PetroSA's five-year strategic plan covered the company's new refinery (Mthombo), its advances in terms of liquefied natural gas facilities, its indigenous gas-drilling project (Ikhwezi), its new acquisitions in Ghana and its handing over of the Mbizana Integrated Energy Centre. Declining feedstock was a major challenge. PetroSA was moving into full project execution mode and would face financial pressures in the years leading up to 2020. PetroSA asked for strong state, shareholder and parliamentary support. The Chief Executive Officer outlined PetroSA's engagement with the National Infrastructure Plan. International project review was being undertaken. There was an emphasis on the company's fiduciary responsibilities.
Members asked what kinds of support PetroSA required from the state and shareholders. There were questions about the “culture” of PetroSA and its functioning as an state-owned entity. Members asked about the risks surrounding the Mthombo refinery. Employment equity, the viability of the Integrated Energy Centre and the expert international project review process were all explored in the discussion. Fracking was discussed briefly.
SANEDI presented its five-year plan and detailed its programmes and portfolios. The main topics presented were carbon capture and storage, questions of innovation in the energy sector, research and development, the Working for Energy, Smart Grids and Green Transport programmes, and challenges related to energy efficiency, renewable energy and funding.
Members asked about the processes and possible dangers of carbon capture and storage. Powering vehicles using cleaner fuels or electricity was discussed. Alternative energy for everyday purposes and energy-efficient public lighting were priorities. In particular, the Committee asked for information on public awareness and advertising in terms of energy-saving best practices.
The Chairperson welcomed Committee Members and the PetroSA and SANEDI representatives, and asked for apologies. A Member apologised for Ms B Tinto (ANC), Ms B Ferguson (COPE), Mr J Smalle (DA) and Mr L Greyling (ID). The Chairperson asked for introductions and commented on the many Standard Bank representatives present; adding that he hoped Standard Bank's interest would attract the other three main banks.
Briefing by PetroSA on Strategic Plan 2013
Dr Benny Mokaba, Chairperson of PetroSA, said that PetroSA was making its presentation in the context of a change in the oil and gas industries. In the 1920s, the Union of SA had developed a White Paper on synthetic fuels as a basis for the country's energy sector. In the 1950s, cutting-edge companies like SASOL had been created. PetroSA was a National Oil Company (NOC) created by the state to meet the state's objectives. He compared PetroSA to British Petroleum during WWII, which was responsible for security of supply in Britain. In the 1980s, China had created two similar companies, CNOOC and Sinopec. These and other national oil companies were offered as models for SA's NOCs. These companies required the full support of their governments and their countries' people. Political considerations were discussed. PetroSA had a fiduciary responsibility not to reveal important information to competitors. PetroSA competitors were present at the briefing. The Chairperson was asked to protect the interests of PetroSA.
Dr Mokaba said the scramble for resources in Africa was at its peak and PetroSA's challenges were enormous. A forward-looking strategy was essential. The chairperson of Sinopec had told him that Sinopec's success as the third or fourth largest oil company in the world since the 1980s had come as a result of the unified efforts of its country's parliamentarians and people. Dr Mokaba said in Sepedi that his company acted in the open while others acted more secretively.
Ms Nosizwe Nokwe, CEO of PetroSA, repeated that PetroSA was aware of the challenges facing SA, including poverty, unemployment, inequality, the need for a greener economy, the need for energy security, health challenges and the need for infrastructure. The government's National Development Plan (NDP) was adopted to address these challenges.
PetroSA's plan for 2013-17 supported government policy, including the NDP. The NDP stated that in the short term, there should be exploratory drilling for economically recoverable shale gas reserves, the development of offshore gas, the promotion of investments in LNG (liquefied natural gas) infrastructure and the introduction of clean fuels in the country, all of which would be addressed in the presentation. In the medium term, LNG structures would be in place to power the first CCGTs (combined-cycle gas turbines), and a decision would be made on whether SA would continue with imports or invest in a new refinery. The strategic plan would detail PetroSA's response to that mandate. (See NDP chapters 4 and 5.)
PetroSA's plans and mandate were aligned to the shareholder. The specific intent of the CEF (Central Energy Fund) was to provide energy resources for national energy security and to minimize the environmental impact in pursuit of government policies, and the Department of Energy (DoE) mandate was to secure sustainable provisions of energy for socioeconomic development. PetroSA's vision for 2020 focused on sustainability, security of supply and transformation.
Ms Nokwe said that since PetroSA's last presentation to the Committee, the company had continued to operate safely and profitably despite challenging conditions, including declining indigenous feedstock and rising feedstock costs. She spoke about progress made with PetroSA's Mossel Bay refinery and the Ikhwezi offshore indigenous gas drilling project. Ikhwezi was expected to produce its first gas during the second half of 2013. Rand capital costs were high. The Mthombo refinery project was gathering momentum since the signing of an agreement with Sinopec (27 March 2013). Mthombo was recognised as part of the Strategic Integrated Projects (SIP), specifically SIP 3 (see National Infrastructure Plan). The Department of Environmental Affairs had accepted the Environmental Impact Assessment (EIA) of PetroSA's LNG project. PetroSA had acquired a stake in Ghanaian oil reserves to supplement depleted indigenous feedstock. More projects like these were desirable. Finally, PetroSA had built and handed over its first Integrated Energy Centre (IEC) in Mbizana, Eastern Cape. The IEC offered other services apart from the provision of energy, including a convenience store and a training centre. A cooperative ran the IEC.
PetroSA was facing increasing future challenges. Project Ikhwezi addressed declining feedstock. Deep water access to hydrocarbons locally and internationally was more expensive than on-land access, which posed a challenge to the national oil industry. Competition with more established, better resourced companies was also a challenge. These factors were worked into PetroSA's risk profile for mitigation. PetroSA was moving into full project execution mode. This would cause pressure on the company's financial results.
The proposed plan advanced shareholders' security of supply of access and strengthened PetroSA's role as a sustainable NOC. The plan was tough and capital-intensive, and would be exposed to internal and external risks. Profitability over the next few years would be reduced.
The Chairperson asked if this was intentional.
Ms Nokwe explained again that declining feedstock had led to reduced revenues, and that the cash PetroSA had on hand would be used to build the company's sustainability and impact. She said that it was better to make the cash work and grow the company than to leave it in the bank.
To carry out its plan, PetroSA would require strong partnerships, shareholder support, an enabling regulatory environment, good governance and a well-resourced and capacitated organisation. Ms Nokwe asked for the Committee's support.
The sustainability of the Mossel Bay plant was important to the economy in that area. The plan aimed to diversify PetroSA's income, create longer-term revenue flows, add new refining capacity and cleaner fuels, establish PetroSA's presence in the downstream arena, create an LNG import facility for gas to liquids (GTL) and power generation, promote the addition of gas to the energy mix in the country, move SA towards a greener economy, and advance equity and organisational capacity.
In future, PetroSA would play a key role in the development of shale gas in SA, as well as the development of additional refineries.
A Member said that PetroSA's projected slides did not correspond to the document handed out. Ms Nokwe apologised for the missing slides. The Chairperson asked her to share the full version electronically after the briefing. Ms Nokwe agreed to do so.
