DA request for nuclear documents; Integrated Energy Plan: Departmental briefing

Energy

20 September 2016
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The DA firstly wanted the Committee to deal with the issue of documents related to nuclear procurement. The party had sought legal advice from the Parliamentary Legal Advisers, who advised that the Minister of Energy, Ms Joemat-Pettersson, had no right to refuse to provide the documents related to the nuclear procurement‚ as she had done repeatedly on the grounds that they were privileged‚ confidential and sensitive. The Committee had already unanimously resolved last year in the Budget Review and Recommendations that the Department of Energy should provide key nuclear procurement documentation including the integrated infrastructure review‚ the financing option models‚ the economic impact‚ localisation and other pertinent documents without this prejudicing the interests of the country. The Chairperson resolved to write to the Minister formally requesting the documents‚ as the Committee was committed to transparency and to holding public hearings on the nuclear programme. The Department would be asked to present the documents by October 11‚ when Members were coming back from a recess that would take up to two weeks.

The Department of Energy briefed the Committee on the Integrated Energy Plan and focused on the main purpose and objectives of the plan. The development of the IEP was envisaged in the White Paper on Energy Policy of the Republic of South Africa of 1998.The purpose and objectives of the IEP were further anchored in the National Energy Act, 2008 (Act No. 34 of 2008) which also mandates the Minister of Energy to develop, review and publish the Integrated Energy Plan. The implementation of the Plan was aimed at ensuring a coherent and coordinated approach to meeting our energy needs, the Integrated Energy Plan would ultimately incorporate detailed sector plans for electricity, gas and liquid fuels. The Plan considers all different energy carriers, all technology options and all key national policy imperatives and proposes and energy mix and policy recommendations, which ensured that the energy sector could help achieve these in the most optimal manner.

The Department highlighted eight key objectives that the Integrated Energy Plan aimed to achieve and these included promotion of energy access, energy efficiency, diversification of supply sources and the minimisation of water consumption. Other additional objectives primarily focused on minimisation of environmental impacts, promotion of job opportunities, cost of energy and the promotion of job creation and localisation. What was clearly at the centre was mainly economic development, social development and the consideration of environmental factors. The Integrated Energy Plan would take into consideration the existing policies and be able to inform development of future energy roadmaps. The Plan would also assist in providing feedback to development and review of external policies. The Department pointed out that there would be a need to explore solar augmentation for existing coal-fired power plants, investigate possibilities for mass production of PV panels locally and explore innovations that could aid in the reduction of CSP (Concentrated Solar Power) costs. There would also be a need a need to investigate the role of solar in providing heating needs of industry (starting with light industry) and explore solar hybridisation technologies (solar/gas, solar/diesel).

Members requested the Committee be provided with timeframes for the commencement and completion of the Integrated Energy Plan as this was missing from the presentation taking into account all the processes that needed to be followed (like public participation) before the plan was executed. What would be the relationship between the Plan and the finalisation of other sector plans in particular on gas and electricity? It was concerning that the presentation had failed to include bio-fuels in the value chain as this was considered as one of the primary energy sources in the country. The Department should consider using the non-edible food stocks for the production of advanced liquid fuel as this was where the country could stimulate the economy and job creation. There should be a proper coordination of all sources of energy and this could be done through the municipalities.

Members expressed concern that the Department had based its economic growth projections on National Treasury, 2014. The economy had fundamentally changed since the period of 2014. The economic assumptions that underpinned the Integrated Energy Plan seemed far rosier than reality and the picture that could be drawn today. The use of incorrect outdated figures for economic growth projections was essentially distorting the amount of electricity that the country would need in the future.  It was rather absurd to see that the Department would be aiming to install a target of 10 million Solar Water Heating when the Department had only just installed less than 1 million Solar Water Heaters in the last five-year period. Some Members requested the Department to explain why the information on the associated cost overruns for the different types of technologies was not included in the presentation. It was also rather surprising that the Department did not include any information on the long-term energy price, as this was something that all South Africans were deeply concerned about. All of the country’s plans around beneficiation and reindustrialisation were fundamentally based on the very low energy price and this should have been at the forefront of the Integrated Energy Plan.

