential saving from energy efficiency in South Africa. It should surely be possible to achieve a saving by means of energy efficiency of at least 12 000 megawatts and then we could reduce our demand for electricity substantially and increase the proportion of electricity generated from renewable resources. It was not good enough to look at the low emissions scenario and claim that nuclear generation was necessary while not including the potential savings from the efficient use of energy. This way of thinking would have to change.

Mr Greyling said that he had other issues but would await a later opportunity to raise them.

Mr E Lucas (IFP) said that the Committee had started the year "in a good vein" but it was necessary to go forward. What Members could see from today was the effect that emissions and climate change were having on the country at the moment - for example, flooding all over the country in the midst of a water shortage. We needed to do something and look ahead. All the excess water currently was being allowed to drain away to waste. 

Mr Lucas said that the very interesting issue was the nuclear issue. The government should examine nuclear energy and educate people about it, because sometimes it argued on the basis of only half the facts.

Mr Lucas said that at the Committee's last meeting on nuclear energy, the delegates spoke of recycling.

Mr Lucas observed a tendency as soon as nuclear energy was discussed to say that it was dangerous. There was need of a serious educational process to enable all of us to understand what was happening.

Mr Lucas noted that coal was also dangerous, but it was what South Africa had available under the ground. It was therefore impossible to dismiss the use of coal. Last year there was a German politician, a member of the Green Party, who called for a stop on using coal. The joke was that Germany was importing coal from South Africa. Yet this German politician had the audacity to stand up and say boldly that we must stop using coal. We should use appropriate technology to reduce the emissions from burning coal so that we could benefit from the use of coal. If we did that we could go forward.

Mr Lucas said that unfortunately electricity could not be stored like water, so "the pump" could work only to a limited extent as a stop gap issue.

Mr Lucas said that the electricity issue was serious and he appealed to the Chairperson that more attention should be paid to it.

The Chairperson thanked Members and adjourned the meeting for five minutes to afford a break and an opportunity for the Department to prepare its responses.

When the meeting reconvened, Ms Magubane replied that the Department was very much cognisant that the most rural provinces - the Eastern Cape, KwaZulu-Natal, and Limpopo - were those that had no infrastructure whatsoever. The Department had a plan separate from the IRP to deal specifically with those provinces. The Department acknowledged that it must work very closely in this regard with the municipalities and Eskom, but also with the provincial governments. As Members would be aware, in areas like KwaZulu-Natal, rural electrification ended up being "a challenge as a political tool", so there was a need to try to make sure that the Department accommodated everybody, including the municipalities, Eskom, and the provincial government. The Department had a national integrated electrification programme. This sought to provide universal access to electricity. Initially the Department had hoped to achieve this by 2012. Unfortunately, because of constraints on resources, the Department would be able, by 2012, to achieve access for some of the municipalities, but not all. The Department would be happy to present that plan to the Committee, with particular reference to how much the Department was allocating per municipality in those provinces. Moreover, as Members would recall, those three rural provinces had been, for most of the time, "labour-sending provinces". So in the past there had been a neglect of providing even bulk infrastructure. With the new way of working in Government the Department had, together with the Department of Rural Development and Land Reform, a plan to ensure provision not only of electricity and energy to rural communities, but also to the farmers. It was to be noted that some of the farmers in the Karoo did not even have mains electricity, but had to depend on their own generators; such farmers also had workers living on their farms who lacked electricity, so it was the Department's intention to ensure provision of electricity in those rural areas. This was a programme on its own and the Department wished to present it to the Committee so that it could be properly interrogated.

Ms Magubane noted also that the Department also offered "solar home systems" -these systems relied on solar energy for provision of power, mainly to ensure electric lighting the households concerned. The Department's experience had been that most communities did not like the "solar home system", because they thought it had a limited capacity to provide them with energy. The Department hoped that with the cooperation of the Department of Rural Development and Land Reform it could mount a better campaign to promote the "solar home systems" and make them acceptable to the majority of communities.

