Department of Energy contributions to government outcomes and Millennium Development Goals

Energy

29 August 2011
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy (DoE) briefed the Committee on the extent to which the Department had fulfilled its obligations and plans with regard to Government Outcomes 2, 4, 6, 8 and 10, as well as its contribution towards the achievement of Millennium Development Goals 1, 3, 7 and 8. The Hydrocarbons and Energy Planning, and Electricity and Nuclear Clean Energy Initiatives branches outlined the Government outcomes that were applicable to their work. Under Outcome 2, the DoE highlighted the initiatives to regulate prices of Liquefied Petroleum Gas (LPG) price regulations to ensure affordability, but conceded that there was still a challenge in that retailers sometimes failed to adhere to the regulations, despite the fact that they were published. Other initiatives included the mandatory blending of biofuels initiative, where the regulations were in the final phase of drafting. The Department had also made headway in a study to carry out a bio fuel pricing framework. The Illuminating Paraffin Safe Appliance Pilot study had been completed as planned, but costs of the stove remained too high. Although the Solar Water Heating Project should have been more successful, it was plagued by the lack of evacuator tubes, which were not locally manufactured, which led to delays in installation of the hot water cylinders.

In respect of Outcome 4, the DoE noted that the issuing of new retail and petroleum licenses enabled new entrepreneurs to participate in the liquid fuel market, and the turnaround times for new licences had improved. Rural development was stimulated by establishment of seven Integrated Energy Centres, with a further two being planned. Under Outcome 6, the DoE was constructing the New Multi Product Pipeline (NMPP), which could be funded either from the fiscal allocation, or tariff allocation, or from both. The 20 year Liquid Fuel Plan could guarantee a long term supply of fuel to the country. Outcome 10 required the DoE to protect and continuously enhance environmental assets and natural resources. Projects undertaken here included the Clean Fuel 2 initiative, which was intended to tighten fuel specifications and standards reducing vehicle emissions, and the research conducted by the South African National Energy Development Institute. The DoE’s greatest contribution to a efficient, competitive and responsive infrastructure was to increase the electricity distribution infrastructure, which also encompassed consideration of alternative funding models to build the infrastructure outside the fiscal allocations. Improved energy regulation would address critical problems in energy supply and the initiatives around Independent Power Producers (IPP), including the drawing of the Framework, were described. Various pieces of legislation had been reviewed and submitted to Cabinet. Integrated Energy Centres had been established to address diversity of energy sources and universal access to energy, and the Free Basic Electricity programme was described. Lastly, in respect of the Outcome that aimed for a cleaner environment and energy, the DoE described some of its energy efficiency programmes in residential, industrial, and commercial sectors and partnerships with various stakeholders.

Members questioned the focus of the presentation, and the Department’s approach to the Outcomes, asked about the tightening of fuel specifications and standards, which could require upgrading of refineries, and for feedback on discussions with the refineries. They also raised questions on timeframes and financing of the distribution network expansion. They enquired if possible escalations in cost were factored in, how the Department was addressing long-term security of fuel supply, and commented that some of the pilot studies into solar heating in KwaZulu Natal, although good in theory, had not had very good results.  discussions were under way for finding alternative external funding. Members expressed their concern about ongoing cable theft. They noted the apparent contradiction between provision of more electricity and conserving energy, and asked how supply of Liquified Petroleum Gas was being promoted, urging the Department to try to achieve reduction in prices. They also enquired about the biofuels strategy, participation of fuel companies in this, and affordability of fuel sources. Members also asked about the progress of the Independent Systems Market Operator Bill,