Meeting report

DA request for nuclear documents
Mr G Mackay (DA) indicated that the DA had sought legal advice from Parliamentary Legal Advisers, who advised that the Minister of Energy, Ms Joemat-Pettersson had no right to refuse to provide the documents related to the nuclear procurement‚ as she had done repeatedly on the grounds that they were privileged‚ confidential and sensitive. The Committee had already unanimously resolved last year in the Budget Review and Recommendations (BRR) that the Department of Energy should provide it with key nuclear procurement documentation including the integrated infrastructure review‚ the financing option models‚ the economic impact‚ localisation and other pertinent documents without this prejudicing the interests of the country. The Earthlife Africa and Southern African Faith Communities Environment Institute had requested a draft of the Department of Energy's nuclear documents in their legal action against the Government for what they said were irregularities in the legal process surrounding the decision-making on the plan to build 9 600MW of nuclear capacity. The Committee should be provided with all the relevant documents considering that the nuclear procurement programme was supposed to start on 30 September 2016.

Mr J Esterhuizen (IFP) also supported the sentiments made by Mr Mackay as the Committee needed to be provided with nuclear procurement documents in order for the whole process to be as transparent as possible. He wanted to make it clear that this was, however, not to say he had trust on the Parliamentary Legal Advisers as they continued to lose a number of court cases which was costing taxpayers a huge amount of money. The Committee was also interested to see if the public participation process was followed for the nuclear procurement programme.  

Mr R Mavunda (ANC) mentioned that the matter that had been raised by Mr Mackay was criticalyl important and needed to be taken into consideration. There should be transparency from the Department in regard to the nuclear procurement programme. However, the solution could be that the matter should be set aside for another time as it was not contained in the agenda that was to be dealt with today.

Mr Mackay suggested that each of the documents that would be provided to the Committee should clearly state the date of the procurement of the documents including the supporting tender and bids documentations. This was aimed at evaluation when the document was commissioned, who it was issued to and if the process that was followed in the commissioning was clean and followed all the regulations. 

The Chairperson agreed to write to the Minister formally requesting the documents‚ as the Committee was committed to transparency and to holding public hearings on the nuclear programme. The Department would be asked to present the documents by October 11‚ when Members were coming back from a recess that would take up to two weeks.

Briefing by the Department of Energy
Mr Ompi Aphane, Director-General: Department of Energy; indicated that the development of the Integrated Energy Plan (IEP) was envisaged in the White Paper on Energy Policy of the Republic of South Africa of 1998.The purpose and objectives of the Integrated Energy Plan were further anchored in the National Energy Act, 2008 (Act No. 34 of 2008) which also mandates the Minister of Energy to develop, review and publish the IEP. To ensure a coherent and coordinated approach to meeting our energy needs, the IEP would ultimately incorporate detailed sector plans for electricity, gas and liquid fuels. The IEP considers all different energy carriers, all technology options and all key national policy imperatives and proposes an energy mix and policy recommendations which ensures that the energy sector can help achieve these in the most optimal manner.
 

Mr Aphane stated that in the stakeholder management the focus was on the following factors:

 

  • Agreement of the purpose of the IEP
  • Agreement with stakeholders on the minimum content of the IEP
  • Agreement of the requisite quantitative baselines and assumptions
  • Assessment of the gaps between expected content and existing content and data
  • Agreement on the scenarios/pathways to be tested and the associated timelines
  • Integration of various sector plans (for electricity, gas, liquid fuels, etc.)
  • Develop Draft IEP for consultation
  • After the Public Participation process, adoption of the IEP

 

Energy was the life blood of the economy which impacted on all sectors as well as individual livelihoods. Integrated energy planning was required to ensure that future energy service needs can be met in the most cost effective, efficient and socially beneficial manner, also considering environmental impacts. A lack of coordinated and integrated national planning for the energy sector led to underinvestment in much needed energy infrastructure. There was currently inadequate supply in both the electricity and liquid fuel industries due to a lack of timely investments in new capacity. Electricity generation was constrained due to insufficient capacity and inadequate availability of existing infrastructure. There was a high dependence on import of liquid fuels as the current production capacity does not meet national and export demand. No investments have been made in new capacity since the start of the new democracy. Planning at individual organisation level was commercially driven and therefore investments which were required in order to ensure the policy objectives of the country had been left under invested. The IEP aims to guide future energy infrastructure investments, identify and recommend policy development to shape the future energy landscape of the country.