Ms Nokwe explained that the current slide (not in the handout) showed that from 2012-2015, PetroSA would operate on existing indigenous gas. Project Ikhwezi was expected to ramp up production, and the LNG project would take PetroSA to its full capacity in the GTL plant. The effect of downstream logistics and the impact of Mthombo and shale gas after 2020 were also shown.
In terms of the Ikhwezi project, PetroSA intended to drill five wells, a process that would take two to three years. At least 1 600 temporary jobs had been created. Once gas was being produced, the plant's production would be extended to 2018/19, at a cost of about US$1.2 billion.
PetroSA's acquisition in Ghana was currently producing 110 000 barrels per day. In Equatorial New Guinea, PetroSA was de-risking its petroleum and assets. Funding options were being explored for the Venezuela Project. The aim was to make an asset acquisition by 2016. The three pie diagrams on this slide showed PetroSA's partners and shareholders in Ghana.
PetroSA had not made a decision about the equity partner question, but had finalised the framework agreement with Sinopec and was also conducting a feasibility study with the IDC (Industrial Development Corporation). Mthombo was part of SIP 3. Infrastructure requirements were aligned with the stakeholders, including the Coega Development Corporation (CDC), Transnet and Eskom. PetroSA was also participating in the CDC-led Industrial Development Zone (IDZ) infrastructure development network. After the feasibility study conducted with the IDC, PetroSA would have a better idea of what was needed in terms of funding.
The Chairperson asked what CDC was and what SIP 3 covered.
Ms Nokwe said that the CDC was the Coega Development Corporation. She said that SIP 3 covered the south-eastern node and corridor development, and promoted rural development through a new dam at Umzimvubu with irrigation systems. SIP 3 plans included a N2-Wild Coast highway which would improve access into KwaZulu-Natal and national supply chains; a manganese rail capacity from Northern Cape to strengthen economic development in Port Elizabeth; a manganese sinter (Northern Cape) and smelter (Eastern Cape); and the Mthombo refinery (Coega) and transshipment hub at Ngqura and port and rail upgrades to improve industrial capacity and performance of the automotive sector. (See National Infrastructure Plan, SIP 3.)
With all of PetroSA's new projects, new opportunities would be created. There was a focus on small, BEE businesses in terms of Enterprise and Supplier Development (ESD). Ms Nokwe said that the company hoped to draw on the practical experience gained in Mossel Bay in future. Employment equity continued to be promoted. PetroSA was developing talent pipelines in partnership with universities. PetroSA had specific requirements for its employees, because it was the only company in SA involved with the upstream sector. PetroSA would continue its partnership with the Synthetic Fuels Innovation Centre at the University of the Western Cape (UWC).
The many projects would put pressure on PetroSA's profitability profile. Ms Nokwe said that the company would have to spend the money it had in order to become a national oil company (NOC) of standing in SA.
Effective project management and good governance
Mechanisms were in place to ensure good project governance, and international project reviewers had benchmarked PetroSA's products and ensured their readiness. There was a strong PetroSA owner's team composed of relevant managers and experts with the experience to execute mega-projects. Legal services and procurement were aimed at strong governance around procurement and contract management. There were tight governance systems in place. Ms Nokwe emphasised the importance of the Group Risks Manager's task. PetroSA was using a combined assurance framework. All best practice mechanisms were in place to mitigate risk.
Ms Nokwe outlined six focus areas in terms of human capital.
The 2013-2017 corporate plan supported both the government's development agenda and PetroSA's sustainability and growth imperatives. PetroSA would focus on efficient and optimal production at the GTL plants. Project Ikhwezi would start production in the second half of 2013. The Mthombo feasibility study would be completed in 2014, and the company would continue to pursue de-risked upstream opportunities. Despite the tough environment, PetroSA was ready to face any challenges.
Dr Mokaba said that governance and auditing issues previously raised before the Committee were being addressed and would be brought back to the Committee when fully prepared.
The Chairperson thanked Dr Mokaba and Ms Nokwe and opened the floor to questions and comments.
The Chairperson asked for further comment on the creation of an LNG facility while contributing to power generation, a move which strengthened the Department's plans towards adequate and sustainable sources of energy.
Enabling regulatory environment
Mr K Moloto (ANC) asked what kind of regulatory environment would assist the profitability of PetroSA.
Ms Nokwe said that globally, regulatory mechanisms were skewed towards local access to hydrocarbons, for example. The regulations usually ensured that NOCs were partners in the exploratory area. PetroSA had engaged with its own Act via a public participation process in which it made its own recommendations.
Mr Moloto referred to slide 12, which discussed the type of support needed by PetroSA. Could PetroSA share with the Committee what kind of support it needed from the shareholder?
Ms Nokwe said that shareholders would be expected to support PetroSA's vision. Where there were barriers to certain areas, the NOC would rely on the support of its shareholders.
Mr Moloto asked what type of support PetroSA required from the state in terms of downstream activities. Had PetroSA allocated enough internal capacity (HR and funding) to ensure that the company focused on this issue?
Ms Nokwe said that downstream activities were a primary concern of PetroSA, and that the company was putting as much as it could towards this effort.
Ms Nokwe said that the NOC would need to be of standing to have a socioeconomic impact. It would require support from the state authorities to accomplish this. PetroSA would come up with innovative mechanisms to assist the company to deliver on the projects under way. PetroSA understood that it would have to provide good reasons why it needed this kind of tangible support from the state.
Dr Mokaba said that in the case of strong companies like BP or Sinopec, legislation was enacted to allocate certain portions of the state's wealth to NOCs. SA was not a resource-poor country and was capable of creating powerful companies like SASOL to play a dominant role in the economy, both locally and globally.
Mr Moloto asked whether PetroSA's acquisitions would be aligned to the culture of the institution of PetroSA as an NOC. He asked not to have his views received as harsh or critical. He spoke about State-Owned Enterprises (SOEs) and the private sector as cultures that focused on the “bottom line”. SOEs, in his experience, often expected money from the shareholder whenever they asked for it. He said everyone knew the examples to which he was obliquely referring. He asked PetroSA to stay critical of itself and not permit a “wrong culture” to develop within the company.
Ms Nokwe said that while PetroSA was an SOE, it operated independently in terms of funding. It generated resources from its GTL plant and pumped them back into the projects to grow the company. PetroSA therefore had not come to ask for money from the Committee.
Mr Moloto said that 2020 would be a “crunch time” in terms of security of supply of finished product, over 25% of which would be being imported at that time. Was the timing around Project Mthombo precise? If Mthombo were not brought on-stream timeously, would there be problems? How long before 2020 would Project Mthombo be realised?
Dr Mokaba said that PetroSA had presented different models based on projected economic growth to the Committee in the past. Around 2020/2025, there would be a demand in SA for a refinery big enough to produce 250 000-300 000 barrels per day, depending on the growth rate. Thus, Mthombo had to come online at some point between 2018 and 2024 to provide additional refinery capacity. This was calculated on the assumption that no other refinery would shut down or fail to meet the specifications required during that time. If problems of this kind did arise, the demand for greater refining capabilities would increase. Building one's own refinery was a massive project for a country, but the economic returns were considerable. Without its own refineries, SA would be under enormous pressure. It would have to import all its finished product and face huge financial challenges. Therefore a refinery was a “no-brainer” for SA. PetroSA believed that Mthombo would have to be operational between 2018 and 2022-24 to avoid a serious negative effect on the country's economy. PetroSA would play a vital role in national security of supply.