Mr Aphane clarified the issue around the consultation of the rural areas on matters related to the IRP. He assured Members that the Department had undertaken a very thorough consultation process and did concede that there was room for improvement. However, he thought that it would be inaccurate to assume that the Department did not involve the rural stakeholders in this process. The Department's consultation process had taken it to "almost all of the provinces". The consultation process had begun with a meeting in Gauteng; Members would recall that during the National Energy Regulator of South Africa (NERSA) process on the electricity tariff, the same concern had been raised. Except for Mpumalanga and North West, the Department had been to hearings in all the provinces "in order to take the IRP debate to as many people as possible". This was in terms of the Department's following the proper channels.

Mr Aphane mentioned that the Department also had been involved in the National Economic Development and Labour Council (NEDLAC) process, in which the same point had been raised in order to ensure that the Department had access to civil society membership that represented the rural stakeholders. In terms of the NEDLAC process, one of the constituencies - the labour constituency in particular - had had a number of engagements with the Department, in which engagements there was the same concern about bringing the rural communities into the consultations. Some of those stakeholders represented the rural communities. So perhaps the criticism could be valid in the context of the Department “not necessarily” going to particular rural areas. The Department needed to address this and perhaps Parliament could give the Department some guidance. For example, there was a process of taking Parliament to the communities and it was known that there were limitations as to how much that could be done. However, the Department believed that there was a clear consideration of rural stakeholders in its considerations.

Mr Aphane said that during the electrification process, in all the provinces there was an energy forum, and each of these forums were constituted into a stakeholder body called the Energy Forum and the Department engaged on matters relating to that from time to time. “So it's not like as part of this process, you know, we weren't wanted, and we feel that, you know,  we have consulted them, but there is a continuous – in fact there is a quarterly engagement on energy matters.”   There was thus a quarterly engagement on energy matters with those rural areas, in which some of the specific issues discussed included access, education, and the IRP. The Department hoped to find a means of improving this engagement.

Mr Aphane replied that he hoped that the comments received by the Department could, in due course, be put on a website, in order to show that they had been taken into consideration.

Mr Aphane replied to Mr Moloto's question as to whether by 2050 it would be feasible, given advances in technology, that 75% of South Africa's energy requirements could be supplied by renewable resources. It was the Department's view that it might be possible. However, it was "not planning up to that horizon", but it was a strategic issue that was being considered at a level of the planning commission; there was a great deal of work being done on those lines around the green economy.

Mr Aphane linked the above to the question around the South African Renewable Initiative (SARi), and around running a model based on some numbers The platform for energy decisions and planning was the IRP. There were discussions to deal with this confusion as to whether the South African Renewables Initiative (SARi) perhaps undermined the IRP. It was a matter that had been discussed with the Directors-General, Department of Public Enterprises and Department of Trade and Industry. The Department's perspective was that of a strategic and planning nature. So basically it was more like, if SARi was possible, the Department wanted to consider it. The biggest constraint, as indicated in the presentation, was that ultimately some of those conditions had to be satisfied - cost and technology transfer, amonst others  in order for the Department to accelerate the renewable energy programme. In the context of what SARi sought to do, it was “like it considers some of those issues”. Without those conditions being satisfied, it would naturally have to default back into the IRP. . The IRP was a “sort-of” commitment that was being made, whereas the SARi initiative was looking at the strategic perspective. So indeed to supply 75% of the energy requirement from renewable energy in the future, if you read some of the literature, was "perhaps doable". However, this IRP focussed on a window which was only 20 years. Even if developments happened sooner than 2050, the Department believed that there was adequate flexibility in the IRP to consider a revision in order to take them into account.

Mr Aphane said that the issue around renewable energy as a viable option for base loads was a very controversial one. On the one hand, the straight answer was "No": there was a technical limitation. However, renewable energy could be used side by side with other options, in order to increase "the capacity credit" related to renewable energy. The Department had also mentioned that the operational viability of the IRP that the Department was considering at the moment was a matter that was not being considered on this platform; it was a matter that the system operator had to consider. The ability of South Africa to keep the lights burning in a distributed kind of network on the basis of the proposals in the IRP was something that the Department had to learn. It was not something that one could easily introduce and assume that the system operator could easily deal with. The Department was very alive to some of those challenges as it introduced renewable energy.