Mr Aphane added that there were eight key objectives that the IEP aimed to achieve and these included promotion of energy access, energy efficiency, diversification of supply sources and the minimisation of water consumption. Other additional objectives were primarily focused on minimisation of environmental impacts, promotion of job opportunities, cost of energy and the promotion of job creation and localisation. What was clearly at the centre was mainly economic development, social development and the consideration of environmental factors. The Department was planning to build about 10 million Solar Water Heaters (SWHs) by the year 2050 and the price of this energy commodity was moderate relative to other commodities that were currently being used. The Department was using the 2014 economic projections that had been provided by National Treasury (NT) as a model for the implementation of the IEP. The assumption from the IEP model was that higher economic growth would require more additional energy.     

Mr Aphane concluded that there would be a need to explore solar augmentation for existing coal-fired power plants, investigate possibilities for mass production of PV panels locally and explore innovations that can aid in the reduction of CSP costs. There would also be a need a need to investigate the role of solar in providing heating needs of industry (starting with light industry) and explore solar hybridisation technologies (solar/gas, solar/diesel).

Discussion
The Chairperson requested that the Committee be provided with timeframes for the commencement and completion of the IEP as this was missing from the presentation taking into account all the processes that needed to be followed (like public participation) before the plan was executed. What would be the relationship between the IEP and the finalisation of other sector plans in particular gas and electricity? It was quite clear that the IEP was a very involved process but there should be clarity as to when there would be certainty on the path that was to be taken by South African on energy generation.

Mr Mabunda wanted to know about the implications of the delays that were mentioned in the IEP as this was a matter of particular concern.

Ms T Mahambehlala (ANC) indicated that the IEP and the Integrated Resource Plan (IRP) could be considered as both the future energy plans for the country and they should also incorporate all sources of bio-energy including bio-mass. The presentation failed to include bio-fuels in the value chain as this was considered as one of the primary energy sources in the country. The Department should consider using the non-edible food stocks for the production of advanced liquid fuel as this was where the country could stimulate the economy and job creation. There should be a proper coordination of all sources of energy and this could be done through the municipalities. She wanted to make it clear that she would not be endorsing the presentation as it failed to include a number of critical sources of energy like bio-fuel which could become quite essential for the people who were located in rural areas.

Ms Mahambehlala mentioned that hydrogen was the future energy source for our modern technologies and the presentation had also failed to provide the Committee with modern innovations on how the country would be exploiting hydrogen as a reliable source of energy. The hydrogen powered vehicles should be accommodated in the IEP as this was where the future transportation was heading to. The country could not continuously use coal as the main source of energy generation as there was a need to look at various other sources of energy. The Department should also consider using Carbon Dioxide food stocks to generate the liquid fuel and all these sources of energy should clearly reflect on the presentation on the IEP. Why was the Department aiming for the timeframe to be finalised in 2050 instead of being aligned with the National Development Plan?        

Mr Esterhuizen said Eskom’s corporate plan was based on the electricity growth of 0.8%, this making it very unlikely that the country would need more energy than the one that was currently being produced. Little or no information had been provided on the public participation that had been undertaken for the IEP. There were indeed a number of issues not been mentioned in the presentation, including the job creation prospect in the IEP. When would the gas utilisation plan be submitted? The Committee should be briefed on the likely consequences in the implementation of the IEP in regard to the reports that the coal that Eskom procured from Tegeta Exploration and Resources was not up to standard.