The DoE then outlined its contributions to the Millennium Development Goals (MDGs), pointing out that although its core business was not necessarily in areas that the MDGs spoke to directly, it did play a significant role in partnering with other departments to ensure the achievement of the goals. Its contribution to MDG1: Eradication of extreme poverty and hunger was to offer initiatives that allowed or universal access to energy, which was critical for growth, job creation and agricultural productiveness. Contributions to the MDG3: Promotion of gender equality and empowerment of women had included programmes that focused on entry of women into the energy sector, forums that allowed women to share information and improve their skills. In response to MDG7: Ensuring environmental sustainability, the DoE had developed policies and programmes that promoted long term sustainability of energy security and resources, and described some, including Solar Park initiative and hydroelectric plants, and Waste to Energy projects. The DoE also contributed to MDG8: Develop global partnerships for development by a number of bi-and multi-lateral agreements, as set out in the presentation. Members enquired about the Department’s relationship with the UN bodies, called for more details on women’s empowerment, the criteria used for the participating professionals in programmes, and the contribution to MDGs at regional level.


Meeting report

Chairperson’s Introductory Remarks
The Chairperson welcomed the new Committee Secretary, and expressed concern over the poor attendance by Members.

Department of Energy briefings on government outcomes:
Hydrocarbons and Energy Planning Branch briefing
Ms Thandeka Zungu, Chief Operating Officer, Department of Energy, apologised for the absence of the Director General and the Deputy Director General.

Ms Tshilidzi Ramuedzisi, Chief Director: Energy Planning, Department of Energy, began her presentation by listing each of the outcomes for this branch, and highlighting various initiatives that were introduced in order to achieve them. She firstly noted that government Outcome 2 aimed to achieve a long and healthy life for all South Africans. A major initiative listed under Outcome 2 was the regulation of Liquefied Petroleum Gas (LPG) prices to ensure affordability. A key challenge confronting this initiative was the non adherence by retailers to the price regulations. The situation was. exacerbated by the lack of public awareness of standard prices even though the Department of Energy (DoE or the Department) published these monthly in the Government Gazette and on its website.

One target under Outcome 1 included the mandatory Blending of Biofuels initiative which had seen the introduction of the industrial strategy approved in 2007. The draft regulations were in the final stages of preparation. The Department has also made headway in a study to carry out bio fuel pricing framework. The Illuminating Paraffin Safe Appliance Pilot study had been completed, as planned in 2010/2011. However, the major shortcoming of the project was that rollout and expansion would be difficult, since costs of the paraffin stove remained high and inaccessible locally.

Ms Ramuedzisi then moved on to describe Outcome 4: Decent employment through inclusive economic growth. The Department issued new retail and petroleum licenses that enabled new entrepreneurs to participate in the liquid fuel market. The Department reported a less than 90-days turnaround time for all licenses issued in year end 2010/11. It also stimulated rural development through the establishment of seven Integrated Energy Centres and planned to include another two new centres in Mbizana and Ulundi in 2011/2012.

Under Outcome 6: An efficient, competitive and responsive economic infrastructure, the DoE was busy with the construction of the New Multi Product Pipeline (NMPP), by Transnet, to alleviate pressure on the Durban-Johannesburg pipeline. The funding model for financing the project could come either from the fiscal allocation, or tariff allocation, or from both. This Outcome also encompassed the 20-year Liquid Fuel Plan that could guarantee a long term supply of fuel to the country.

Under Outcome 10: Environmental Assets and natural resources, the DOE sought to continue its protection and enhancement of all resources. Initiatives undertaken in terms of this Outcome included the Clean Fuel 2 initiative which was intended to tighten fuel specifications and standards reducing vehicle emissions. This outcome was also supported the establishment of the South African National Energy Development Institute (SANEDI), which could conduct research on energy and energy efficiency that could enable informed policy formulation.

Electricity, Nuclear, Clean Energy branch 
Mr Ompi Aphane, Acting Director General, Department of Energy, then set out the initiatives of the DOE in the Electricity, Nuclear Clean Energy branch. The first listed Outcome related to an efficient, competitive and responsive infrastructure. He noted that the Department’s greatest contribution was to increase the electricity distribution infrastructure, as the process had been terminated last year. The Department now was in the process of considering alternative funding models to build the infrastructure outside the fiscal allocations, and suggestions included independent distributors.