Mr Njikelana asked about employment equity. Had PetroSA looked into partnerships with Further Education and Training colleges (FETs) as well as universities?
Mr Darrin Arendse (PetroSA Vice President: Human Capital) said that PetroSA had started looking at ways to integrate FETs into its learning and development approach. PetroSA was considering internships and other ways to close the gap between FETs and universities. Mr Arendse said that a whole “lost generation” of students did not have access to the market, and that that was a concern for the company.
The Chairperson applauded the construction of the new IEC in Mbizana and its additional facilities. Had the cooperative been trained? This had been a challenge for IECs before. To what extent was the municipality cooperating with the IEC?
Mr Bonga Zungu (PetroSA Government and Stakeholder Relations Manager) said that it was not possible for PetroSA to build an IEC without the support of the municipality and the local stakeholders in the form of the cooperative. The employees of the Mbizana IEC were offered training at PetroSA's expense in Johannesburg, as were members of the cooperative who functioned as a board of trustees. There had been cooperation from the municipal mayor and from the municipality generally. There had been some instability on the ground. Stability within the cooperative was not as settled as it should have been. That, and the changes at a municipal level, had been challenges. PetroSA colleagues had been in Mbizana the week before to meet with the municipal leadership, and would be grateful for any additional support. It was PetroSA's aim that the mayor and the cooperative work closely together and resolve their differences so that the IEC could continue to be viable and sustainable.
International expert project review
The Chairperson asked about expert international project reviewers. What was their take on PetroSA's work? It was important that PetroSA subject itself to that scrutiny. The chair asked to hear more about this in future.
Mr Jorn Falbe (PetroSA Vice President: New Ventures (Midstream)) said that it was important that PetroSA knew what it did not know, because it knew what gaps it had to fill. The project planning process had been undertaken together with international experts who assisted with benchmarking and project management. PetroSA had reviewed its own project structure accordingly, using Independent Project Analysis (IPA), a company that Mr Falbe had used before when he worked for Shell. Mega-projects that changed the environment in which a company operated had to follow a certain structure. External factors could cause a project to fail. Planning certainty was important to avoid making projects of this magnitude schedule-driven. 2020 was an important deadline, but the company should not have to hold to it at all costs. There needed to be flexibility without a loss of focus. Proper partner integration with Sinopec was also very important in this first phase. In the second phase, PetroSA had to develop and integrate the project owner's team by integrating the IDC and aligning shareholders' interests. The project execution strategy also had to be agreed on. PetroSA was not expert in running mega-projects. Thus the partnership with an entity like Sinopec was crucial, because Sinopec had done multiple refinery and mega-projects, had strong access to the global procurement market (which would help PetroSA manage costs properly), and could bring expertise to challenge and grow the company. Sinopec and PetroSA were fairly equal partners in terms of experience, but Sinopec's way of doing things was often smarter and more insightful. This was a strong partnership. Mega-projects often failed because there was no alignment with the shareholder or the government. PetroSA had a strong forum at the Presidential Infrastructure Coordinating Commission (PICC), which had put structures in place to coordinate different types of projects. SIP 3 was important to PetroSA's projects. Without a port, for example, there would be no project because the refinery could not be linked to the market (SIP 3 provided for port and rail upgrades, especially at Ngqura on the east coast). PetroSA was working with Transnet on the integration of logistics. The company needed to show a potential investor like Sinopec that it could coordinate this logistical infrastructure. PetroSA's project execution strategy would be aligned with global best practices.
Mr Moloto posed his final question broadly to avoid bringing up sensitive information. The Committee had looked at PetroSA's financial statement the day before. Was PetroSA comfortable with the inventory level of the company?
Mr Webster Fanadzo (PetroSA CFO) said that PetroSA kept a close eye on the level of inventory in the company. Downstream acquisitions accounted for anything the honourable Member had seen in the numbers, but PetroSA managed these levels very cautiously.
Accelerated Development Programme
Ms N Mathibela (ANC) referred to the Skills Development Priorities slide and asked how many women had graduated from this programme. Had people living with disabilities been included?
Mr Arendse replied that the programme was currently under way. 30 out of 91 employees on the Leadership Development Programme were women. The programme would be completed in 2013. PetroSA's study assistance and bursary programmes also aimed to ensure sufficient female representation. The company's numbers as to gender equity were respectable -- in the order of 50%.
Ms Mathibela asked again for information on people living with disabilities.
Mr Arendse replied that PetroSA had challenges in this respect, but had taken a targeted approach to identifying students living with disabilities to participate in the programmes and make progress through the ranks. This was partly the result of a partnership between PetroSA and the Cape Peninsula University of Technology (CPUT). PetroSA was also strengthening efforts to employ people with disabilities and partnering with providers who were specialists in this area in order to achieve the target set for the company.
Ms Mathibela asked what would happen if drilling had not been completed in three years' time?
Mr Fanadzo replied that the company had budgeted for each well to take about six months. He explained that the wells were first drilled vertically and then continued horizontally for about 1.5km at a depth of about 4 000m, and that this was a lengthy process. Various technologies could speed up the drilling. It was important that the well head keep working. The company aimed to minimise all the non-productive factors in this context. PetroSA was confident that the six months allocated to each well would be sufficient. If PetroSA failed to meet these deadlines, the company would face serious challenges and would have to put its contingency plans into action.
Shale gas safety
Ms Mathibela said that in terms of shale gas, people in the Karoo had complained about water contamination. Would PetroSA's shale gas project be safe?
Mr Godwin Sweto (PetroSA VP Corporate Strategy) replied that adequate studies and investigations had to be carried out to identify the location of aquifers in relation to the gas reserves, and to ensure that contamination did not happen. Before exploiting this resource, PetroSA had to be completely sure that contamination would be avoided. There was a need to find out the structure of the Karoo in this context.
Chairperson's final comments
The Chairperson said that last year at a meeting with other portfolio committees, the Portfolio Committee on Women, Children and Persons with Disabilities had committed to working with the Department of Energy to look into matters of equality for women and disabled persons. There had been no update on this yet. He encouraged the Department to engage robustly with the SOEs on this issue. The SA Disability Alliance and Disabled People South Africa (DPSA) were a useful resources here. The Department of Trade and Industry's model was a good example, where a call centre in Soweto was being managed by disabled persons. PetroSA was in a good position to enhance what it had already achieved in this area.
Economic development was crucial. Small, Medium and Micro Enterprises (SMMEs) and cooperatives were able to help with job creation. The Committee wanted to see SOEs take bolder steps in certain areas, particularly as regards job creation, using funds provided by the state. In future, the Committee wanted to hear how PetroSA would enhance its trading capacity. SA was under pressure in terms of getting crude from outside the country. SA did not have any “axe to grind” as regards Iran, and China and India had taken strong stances in this context. SOEs could advance a country's foreign policy. Mr Moloto had raised an important point about cultural differences, and it was hoped that the Presidential Review Project on SOEs would address this question.