Mr Mackay thanked the Department for the incredible work in projecting the energy demand into the future and developing a plan around it as this was a very complicated task and South African had never done it successfully. It must be recalled that the country had periods of oversupply and undersupply of energy throughout its history or since 1910. It was concerning that the Department had based its economic growth projections on National Treasury, 2014. The economy had fundamentally changed since the period of 2014. The economic assumptions underpinning the IEP seemed far rosier than reality and the picture that could be drawn today. For example, it was already indicated that the economy of South Africa for 2016 would not be growing at a rate of 2.3% as the country would be lucky to even reach growth rate of 1%. The average growth rate for 2014-2022 would actually be lower than the growth rate reflected in the presentation.

Mr Mackay added that the Department had clearly used a growth rate that could not be fundamentally substantiated and this was important when one considered that the Gross Domestic Product (GDP) was used as a proxy for electricity demand in the country. The use of incorrect outdated figures for economic growth projections was essentially distorting the amount of electricity that the country would need in the future. The economic growth projections were also helping in determining whether the country was in need of nuclear and additional significant investments energy to grow. Why was the IEP holding so tightly to the 2014 economic growth projections which were clearly unrealistic and unattainable? It was quite surprising to see that the Department was suggesting that the price for gas would exceed that of the nuclear as the Parliamentary Budget Office (PBO) as well as the Mackenzie Study had all indicated that the capital costs of gas were significantly lower than the other forms of energy. The PBO specifically announced last week that gas was 67% cheaper than nuclear and coal was 16% cheaper than nuclear.

Mr Mackay said the Department could also attest that it had had a very poor record in terms of the installation of Solar Water Heating in different households. It was rather absurd to see that the Department would be aiming to install about 10 million Solar Water Heating (SWH) when the Department had only just installed less than 1 million SWHs in the last five-year period. It seemed like some of the assumptions of the Department had a very weak and flimsy basis. It would be interesting to know exactly how the Department was planning to make these assumptions a reality. He requested the Department to explain as to why the information on the associated cost overruns for the different types of technologies were not included in the presentation. It was also rather surprising that the Department did not include any information on the long-term energy price, as this was something that all South Africans were deeply concerned about. All of the country’s plans around beneficiation and reindustrialisation were fundamentally based on the very low energy price and this should have been at the forefront of the IEP. It would be important to know about a particular instrument that informed the IEP scenario price comparison. What were the assumptions underpinning the IEP scenario price comparison? 

The Chairperson commented that the presentation made to the Committee on IEP was still at draft stage. Members would need to reach a certain stage where they would fully interrogate the assumptions made by the Department and the conclusions that were likely to be reached. The Committee would have to compare the sources of data provided relative to other existing information to ensure that the assumptions being made were based on concrete evidence and this could be done at a later stage. The Committee would certainly not adopt the report on the IEP that was based on inaccurate and outdated economic growth projections.

Mr Aphane responded that it was obviously impossible for anyone to predict the future and the way that the Department was dealing with the unpredictability particularly in things like cost and demand projections.  There was an upper limit and a lower limit and the point about the plan was that it must be robust enough to deal with any possibility that would be encountered. It was therefore irrelevant that the Department had a model that was based on inaccurate GDP projections. What was presented to the Committee was an output that was based on one scenario and the Department could repeat the model and show Members how it would look like in relation to higher GDP projections. It was correct that economic growth for 2016 was particularly slower than anticipated but this did not mean that the Department should base its plan on the current economic growth as the economy was fluctuating. The focus of the Department was on primary energy cost, capital cost and demand projections and there was range in which the Department was dealing with cost overruns and this was not only related to nuclear only. There were also cost overruns on most large capital projects and this was something that needed to be taken into consideration.

Mr Aphane replied that the very first public consultation on the IEP was around 2010 and this was because it was impossible to produce an IEP that was not aligned to other sector plans. The Department was comfortable to have a better sense about the liquefied fuel space and IRPs and there was a need to bring these plans together. The presentation for today was essentially on the IEPs and not the IRPs but there were plans in place to ensure that these plans were well coordinated in a detailed plan. It was impossible to align the IEP when there was only one plan in place; hence there was a focus on the other existing sector plans of the Department. The process of the Department involved public participation and the public was likely to raise questions on two questions and these included questions around the use of the high demand economic growth and the cost implications that would impact the general public. The Committee had only been presented with seven scenarios and there were about a hundred scenarios that had not been presented and still needed to be tested.