The next listed outcome was improved energy regulation: The Department noted that regulation was a critical problem in energy supply. There were considerations around inviting Independent Power Producers (IPP) to produce electricity alongside Eskom. These considerations had also led to the establishment of the Independent Power Producers’ Framework (IPP Framework) that included procurement, licensing and access to third party grid connection guidelines. This had led to the revision of legislation, such as the Electricity Regulator Second Amendment Bill, Energy Regulator Amendment Bill and Independent Systems Market Operator Bill (ISMO) Bill. These had been approved by Cabinet. These regulations could solve the current problem faced by Eskom in which the company was both a supplier and regulator.

The third Outcome related to the diversity of energy sources and universal access to energy: This had resulted in the establishment of Integrated Energy Centers (IECs) which had extended to households, schools and clinics using the grid and non grid technologies. Initiatives directed by the Department under this outcome included the free basic electricity programme (FBE) which allocated 50 units free to low income households who otherwise could not afford electricity.

The fourth outcome related to the Environment and Clean Energy/ alternatively Mitigation and Climate Change Initiative: The Department was involved in energy efficiency programmes in the residential, industrial, and commercial areas, through partnerships with various stakeholders that included businesses, government, labour and civil society. The Department secured joint partnerships with the UN Industrial Development Organisation (UNIDO) to carry out industrial campaigns, at national level, on energy efficiency. At residential level the Department was in partnership with Eskom in its 49-million inhabitant campaign.

Discussion
The Chairperson said that he had expected the Department to take the members though a discussion that tackled the grounds and origins of this outcomes-based approach to service delivery, as it was something new under the current administration.

Mr Aphane replied that government was organised along a number of deliverables, or, to be more specific, twelve outcomes. This was the reason why the presentation had reflected upon the key outcomes that related to the DOE, which he summarized as Outcomes 2, 4, 6, 8, and 10. He reminded Members that government was organised into Clusters, and noted that each Department was structured in ways that aligned, coordinated and integrated their activities around those 12 Outcomes. He noted that the President would firstly negotiate with the President around service delivery, and then the outcomes were cascaded down to the departments, who had to draw strategic plans. The DOE therefore planned in a top-down approach that was directed by the Outcomes. He highlighted how the Department had used this approach to avoid the previous problem where there had been misalignment of the strategic plan with the budget.

Ms Zungu reiterated the point made by Mr Aphane that all the objectives of the Department were directly or indirectly linked to the fulfillment of the 12 outcomes. It was also necessary to try to achieve the Millennium Development Goals (MDGs). The five outcomes listed were those incorporated into the direct service delivery agreement by the Minister of Energy.

Mr K Moloto (ANC) asked about the tightening of fuel specifications and standards, which could require upgrading of refineries. He also asked for feedback on the Department’s discussions with the refineries and whether they were expressing divergent views.

Mr Moloto asked for clarification on the timeframe set by the Department to expand the distribution network, and which funding model could be used to finance the project.

Ms Ramuedzi said that the financing was likely to come from the consumers to compensate the industry for upgrading refineries.

Mr Aphane added that the funding would be an amalgamation of three options - either a fiscal allocation, or tariff allocation, or both.
 
Mr Moloto wanted to know if the Department had factored in the possible cost escalation in the Multi Product Pipeline and what contingency plans were in place to mitigate the possible rise of costs.

Ms Ramuedzisi replied that at present the remainder of the project was estimated at R4.5 billion over a three year plan. The Department hoped to finance this through a fuel levy, but it was still under discussion.

Mr Moloto asked what the Department was doing to ensure long term security of fuel supply to the country and what options it was currently exploring.

Ms Ramuedzi replied that the issue was being discussed, along with research being done on how to provide for the 20 year Liquid Fuels Master Plan on clean fuels. The issue of how to secure long term fuel supply could come out of recommendations made from the research.

Ms N Mathibela (ANC) asked about the pilot studies in Kwa Zulu Natal, which she felt had been good initiatives, but perhaps lacked proper follow up.
The point by Ms Mathibela was reiterated by Mr S Radebe (ANC), who also pointed out that the Solar Water Geysers in Tobatu that had solar tubes missing.