Finally, the Chairperson recognised that it was a challenge for PetroSA to come and present to the Committee, and asked the Members to take a more robust approach next time. The ultimate shareholder of PetroSA was the citizen of South Africa. He hoped that through the media, this approach would be responsibly and appropriately articulated to the public, whose responses could be of value. However, it was recognised that this was a highly competitive area. PetroSA had aptly articulated its plans up to 2017/18, and that the Committee would be monitoring PetroSA's performance.
Briefing by SANEDI on Strategic Plan 2013
The Chairperson welcomed the SANEDI delegation.
Ms Nothemba Mlonzi (SANEDI Chairperson) introduced herself and her team. She also introduced Ms Mokgadi Mathekgana (Department of Energy, Chief Director: Clean Energy). According to SANEDI's website, Ms Mathekgana is an independent non-executive director on SANEDI's board of directors. Ms Mlonzi outlined the strategic plan and SANEDI's mission and vision, which were aimed at sustainability and innovation. She described the history and legislative mandates of SANEDI and handed over to the CEO.
Mr Kadri Nassiep SANEDI CEO, said that SANEDI had the specific mandate to foster and support the transition to a low-carbon future in SA. There were existing strategic outcomes and programmes in place for this purpose.
Strategic outcome orientated goals
There were three main strategic outcome-orientated goals, the first of which was critical to decision-making at the highest level in the country. This first goal was to enable well-informed and high confidence energy planning, decision-making and policy development, which required access to data. Data gave access to appropriate planning tools, which empowered policy-makers to produce effective strategies and policies. The second goal was to support accelerated transformation to a less energy and carbon intensive economy. This was in line with SA's commitment to reducing its CO² emissions, and SANEDI addressed this in its Climate Change Response White Paper. In the context of moving SA to a less energy intensive framework, he referenced the media “debacle” of Eskom's contract with BHP Billiton and said that SA should be looking at less energy intensive industries and better pricing regimes. The third goal was to foster a culture of greater efficiency and a more rational use of energy and natural resources. The conservation of energy and energy efficiency (less units of input to achieve the same units of output) were important. These three strategic outcomes were the foundation of SANEDI's strategic plan.
Programmes and portfolios
SANEDI's programmes were derived from its strategic outcome goals. The first programme dealt with corporate governance and administration, including the overhead administration of SANEDI's management. The second programme was the heart of SANEDI's operations and talked to the applied energy research and demonstration portfolios. This programme covered carbon capture, fracking and a road map dealing with the sustainable use of coal and gas in the future.
In terms of the Clean Energy Solutions portfolio, SANEDI had the Renewable Energy Centre of Research and Development (RECORD), which coordinated research and development (R&D) undertaken at SANEDI's tertiary institutions, other international research bodies and private sector R&D institutions. RECORD looked at producing tangible solutions, training and human capital in the area of renewable energy. SANEDI's Smart Grid Initiative (SASGI) also ran a comprehensive programme which combined the work of Eskom and the major metropolitan areas to decide what would constitute a Smart Grid in SA. This programme aimed to identify gaps in knowledge and to decide how to introduce Smart Grids into SA over the next few years.
Under the Renewable Energy Independent Power Producer (REIPP) procurement plan, SANEDI had an ambitious renewable energy programme that would inject large quantities of energy (particularly solar and wind) into the grid. Thus the grid needed to be able to accomodate fluctuating power. Another of SANEDI's portfolios was Green Transport. SANEDI was in the process of remodelling the centre, which had been in existence for the past four years, and was now relocated to the Centre for Energy Systems Analysis and Research (CESAR). Working for Energy dealt with sustainable energy provision into low-income and rural areas while aiming to use that energy to create job opportunities. Combining energy and jobs was the key focus of Working for Energy. Energy Data and Knowledge Management was a portfolio that connected with the first strategic outcome goal to enable confident high-level decision-making. Government and the private sector needed institutional memory to provide access to necessary data. SANEDI had to have faith in the data used in its modelling tools. Energy Efficiency required coordination of the efforts of other state entities working in the same area. 49M, Eskom, the Department of Energy and the Government Communication and Information System (GCIS) ran their own campaigns on energy efficiency.
The CEO repeated that SANEDI needed access to robust data, including databases detailing consumption and supply of electricity and other energy carriers. There was a lot of data on the electricity sector, but less about liquid fuels, gas and coal. SANEDI wanted to manage the energy landscape via access to appropriate data. The main focus of accelerated transformation to a less energy and carbon intensive economy was sustainable jobs. There was some confusion and uncertainty about the role of the state in this area, in terms of driving long-term infrastructure development plans. There seemed to be very little scope for the creation of jobs in the area of sustainable energy. It was necessary to ask where the jobs would come from in this sector, or in the sector of, for example, nuclear energy or refineries. The final strategic outcome homed in on energy efficiency in all its various forms. It also looked at the management and conservation of other natural resources such as water, which had a synergistic relationship with energy.
Innovation value chain
Mr Nassiep said that when someone could make a process more efficient or smarter, various strategies were available to take that innovation forward. The Department of Science and Technology (DST) had the most authority in this area. The Technology Innovation Agency (TIA) had a mandate to support the development of home-grown innovation. At the same time, when SANEDI had a product it was ready to demonstrate, it would support the development of a pilot project and the ultimate commercialisation of that product. SANEDI did not have the resources to introduce a product into the market place, however, which required close working relationships with the IDC, CEF, DBSA and others who could afford to bankroll new technology. SANEDI's role in the innovation value chain was to mitigate the financial risk attached to new technology. It was important to understand technology diffusion in this context. For example, the price of photovoltaic panels had decreased in recent years from $4 to 5 per watt at peak to $1 per watt at peak. The cost had come down dramatically. Although the end use was up to the market to determine, SANEDI aimed to bring down the associated costs of technology by overcoming the barriers that kept the product from entering the marketplace. Mr Nassiep raised the example of ethanol gel. This product had been presented as an alternative to paraffin. However, it was not as efficient, cheap or widely-distributed as paraffin. If the government had thought of ethanol gel as an energy solution, it could have broken down those barriers keeping ethanol gel from succeeding in the marketplace.
SANEDI was based on the three strategic outcomes mentioned above. As an entity, SANEDI operated in two defined spaces: technology development and programme development.
SANEDI managed resources located at research bodies like the Council for Scientific and Industrial Research (CSIR) or universities -- for example, the Energy Efficiency Hub at the University of Pretoria which had already produced over 100 Masters and PhD graduates capable of working on energy efficiency. Other centres existed around the country to build the proficiency and skills of students to deliver high-quality research.
SANEDI relied on in-house skills and capacity. Its strength lay in its ability and experience. It had the industry leaders at its disposal to manage its programmes effectively.
Responsible talent management internally, and in the context of internships, was an enabler. SANEDI aimed to help universities become more advanced and to help historically-disadvantaged institutions to improve to the highest levels. In terms of cost-cutting and energy efficiency, institutional memory was key. SANEDI had learned from examples of institutional memory being lost, and consequently, protection of knowledge and knowledge management were recognised as vital. As SANEDI commercialised products, it was important to coordinate efforts with entities in the same fields. Proactive stakeholder engagement was also a priority. The South African Nuclear Energy Corporation (Necsa) had been working proactively with SANEDI on biomass.