Mr Aphane added that the liquid fuel and gas were incorporated in the IEPs as reflected in the presentation. The public consultation inputs would be incorporated and collated so as to have a modified integrated energy plan. There was a bio-fuel regulatory model that was very well advanced but it had not been included in the presentation as it was very bulky. The model talks about ways to take various non-edible stocks, in order not to threaten food security and manufacture bio-fuels from them as part of the liquid fuel demand-supply balance. The Department would include a dedicated chapter that was focused on bio-fuel and biomass as well. It was quite clear from slide 33 of the presentation that biomass was consistently appearing in all of the programmes. There was also a similar scenario on biogas and this was usually a small opportunity to be exploited given the number of landfill sites and the cost of the biomass gasification technology was also another factor. The IRPs was given the timeframe of 2030 as this was a nice planning horizon in South Africa, from an energy point of view and this was not seen as prominently in the period of 2025 onwards.

Mr Aphane clarified that the Department needed to look at the window that would be extending to 2030 as there were a lot of activities that were coming up between 2025 onwards as this was the phase that the country would be decommissioning power stations that were coming to the end of lifespan. It was unfortunate that the majority of power stations in the country were built at the same stage and therefore their lifespan was likely to almost end simultaneously. Therefore, the Department decided that the timeframe for the EIP should be extended to 2050 and this was mainly for the purposes of proper planning. There was a slide for the energy prices and these figures were for the purposes of comparison and the Department had discounted inflation on a particular basis. The IRPs would offer real sense figures on the energy prices. The prices provided for IEPs were indicative figures as it was impossible to talk about fares per/kilowatt-hour when talking about, for example, petrol and this means there was also a conversion issue that comes into play. There was a need to understand that prices were very particular in electricity as there was a whole price by Eskom and retail price and this wad adding to the complexity of energy prices.

Mr Aphane responded that the issue of hydrogen economy had been included in the research agenda and there was a collaborative programme with the Department of Science and Technology (DST) in relation as to how to use platinum as a catalyst in the hydrogen fuel cell development programme. There was a pilot programme that the Department was currently piloting using platinum catalysed fuel cells. The Department was also looking into the issue of researching on how to use carbon dioxide feed stock for energy generation. The Department was looking to explore the potential of extending the use of hydro-powered energy generation as South Africa was a very dry country. There was also a regional integration potential that the Department was looking to explore in other countries with a main focus on these hydro projects like Great Inga project. It would perhaps be appropriate for the questions that were related to coal quality to be directed to Eskom. It was safe to say that the coal that was being used in the country was a particular grade of coal and this coal was historically considered as a “nobody wants it coal” because of it contained high sulphur dioxide, moisture and high ash content. The use of coal for energy generation was slowly being considered as financially costly and environmentally unsustainable.

Mr Aphane explained that the Department would review the economic growth projections that had been provided in order for those figures to be updated and aligned to the reality on the ground. Gas from a capital cost point of view was certainly less expensive than coal. It must be clarified that the installation of 10 million SWHs was for the period up to 2050. The Department should be given an adequate support so as to implement this project successfully. The IEP was based on the assumptions and scenarios that would need to be tested and the figures could always be adjusted to suit the reality on the ground. The IEP was not dealing with a levelised cost as the focus was on capital cost, life cycle operating and maintenance cost and how to discount the cost of energy. The actual test would be on the procurement that would be undertaken for the completion of a particular project. The Department was waiting to solicit permission from the Chairperson of the Committee in order to start with the public participation process and be able to revise the inputs from the general public. The Department was adamant that the IEP and the IRPs would complete the picture and be implemented successfully.

The Chairperson thanked the Department for the presentation that had been made in the Committee. The outstanding minutes would be adopted in the next engagement.

The meeting was adjourned.                        
 

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