Mr Aphane replied that the shortcomings of the solar water heaters could have been overcome with careful planning. He conceded that the Department had some serious oversights - for example the fact that the evacuator tubes were imported from China caused delays in the roll out. In other instances the Department introduced the solar water heaters option to household without considering the water quality in the areas, or without considering whether the municipality could reticulate water into the houses. He highlighted that the biggest problems in the pilot study on the solar water heating programme was that it had become more successful than the funding really allowed. For example, the rebates allocated for this financial year had already dried up. However discussions were under way for finding alternative external funding.

Several members expressed concern as to how the Department could mitigate the instances of cable theft.

Mr Aphane noted that the issue of cable theft was so well organised that the Department and police had a problem in handling it separately. He said there was need for a multi sectoral approach to try and curb such theft. He reminded the Members that the issue was not unique to South Africa.

Mr S Motau (DA) asked the Department to comment on the apparent contradiction that Eskom had been commissioned to provide as much electricity as possible, while at the same time conserving electricity.

Mr Aphane agreed with Mr Motau on the apparent contradictions but quickly highlighted that Eskom was not leading the campaign but was simply keeping in line with government energy efficiency strategies. Given the fact that Eskom was a key player, the Department did not view it as problematic that the company should be involved in energy efficiency programmes as well.

Mr Motau asked what the Department was doing to promote the supply of LPG, which was currently “non-existent”, given the confusions on the regulation of LPG, whether it was regulated at retail or manufacturing level, and the impact on the price.

Mr D Ross (DA) reiterated the question by Mr Motau, and asked also that, in relation to LPG, the Department should consult with the Competition Commission to try to achieve a reduction in prices.

Ms Ramuedzi replied that LGP prices were the maximum stipulated prices at which LPD was to be sold by retailers. She said there were instances where retailers did not adhere to this, and such instances should be reported to the Department. The Department tried to promote awareness by publishing the prices on a monthly basis in the Government Gazette and the Department’s website.

Mr Ross noted the need to review the strategies on the mandatory blending of bio fuels to include the use of excess maize. He therefore wanted to know what the Department had done, in terms of consultation, to introduce excess maize into petroleum.

Ms Ramuedzi replied that the there was a current study under way to look into the matter.

Mr E Lucas (IFP) asked the role of petrol companies and of the motor vehicle manufacturers and asked how the Department was going to allow them to participate.

Ms Ramuedzi replied that the National Automobile Association of South Africa was already engaged in discussions with the Department.

Mr Lucas asked about the affordability of the fuel sources, given the fact that the natural resources were available.

Mr Aphane replied that limits in the source of non-renewable resources, like water and arable land, meant that the fuel costs could remain relatively high, unless new technologies were brought in that provided substitutes.

Mr S Radebe (ANC) asked who constituted the 5%, under outcome 4, who were mentioned as not completing the documents for their license. He also asked what solutions the Department put in place to try to prevent them being excluded any longer.


Ms Ramuedzisi noted that there was a help desk at the Department where applicants could consult on the information required. However, this did not extend to field visit exercises to assist clients in making feasible applications.

The Chairman asked how far the ISMO Bill had gone. He highlighted the need for transparent mechanisms allowing for the tracking of a process right through from drafting stage of a Bill to the promulgation of regulations once it had been passed as an Act. He suggested that Members be updated by e-mail or that regular updates should be posted on the Committee’s website.

Mr Aphane responded that the Bill had approved by Cabinet some time ago.  He explained that once the Bill was approved by Cabinet the Department had effectively “lost control” of it as the process was taken up by the Joint Tagging Mechanism and State Law Advisors. The Department had tried to follow up on the Bill, through two letters written to the Speaker of the National Assembly and Chairperson of the NCOP.

The Chairman noted that oversight work had critical implications to the performance of the Department.