Mr Aphane said that the concern regarding nuclear energy was based definitely on safety. There had been some movement to try to highlight the safety issues and concerns around nuclear energy rather than the virtues of nuclear energy. Mr Lucas's point was well taken. Public education and awareness was perhaps taken for granted, and the Department should perhaps embark on a public awareness campaign on the issues of nuclear energy. Naturally the example that was given of Finland and elsewhere, because the introduction of nuclear energy generation was disastrous; however, there were examples of where nuclear energy generation had been introduced successfully, for example, in South Korea, in China and France. So the sense was created that one built a nuclear power station and then ended up with cost overruns. This tended to obscure the debate. Mr Aphane particularly liked the example of Denmark, a country that was heavily interconnected, with reliance on Norwegian hydro-electricity, but also on nuclear generated electricity, and coal-fired generation of electricity through Demark's interconnections. As such it became a little misleading to say that one could run a portfolio like that; this was related to the question on the base loads. Scandinavia was a region with a good example of an interconnected system. France was building more nuclear capacity as one spoke. It was not like France would not send "the nuclear electrons" to Norway or Denmark. The South African system unfortunately was not as interconnected as Scandinavia's system. So South Africa's reliance on Mozambique, Zimbabwe, Namibia and Botswana was not at the level to allow South Africa to replicate the Danish example. 

Mr Aphane said that one of the criticisms was of the manner in which coal had been handled in the context of carbon capture and storage so as to reduce emissions. The criticism was that South Africa had literally, on an overnight basis, created an impression that it was shutting down the coal industry without examining the possibility of clean coal options. The Department was looking at this very closely. [In the present IRP plan coal-fired generation would be retained at least until 2028.] It was something that the Department was addressing in this round of IRP consultations.

Mr Aphane replied that electricity generation from waste was an integrated part of the Government's programme of action - the need to take advantage of all the waste, not only landfill,  that was produced, particularly in the urban areas. Durban municipality had demonstrated how it could be done.

Mr Aphane replied that the funding model for nuclear electricity generation was definitely something that needed to be developed as part of the IRP portfolio. The Department had had a funding model for Eskom, but the Department needed to review the funding model of the whole IRP programme for the furure.  18m 16s

Mr Aphane replied regarding the regulation of the new capacity for generating electricity and the need to support the renewable energy target of about 16%. “We've taken the same approach, and it links with the funding model.” The new regulations for generating capacity were designed to facilitate the introduction of renewable energy through financial incentives.

Mr Aphane said that the target was a function of the modelling and the impact. The Department was giving in the programme extremely generous incentives for the different technologies. It acknowledged the risk of "the Spanish problem" in which any renewable energy became unaffordable because the model provided unaffordable incentives. The Department was looking at that very closely. The Department thought that it might increase the requirement of megawatts, but drastically reduce the incentives in the next round. This would have an impact on the renewable energy target. The real figures would be revealed once the process of implementation had begun.

Mr Aphane said that there was a medium term risk mitigation plan in which the options were related to the question raised on energy efficiency and how one dealt with that. It was necessary to indicate how the Department dealt with energy efficiency. Energy efficiency was the cheapest option. There was no argument about this. There was, however, a sense that energy efficiency represented an infinite power generation option. However, in reality there was a saturation point. At some stage one would not be able to substitute energy-saving light bulbs for ordinary light bulbs, because all bulbs in the country would have been changed. There remained, nonetheless, a huge potential for saving energy. The Department estimated that there was a potential for some 30% saving overall. The way in which the Department dealt with it in the IRP was that as long as there were more and more energy-saving and efficiency options, the Department would take those options. It was not so much the fact that the Department assumed that it was only 3 400 megawatts that the Department wanted to save by energy efficiency. The way information had been presented gave the impression that the Department did not really seek energy efficiency in the mix because it was constrained to 3 400 megawatts. In fact, the Department had had a discussion on what this meant, whether it was a cumulative target or an annual target. There was need for clarification in the way in which the Department dealt with this in the IRP. The Department welcomed suggestions as to how it could deal with this issue.

Mr Aphane said he had dealt with the matter of nuclear energy and that coal remained in the ground-t was necessary to develop technologies to exploit it efficiently.