Mr Nassiep said he would talk about SANEDI's programmes of national interest, and also the company's timelines and associated challenges. He would also cover what to expect from SANEDI in terms of deliverables in the 2013/14 year.
Carbon capture and storage (CCS)
SANEDI housed the South African Centre for Carbon Capture and Storage (SACCCS) and most of its R&D capacity. Various parties were responsible for the management and funding of the centre, including SASOL, the Norwegian Embassy and ESKOM, as well as other industry partners. These main players were very important in making CSS a tool for mitigating against carbon dioxide emissions. The funding allocation was a priority, and Treasury had increased its allocation to CCS and given them R69m in 2013, R103m for 2014 and R35m for 2015. The amount tapered off in 2015 because by then SANEDI should be ready with its commercial partners for the pilot injection phase. In this phase, SANEDI had to identify a suitable on-shore site which would house tens of thousands of tons of CO². This project involved injecting carbon dioxide underground, and SANEDI expected there to be some sensitivity from the public. This form of long-term CO² storage would attract interest in the same way that fracking had done. SANEDI was also trying to access additional funding through the World Bank with the support of the UK government, which had been a direct funder of SACCCS. The UK government had nationalised its Official Development Assistance (ODA) support, and SANEDI was working with the UK government to ensure its continued support via a different funding route.
This year, CCS activities had two focuses. First was the appointment of appropriate human resources to support the pilot injection phase, beginning with an international advisory body that would be put in place in 2013. CCS also needed the appropriate engineering, procurement and construction contractors and stakeholder engagement officers (already appointed). These officers would be operating in the Zululand and Algoa basins, which were the two prime destinations for the storage sites. Once specific sites had been identified, SANEDI would have to go in and do the explorations, along with the necessary seismic work. By the end of 2013, SANEDI would have a good idea of which sites would be suitable for the pilot injection phase. CCS also had to source CO². Although SASOL and ESKOM gave off lots of CO², it was difficult to transport that gas to the appropriate sites. An off-shore site would be prohibitively expensive, so the CCS sites would be on-shore. ESKOM's flue gas contained about 13% CO², but the CO² would have to be separated out from the other flue gases. SASOL gave off about 95% CO², but the gas would have to be transported to the sites on the coast. During the course of 2013, CCS's engineering team would resolve this dilemma.
Working for Energy
Working for Energy was a critical programme for SANEDI. However, the programme had no funding for the 2013/14 financial year. In terms of solutions involving renewable energy, low income housing and energy-efficient building materials could and should be manufactured domestically, and should also contribute to job creation. Renewable energy and energy efficiency encourage growth and job opportunities in microeconomies. SANEDI provided energy but also an end use for that energy to help people become economically active. SANEDI concentrated on biomass production and the converting of waste into energy. In KwaMashu, SANEDI had a pilot project aimed at converting sewage into electricity. Once the plant was commissioned, it would produce 2 megwatts of electricity from sewage. This would be in conjunction with invasive vegetation used for coal-firing. The plant would be commissioned once the city of eThekwini had agreed to the public partnership. Background work had been done, and a fluidised bed reactor had been put in on site. All that was needed were the power generation equipment and feedstock for coal-firing. This would be a good project under Working for Energy.
A great deal of energy was wasted at the domestic level. Septic tanks in rural areas were a wasted resource. SANEDI intended to introduce smaller-scale digesters in Bela-Bela and other parts of the North West, Limpopo and Western Cape provinces. Communities were being taught how to build digesters and to use the gas effectively. The gas was being sourced from cow manure and pig waste.
In terms of solar energy, SANEDI worked with a French company, Soitec, to develop a 500 kilowatt concentrated photovoltaic (PV) system in Hazelmere, KZN, and had developed a training programme that produced artisans who could install and maintain these kinds of systems. An agribusiness had been set up on the same facility. This was one of the first developments of its kind in SA.
Working for Energy was also involved with invasive vegetation projects through Working for Water, established under the Department of Environmental Affairs. In Uitenhage in the Eastern Cape, SANEDI would be converting invasive vegetation into electricity using gasification technology. Working for Energy was involved in a number of projects, and would be able to show opportunities for job creation in these areas during the 2013/14 year.
As above, SANEDI had renewable energy on hand to inject into the grids, which meant that the grids had to be able to accommodate those kinds of energy. The smart grids would also give customers the ability to choose suppliers and to understand and influence their own consumption. SANEDI had established the SA Smart Grid Initiative (SASGI), which brought together the municipalities, ESKOM distribution businesses and the service providers and their representative associations. SASGI was in place to understand the Smart Grid vision, the technology requirements and the relevant gaps. It also had to develop a business case and an implementation plan for rolling out Smart Grids over a set timeframe. The Department of Energy and European funders had put together a programme for smart meters in SA. The pilot project for smart meters would start in 2013. Ten to fifteen thousand smart meters would be installed in one or two metropolitan areas, which would be selected by the Department in the coming weeks and months. This project would need to be accompanied by an education and awareness campaign to inform consumers. Mr Nassiep suggested that the meters could be linked to e-learning.
Data and Knowledge Management
It was important to know where the data resided. For this reason, the DoE, DST and SANEDI had together established the Centre for Energy Systems Analysis and Research (CESAR). CESAR was working with the University of Cape Town's Energy Research Centre (ERC) and the University of Pretoria. The aim was to produce all the databases required for planning purposes, to test and develop new planning tools for use in terms of Integrated Resource Plans (IRPs) and Integrated Energy Plans (IEPs) and to produce human capital in terms of modelling skills, including statisticians and mathematicians who could assist with planning. The DoE and DST were actively involved because of the benefits of CESAR for policy-making.
This centre had been in Midrand for the past four years, and had been relocated to CESAR. In partnership with CESAR, Green Transport was developing an incubation, or soft-start, facility which would allow industry to benefit from SANEDI's R&D exposure and funding support. Green Transport had worked with Gauteng Province and the taxi industry, converting vehicles to run on a combination of liquefied petroleum gas (LPG) and petrol or compressed natural gas (CNG) and petrol. There had been notable successes. Buses in Gauteng were running on CNG and refuelling stations had been put in place. It was hoped that this could be rolled out to other areas where CNG could be sourced. Green Transport had supported the use of portable pods used as mobile CNG refuelling facilities. These would be useful for areas which did not have a mainstream supply of gas. Green Transport had established the e-mobility facility, which would see collaboration with CESAR and SANEDI in developing solutions for the electric vehicle market. This was not the right time for Green Transport to be competing with established manufacturers to develop its own electric vehicles. Rather, Green Transport would concern itself with retrofits. Vehicles converted to run on electricity could run far more efficiently than if they ran on diesel or petrol alone. In 2013 Green Transport would help a number of industries make the transition to LPG, CNG and electric vehicle technology.