Millennium Development Goals 1, 3, 7 and 8: DOE contributions

Ms Thandeka Zungu, Chief Operating Officer, Department of Energy, gave a presentation on the Department’s contribution to the Millennium Development Goals (MDGS).  Millennium Development Goals (MDGs) were defined as the world’s quantified targets for reduction of extreme poverty, in its many dimensions, by 2015. Although the Department was not the core provider of services to these goals, it played a significant role in partnering with other departments to ensure their achievement.

She noted that the main focus of DoE in respect of MDG1 was to eradicate energy poverty through initiatives that allowed for universal access to energy, which was critical for growth, job creation and agricultural productiveness. The Department implemented the Integrated National Electrification Programme (INEP) programme that focused on rural areas. The Department also introduced regulation of Liquefied Petroleum Gas prices to ensure increased affordability.

MDG3 aimed to promote gender equality and empower women. This had been achieved through initiatives that focused on the entry of women into the energy sector. Some of the initiatives included the audit of and Compliance with the Liquid Fuels Charter, 2002, and increasing of the skills levels of women through initiatives like Learner’s Focus Week, targeted bursaries and internships. Other forums that had given women a platform to share information and self-betterment included the Woman in Energy and Gas in South Africa (WOESA) and the South Africa Young Nuclear Professions Society (SAYNPS).

MDG7 was aimed at ensuring environmental sustainability. The Department had responded to this by developing policies and programmes that promoted long term sustainability of energy security and resources. One such policy was the renewable Energy White Paper, which set out the aim to produce 10 000 watts of renewable energy by 2013. Examples of some of the programmes either under way or completed were the Solar Park initiative, and the small scale hydro plant at Bethlehem, Free State, and Waste to Electricity Project at eThekwini.

MDG8 related to the development of global partnerships for development: The presentation listed a number of bilateral and multilateral relationships and agreements that promoted the Millennium Development Goals in the energy sector. This included the Africa-EU partnership on sustainable energy and Clean Energy Ministerial (CEM) meetings. The focus of all partnerships was to promote clean energy. The emphasis on global partnerships with the Department had resulted in the formulation of strong bilateral relationships such as the one between the Department and the UN Industrial Development Organisation (UNIDO) which focused on securing sustainable energy by 2012. In addition, South Africa would be hosting the COP 17 conference from 28 November to 9 December 2011, and the Department would host the Pre-COP Africa Energy Ministers Conference from 15 to 16 September 2011.

Discussion
The Chairperson asked for clarification on the Department’s relationship with UNIDO, which was critical to energy efficiency.

Mr Aphane explained that the Department had a strong relationship with UNIDO, and that there was a proposal made to jointly launch the industrial energy efficiency campaign in the coming month. He stated that Eskom was to carry out the residential aspect through the “49 million Inhabitants’” campaign. The Department also was in partnership with other multinational agencies like the International Renewable Energy Agency (IRINA).

The Chairperson asked for more details concerning the empowerment of women.

Ms Zungu replied that woman empowerment initiatives were more about information sharing on the energy sector. These involved mentorship programmes to young girls. The initiative also allowed women to be involved in business ventures within the energy sectors, examples being the Vusa in the Bethlehem Hydro Projects. Other projects provided employment opportunities to woman. The essence of these initiatives was to involve more women into the energy sector.

Mr Radebe asked what criteria were used for the selection of the young professionals who participated.

Ms Zungu noted that the young nuclear professionals were under 35 years of age, and they were mostly graduates who were already employed, and a few who were about to finish their studies. They came together under a platform for information sharing and self-betterment. They were affiliated to an international non-profit organisation that aimed to spread awareness among women.

The Chairperson asked to what extent the Department contributed either directly or indirectly to the MDGs within the Southern African Development Community (SADC).
Mr Aphane replied that the diversification outcome had integrated a regional approach. This was done to ensure that the South African power pool could be completed on power generating options that supported clean energy. For example, South Africa was supporting the World Bank initiative to establish the Cabora Bassa hydroelectric projects in Mozambique, since this would offer benefits also to South Africa.

The meeting was adjourned.

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