Mr Aphane added that South Africa hosted the Carbon Sequestration Leadership Forum and one of its state-owned entities (SOEs) was charged with the responsibility of dealing with it. Over and above carbon capture, there was work in progress on underground gasification; as one spoke Eskom was co-firing some of their power stations by a combination of coal and other options. “So we're looking at all of those things as well.”

Mr Aphane confessed that the Department had not dealt adequately with coal firing in the IRP, and had given the impression that there was no more coal. This impression had to be corrected.

Mr Aphane replied that if you wanted a sense of the comments that had not been taken into account, as was raised, the easiest way to deal with that was as the Department did at one of the public platforms; if somebody raised the question that his or her question had not been taken into account, it was very easy to open the database and say “What is your name?  And show that there is your comment.

Mr Aphane continued: that what the Department did not do, perhaps, was to write letters back to everyone who had responded.  The question raised earlier “would close that loop”.  Once the Department had “put this on some open platform” then one would be able to see a match between questions and how the Department had responded. However, to be fair, it had to be conceded that most of the issues around comments that had not been taken into account were those where there had been some disagreement on what should be done about the issue raised. It then became very difficult to say that the Department had taken into account such specific comments. Mr Aphane gave examples of such comments and indicated that the Department had at present no platform on which was practicable to reflect its responses to such comments, but that it was only when the Department was in a position to publish the comments on the website that members of the public would be able to find out how the Department had addressed such comments.

Mr Aphane said that socio-economic issues and "externalities" needed to be accommodated in the model. The Department had been presented with two contradictory approaches to "externalities", and this was what the problem was. There was much disagreement on how it was to be modelled, but the Department needed to make a start at some point.

The Chairperson reminded Mr Aphane about Mr Greyling's question on the model. Perhaps the question had been responded to in a different way and the Chairperson had missed it? Mr Greyling had asked about the model for renewables developed by the dti and the Department of Public Enterprises.

Ms Magubane replied that it was called the South African Renewables Initiative (SARi). She added that the Department had held discussions at length with the previous Director-General of the Department of Trade and Industry (the dti) and there was agreement that “we should not be speaking across each other.”

Ms Magubane explained that the IRP was a policy and regulatory instrument.

Ms Magubane secondly affirmed that the IRP was going to be revised every two years.

Ms Magubane said that, should things change within the two years, the Department would be able to be able to factor in any new ideas and technologies. “We would be happy to do that.”

Mr Greyling stated that South Africa had not dealt with energy efficiency properly in the IRP2. A figure of 3 400 megawatts distorted the energy demand for the country and it was necessary to interrogate this figure seriously. It was one of the biggest constraints that South Africa faced. It was "completely ludicrous" to imply that one would build three new coal-fired power stations but if one wanted to build more that was fine. This affected the parameters of the model. If one used a figure of only 3 400 megawatts, then in terms of what one had to build, whether it was coal, nuclear, or renewable sources, that figure increased. This affected one's demand forecast, one's energy mix, and the decisions around these. When one considered IRPs that had been done elsewhere in the world, for example, one in the United States of America (USA), there was something like 4 000 different energy efficiency measures that had been specifically modelled.

Mr Aphane said that the point was taken. Perhaps the Department must review the conservative approach in the IRP. The reality in South Africa at this point was that we were not an energy-efficient country. In order to plan to take energy efficiency more seriously, it would be well to be aware of this conservative approach and that it must be reviewed with regard to the supply-side options. However, if we assumed that we would achieve energy efficiency to that level “we might create a very risky kind of situation." The premise here was that it was cheaper as a country to build more than not to have. The impact on the economy was that rather that it was better to have spare capacity than not to have enough and then have blackouts.

The Chairperson thanked the Department. It was necessary to decide how to factor in the IRP process, bearing in mind that it still had to be presented to the Cabinet and formalised. It was an instrument that had emerged at a crucial moment. There must be full cooperation between governmental departments, while acknowledging the central role of the Department of Energy.

The Chairperson encouraged Members, if they had further questions or inputs, to forward them so that the Committee could engage on an ongoing basis with the Department, even on the basis of correspondence. The IRP was a crucial instrument until it was logically concluded. The Committee would like to see a summary of the Department's responses to the 5 000 comments received. It was necessary to be sensitive to public participation

The meeting was adjourned.


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