SANEDI had worked with government to establish the Renewable Energy Centre of Research and Development (RECORD). A collaborative effort between SANEDI and the universities, it was launched last year. The governments of Germany, the UK, Norway and Denmark had all supported this initiative. RECORD pulled together all the research in the country on renewable energy. SANEDI represented South Africa at the International Energy Agency (IEA) with regard to implementing agreements on renewable energy. This brought international exposure to domestic partners. SANEDI supported local wave energy conversion technology using the exposure gained via the ocean energy systems implementing agreement. The Wind Atlas of SA (WASA) was one project linked to RECORD. The universities of Stellenbosch and Cape Town, SA Weather Services, the Danish government and others were involved with WASA, which accurately mapped out the wind resources in SA. Microscaling for more accurate prediction of wind speeds would be part of the project's next phase. The DoE was working towards a five gigawatt solar park in the Northern Cape, in the Prieska area. SANEDI would support CEF in its efforts. SANEDI aimed to establish a station within the solar park that would gather data and allow for the testing of new technology. SANEDI worked closely with the IEA, where the bulk of international energy research was being consolidated.
SANEDI was involved with the National Treasury and the Department of Trade and Industry with regard to the Income Tax Amendment Act, particularly sections 12i and 12l (pending), which talked to incentives for energy efficiency in the industry. SANEDI had certified certain projects and contributed to the measurement and verification (M&V) programme. To get the benefits of the tax incentive, a company had to have its baseline measured. Additionally, every year an M&V practitioner would have to verify the project's savings. SANEDI's current M&V centre involved only academics, and the skills-base would be broadened in future. The Energy Hub at the University of Pretoria was especially prolific in publishing R&D in the energy efficiency field. SANEDI intended to increase funding to the Energy Hub accordingly.
Funding had been a challenge in previous years, but the increase from the Treasury in 2013/14 had been welcome. However, there were still funding shortfalls in some areas. With implementation came the need for human resources, but there was a shortage of the necessary skills in the marketplace. This was a problem for the energy industry generally. SANEDI needed clarity on its energy efficiency mandate (in terms of the National Energy Efficiency Act) as well as to the expectations of Parliament and stakeholders such as the DoE. The Green Transport programme was not funded at all. The Department of Transport had committed an allocation of R10m per annum to the programme for the next three years, but that had not materialised yet. Working for Energy's three-year allocation of funding from the Treasury had come to an end. Energy Efficiency also lacked funding for its programmes. SANEDI was aware of ESKOM's funding under Multi-Year Price Determination 3 (MYPD3), and noted that funding for Demand Side Management (DSM) had dropped from R13 billion to R5 billion over a five-year period, thus reducing ESKOM's support for energy efficiency. In order to take up slack in this space, SANEDI needed a workable funding solution (involving Treasury, MYPD or a carbon tax).
SANEDI had a staff complement of just over 40, most of whom were professionals. Technical skills required growth, which was being achieved through a one-year internship programme. SANEDI saw this as its contribution to skills development.
Energy efficiency mandate
There were conflicts between the specific requirements of the Act, which detailed SANEDI's role in implementing energy efficiency, and other factors, including the National Energy Regulator of SA's (NERSA) recent pronouncements on MYPD and the issue of whether ESKOM should be selling instead of conserving electricity. There was a conflict between the player/referee roles in this respect. The energy efficiency landscape was dominated by a number of players with overlapping awareness campaigns. These included 49M, ESKOM's Integrated Demand Management (IDM), local authorities' own campaigns and the Power Alert feature on television. Mr Nassiep said that too many academic researchers were undertaking similar energy efficiency R&D efforts, which could lead to diluted research and wasted funds. The average member of the public was becoming confused. Too many competing products were available, each with their own marketing. Competing options included solar water heaters or heat pumps and compact fluorescent lamps (CFLs) or LED lighting. Those working on energy efficiency needed to provide one repository of clear information on these topics. The public needed to know and understand its available options. SANEDI was working on a position paper with the DoE. This paper postulated a national clearing-house facility to ensure coordination and performance measurement. There was as yet no reliable figure for the extent to which energy efficiency had been introduced in any part of the country. A central repository of both public and private efforts in this field should be established, and this would help to channel donor funding as well. Variable costing models were being implemented to encourage international funding. SANEDI was working with Necsa, Nersa and ESKOM on this. Finally, SANEDI believed that its intern programme was critical. In 2012 SANEDI had received over 3 000 applications for ten intern positions. It was difficult for graduates in this field to find work in SA.
In terms of funding for 2013/14, SANEDI had sufficient funds to run its programmes. Baseline funding from the DoE had increased to R63 m for 2013/14 (up from R50 m in 2011/12). The amount would drop to about R54 m in the future, so SANEDI was looking to increase that allocation. Treasury had made available an initial sum of R2m to fund a feasibility study into the use of shale gas in SA. SANEDI was looking at fracking and its possible resultant environmental fallout. CCS had received R69m for the pilot injection phase (scheduled for 2016/17), and the concentrated solar power allocation supported energy efficiency, Smart Grids and CCS. The Smart Grids pilot had received R71m as a combination of EU and DoE funding.
Ms Mathibela commented on institutional memory, which was so easily lost between generations.
Mr Nassiep replied that the loss of institutional memory was a problem that had affected the whole country. Between twelve and fifteen years previously, ESKOM had instituted its own knowledge management system, using a tool called Hyperwave to map out and manage every aspect of a power station. Hyperwave worked something like a database, focusing on a specific aspect of the station -- for example, the relevant chemistry and chemical processes and byproducts. This systematic process had taken a very long time, but was very necessary. In 2005 the DoE had prepared a blueprint for a feed-in tariff for renewable energy with the support of the Danish government. A few years later, Nersa had produced its own, very similar tariff outline. The key was to have a dedicated resource inside a given entity such as the Department that had the tools to capture the tacit/explicit knowledge available. This was a critical matter. The energy sector had lost people engaged in capturing data on, for example, coal end-use. Mr Nassiep explained that not many people knew that one could drive to a coal mine and collect coal, for instance. Knowledge management was a challenge for the industry.
Ms Mathibela asked whether CCS was really going to be safe. She compared the possible contamination to what had happened at Fukushima in 2011.
Mr Nassiep replied that stakeholder engagement was key in this area. The public had to be sensitized as to how CO² storage actually worked. At the depths that CO² was injected underground (between 3 and 5 km down), the pressure was so great that the CO² gas liquefied and blended into the substrate. Two factors were important in this context: porosity and permeability. Regular tests would be done to ascertain how far the CO² had spread underground. Research done at a commercial CO² storage facility in Norway had helped determine how far the CO² could spread with relation to seismic activity. Over time CO² merged with the rock to form a benign mineral carbonate. At the depths considered here, it was very difficult for the CO² to come back up. SANEDI had looked into using abandoned mines for this purpose, even though there was a risk that remaining mine resources could be sterilised by the injection process. The cavities where CO² was stored would have to be sealed off. SANEDI wanted to be clear on the fact that the CO² would never escape, except where there was unusual or high seismic activity. Therefore the areas selected for this process had to be sound and maintain their integrity for the next 100 to 200 years. Geological studies were necessary to ensure that only these steady sites were used.
Ms Mathibela said that Green Transport was a good thing, but was concerned that it would be very expensive. Most people would not be able to afford those kinds of vehicles.
Mr Nassiep replied that cost-effectiveness depended on the type of solution one was introducing. SANEDI had worked with the taxi industry and converted the vehicles to hybrids that ran on LPG and petrol. The cost of conversion per vehicle was between R18 000 and R20 000, with the payback being about one year. This was a win-win situation for the taxi industry. It was cheaper for them to run their fleet, and the payback period was relatively short. Compressed natural gas (CNG) was an alternative, but was limited by the fact that its use required access to gas. LPG also required an extra refuelling pump at service stations, but CNG was more difficult to access. Supplying the necessary infrastructure would increase the costs. The challenge with electric vehicles was batteries. A lithium-iron battery would allow an electric vehicle about a 200km range. The Nissan Leaf had about this range. In an everyday town context, 200km would be sufficient, and the vehicle owner could recharge the car at night. The LPG hybrid would be a better solution for longer drives. Batteries were expensive, and some companies leased batteries. For SANEDI, buying electric vehicles was expensive. Instead, it aimed to retrofit existing vehicles. In SA there was no mandatory scrapping age for vehicles. If such a mandatory age were implemented, it would be easier to encourage the population to shift to alternative means of transportation because they would have to pay a penalty for their continued use of an old vehicle. A CO² tax applied to vehicles would also motivate the public to switch. Preferential parking and access routes for electric vehicles would also help. At the very least, LPG, CNG and biofuels needed to be introduced. In terms of biofuels, the necessary feedstock was not always available. Green Transport was restricted by what feedstock it could use for bioethanol and biodiesel, and more incentives were required for biofuels to be introduced on a larger scale.
Ms Mathibela asked whether ethanol gel was still being used. It was in the shops, but why was nobody buying it?
Mr Nassiep replied that ethanol gel was not succeeding for a number of reasons. In the past, ethanol gel had not adhered to appropriate standards. It had been blended with water by suppliers, which resulted in a very inefficient product that could not compete with paraffin. Paraffin was also much more widely distributed than ethanol gel. Ethanol gel also required a different burner head on a stove. The gel was an alternative fuel for camping and other pursuits, but it was not set to become a major alternative to paraffin.
The Chairperson asked whether ethanol gel was cleaner than paraffin.
Mr Nassiep replied that it was absolutely cleaner than paraffin. He said that one could eat ethanol gel, although he would not advocate eating it.
The Chairperson asked whether there was any R&D work being done on ethanol gel at that time.
Mr Nassiep replied that there was a stove-cooking research facility at the University of Johannesburg that was looking at alternative burners and stoves. However, as far as Mr Nassiep knew, there was not any significant research being done on ethanol gel at that time. He emphasised that if ethanol gel were of the right standard, it was almost as efficient as paraffin. He added that ethanol used as a fuel should be subjected to less taxation than ethanol sourced for drinking purposes. Access to ethanol was a limiting factor, and there was an industry waiting to be developed in this area. He repeated the safety (even of consumption) of ethanol gel, and mentioned a project undertaken by CEF to manufacture gel paraffin. This initiative faced cost difficulties, however. The Paraffin Safety Association looked instead at tamper-proof containers. Paraffin in a gel form reduced the risk of fires in informal settlements, which was worth a small cost increment.
General text-related queries
Prof S Mayatula (ANC) asked about the figures on the slide on financial support. In terms of SANEDI's objectives and workplan, how many jobs had been created? Prof Mayatula wanted a means to hold SANEDI accountable to its targets. He then referred to the SANEDI Strategic Five-Year Plan booklet, looking at pages 19, 34 and 35 and the Energy Technology Innovation Policy. He asked about the dates on pages 37 and 38, which described plans to be implemented during 2012/13 when the booklet contained SANEDI's plan for the next five years. From page 44, he asked what would happen with Green Transport and the public fleet. He also had a question about the figures on page 45.
Mr Nassiep said that the contribution to CCS from the Norwegian government was about R1m per year. The industry contribution was about R6m or R7m.
Ms Racquel Abrahamse (SANEDI Acting CFO) confirmed these figures, citing SASOL as a contributing industry. ESKOM, PetroSA, Anglo American and Xstrata's contributions amounted to about R6.9m.
Mr Nassiep said that in terms of green jobs created, in SANEDI's strategic documents the strategic outcomes did refer to the key performance indicators (KPIs) relevant to each outcome. Specific jobs created were indicated here. SANEDI's number one target in terms of measurement was the carbon intensity of the economy. SANEDI was trying to unify many diverse areas and support the transition to a low-carbon future, and this was measured by looking at the carbon intensity of the economy. Jobs were available through the Working for Energy programme in particular, and this was reflected in SANEDI's strategic documents.
The Energy Technology Innovation Policy should be developed between the DoE and the DST. It was important that SA knew what it wanted in relation to a particular technology. Did it want to be an adopter, a market leader or a fast follower? It could take tens of millions of rands to develop the concept around, for example, the pebble bed modular reactor (PBMR), but producing the commercially available product under license could cost billions or even trillions. It was up to the state to decide how much it was willing to invest in such a project. The electric car called the Optimal Energy Joule was a similar project. Tens of millions of rands had been spent to develop the first eight prototypes, but the costs had escalated in relation to commercial production and the funders were not prepared to spend hundreds of millions of rands to take that next step. The Energy Technology Innovation Policy should provide guidelines to indicate where SA wanted to be in terms of its investment in new technology. A former DST Minister had asked why SA did not have one local cellphone, but Mr Nassiep said that SA could not compete with Korea or the US in terms of cellphone manufacture. In this arena, SA had to accept that it was an adopter of technology only.
Ms Mikgadi Mathekgana, Chief Director, Clean Energy, added that the DoE and the DST were already working on a memorandum of understanding (MOU) that covered the work done by SOEs. This MOU would be completed by June 2013, and touched on innovation and research in the energy sector. Nuclear energy, clean energy and Smart Grids would be covered in this MOU.
In terms of the dates brought up in the strategic plan, Mr Nassiep explained that this was a rolling five-year plan. There were activities started in 2012/13 that would have to continue into the five-year planning period. For example, activities around the appointment of the Acting CFO had taken place in 2012, and the final appointment would be made in 2013.The way the dates had been presented might have been slightly misleading.
Mr Nassiep said that SANEDI was also excited about the aspects of Green Transport raised by Prof Mayatula. Refuelling and recharging infrastructure was a priority and a challenge.
There were gaps in the budget line items because not all the budgets were referenced in the document. For example, Smart Grids had no entry because it had an internal baseline allocation, parts of which were used to support Smart Grids work. The smart meter project had the R71m allocation of external funding, but the Smart Grids project was not funded explicitly on its own. Again, the Clean Energy entry was a holding programme including WASA and RECORD, which had their own allocations.
Mr Moloto asked about energy-efficient lighting, to which the DoE had allocated R548m. Had SANEDI been in conversation with DoE about this lighting?
Mr Barry Bredenkamp (SANEDI Senior Manager, Energy Efficiency) replied that the matter of public lighting had come up with the Department of Trade and Industry (DTI). The money for this was channelled from the Treasury through the DoE to various municipalities, who had submitted business plans to upgrade traffic lights and street lights. The problem was that the municipalities had their own tender procedures, and worked with specific suppliers for two or three years. It was difficult to enforce specific specifications in this context. There was only the requirement that what was done had to be energy-saving. Thus municipalities did not always pursue the most efficient solutions. DTI, DoE and SANEDI had created a task team to look at the designation of energy-efficient lighting in SA. As with solar water-heating, there would be specific requirements for the technology, some of which was local and some imported. Street lights in different cities were all different: some yellow, some white, some straight up and some overhanging the road. There was now a plan in place to work towards standardisation.
Ms Mathekgana added that when contracts were signed with municipalities, no specifications were given in terms of procurement and processes to be adhered to. This was a difficult for M&V processes, which had to submit a report on energy saved to Treasury.
Coordination with PetroSA
Mr Moloto asked whether SANEDI interacted with PetroSA, because they both had a financial allocation and DoE mandate on fracking. What was the connection between these two organisations?
Mr Nassiep replied that SANEDI would be working with PetroSA on fracking. SANEDI's interest here was not commercial, but it had to work with other companies who had a commercial interest.
The Chairperson asked what role SANEDI would play in the transition to a low-carbon future, and to what extent biogas digestors would be viable for rural schools.
Mr Nassiep said that this was a primary focus for SANEDI, which had been working with rural schools in KZN. Maintenance and utilisation were important for the effective use of the digesters. The gas was derived from human waste, and could therefore be viewed as unsuitable for cooking. It was better suited to heating, lighting or some other use.
The Chairperson commented on how readily available waste was in this context. He suggested that this was a suitable context to talk about Skills Education Training Authorities (SETAs).
Mr Nassiep replied that SANEDI intended to work with the SETAs in this area, and had already started projects in the Western and Eastern Cape. Locals were being trained to construct biogas digesters. SANEDI would need the SETAs' support to advance this project.
The Chairperson asked how Smart Grids could connect with e-learning.
Mr Nassiep replied that an interface was necessary for owners of a smart meter to understand how their meters were operating. In this context a low-income tablet like a cost-effective version of an iPad was needed. Learners in rural areas could have all their textbooks loaded onto this interface and, in WiFi-enabled areas, learners could access web-based classes. With the necessary backing from the Department of Basic Education, SANEDI hoped to pioneer this project within the course of 2013.
Working for Energy programme
The Chairperson asked the DoE to comment on the use of energy efficiency and the challenge of a conflict of interests.
Ms Mathekgana said that in 2008, the Government Communication and Information System (GCIS) was appointed as SA's energy efficiency campaign leader until 2011. GCIS's report indicated a range of energy efficiency recommendations. One key recommendation was to develop the National Energy Efficiency Strategy. Combining the necessary funds from all the respective donors had been a challenge in this regard. She asked to have the question repeated.
The Chairperson asked what benefits the Department saw coming out of the Working for Energy programme. There were no funds for the programme. Could it be sustained?
Ms Mathekgana replied that when the programme had started, the DoE had been discussing the programme's funding with National Treasury. It was necessary to prove the programme's worth by indicating the number of jobs it had created. The DoE still had to make a convincing case to the Treasury to have the programme sustained. It had also been suggested that Working for Energy be integrated within the Public Works extension programme.
Confusion around multiple energy-saving devices
The Chairperson asked Mr Bredenkamp to comment on this topic, with reference to a previous discussion at the Domestic Use Energy Conference.
Mr Bredenkamp said that at the conference, there had been a very interesting presentation on solar water-heating as opposed to heat pumps. If a member of the public decided to buy a solar water-heater, the ESKOM website had over 300 suppliers to choose from without helping the client to make an informed choice. Over 200 Energy Services companies (ESCOs) were also registered on the website. There was no real advice for people trying to become more energy-efficient. People could end up using the wrong technology for their geographical area -- for example the Highveld, where hail could damage solar panels, compared to the coast, where hail was not a concern. SANEDI and other energy efficiency authorities had to commit to more intelligent and streamlined public information campaigns. Mr Bredenkamp used the example of a member of the public seeing a 49M billboard advising everyone to “switch off”. On TV, Power Alert instructed people to switch off their non-essential applicances. On the radio, the City of Cape Town was running its own campaigns. Despite the good intentions behind these advertisements, the public was being bombarded with information and was confused as to what should actually be done to save energy. Often this resulted in people doing nothing. SANEDI was preparing a positioning statement on the streamlining of responsibilities, aligning itself with the best practices of countries most advanced in terms of energy efficiency, for example Germany and Spain. SANEDI advocated a simple, comprehensive web-based database combining the efforts of everyone involved in awareness and advertising. Every month there would be a different theme and campaign; different strategies were required for different seasons. This would be a more efficient use of the money currently being wasted on duplicated efforts in various media. The position paper on this would be ready within the next month. The aim was to make the energy-efficiency landscape more consistent and effective. People needed to know who they should phone to find out about energy-efficiency technology. ESKOM, SANEDI and the local municipalities had to handle high volumes of calls. A central repository of information was a necessity. SANEDI did not have a vested interest. It did not build power stations. It worked for the public good, not only to assist ESKOM but for socioeconomic reasons such as the tariff increase impact, the creation of jobs and other factors, apart from merely the generation of power.
Previously disadvantaged areas needed energy-efficiency the most. Many in these areas could not afford to pay their electricity bills, unlike wealthier sectors of society. For example, people in a rural situation had received solar water heaters, but the rising price of water had become a difficulty because the free energy led to increased water-usage. SANEDI had to be aware of these additional difficulties in the low-end market.
Ms Mathekgana added that when the DoE had reported on its strategic plan (16 April 2013), it had indicated that it was working towards a new contracting model to contract with manufacturers (particularly in relation to geysers). This model identified seven manufacturers, and would address issues of confusion surrounding which manufacturers to choose. The DoE also aimed to promote local products.
Energy Service Companies and solar water-heaters
The Chairperson asked whether SANEDI had had any engagement with ESCOs.
Mr Bredenkamp said that SANEDI was assisting the National Regulator for Compulsory Specifications (NRCS) on the comparison between solar water-heaters and heat pumps. Huge strides had been made in testing solar water-heaters, but labelling them in terms of energy efficiency was a challenge. It was not known what the heat losses for these heaters were in SA. NRCS was drafting the terms of reference and SANEDI was assisting with research through the Energy Efficiency Hub. Thus heat pumps and solar water heaters would be rated according to efficiency, and consumers could make an informed decision as to which technology to use.
Mr Bredenkamp said that SANEDI worked very closely with ESCOs. However, a recurring problem was that many of these registered ESCOs were not properly trained energy service providers. Any ESCO should be able to offer the full spectrum of services, including air conditioning, insulation, water-heating and other services. Training was the major problem in this area. SANEDI was working to offer training courses costing from R7 000 to R10 000, which would stimulate SMME development. SANEDI was developing a curriculum with the SETAs to bring registered ESCOs up to the international standard.
The Chairperson said that the Committee had run out of time. He thanked the SANEDI team. SANEDI's vision was to serve as a catalyst rather than as a delivery entity. This indicated that SANEDI worked with a wide range of players and would take on a heavy burden of work. In future, further oversight on the Working for Energy programme would be helpful. He asked to hear about the position paper on energy efficiency as soon as it was available.
The meeting was adjourned.
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