South African Weather Service on its Quarter 3 performance; Integrated Resource Plan & Integrated Energy Plan: Department of Energy briefing

Meeting report

The Chairperson welcomed everyone to the meeting and noted apologies by both the Minister and Deputy Minister. He said the just concluded colloquium had been a very good meeting attended by industry players and stakeholders. The next colloquium will focus on the ocean.

Ms Nosipho Ngcaba, Director-General (DG),  Department of Environmental Affairs (DEA), in her opening remarks noted the presence of the board but informed the Committee she and the board were on instructions not to discuss any issues relating to the former CEO as this was to be handled by the Minister.

Performance objectives of the South African Weather Service (SAWS)

Ms Mmapula Kgari, Acting CEO, SAWS noted that the performance report of both quarter 2 and 3 had been merged and this would be presented to the Committee.

The drivers of internal control to achieve clean administration were financial assessment, performance assessment and compliance assessment.  The performance assessment was still a work in progress and the shortfalls in this area are being addressed especially in the ICT environment. The shortfalls which were noted by the Auditor-General in 2015/16 are currently being addressed and these included the issues around protocol for data and strengthening the firewall of the organisation. She emphasised the huge commitment from the team to retain the clean audit status in the next cycle. The overall summary performance on objectives for Q2 and Q3 of the 2016/17 financial year showed that in Q2, 83% of targets were met, 3% of the targets are works in progress while 14% of the targets were off target. For Q3, 70% of targets were achieved, 10% was still work in progress and 20% were off target. Q2 ended well for SAWS while Q3 showed a dip - 13% fewer targets achieved compared to Q2 and 20% (6/30) of the targets had delayed implementation in Q3. This was 6% more if compared to Q2. The delayed indicators included:

• Completion of the ‘As Is 'community weather-smart Needs Analysis Report across all targeted communities
• Availability of RADAR data
• Availability of employee capability for core and critical skills
• Increase in leadership competency index
• Stakeholder satisfaction rating
• Funds secured for conducting social economic benefits study.

The process of appointing a resource to assist with the development of a five-year marketing plan is in place and the research on the sector completed with the United Kingdom Meteorological Office (UKMO) with analysis of the findings underway. The performance of the RADAR availability was quite low in Q3 mainly due to power failure and communication networks being down. The repairs of the faulty parts are on schedule and an aggressive maintenance programme was underway for the whole observation network. The RADAR availability target will not be met at the end of the year but the performance will be improved upon. Conducting a stakeholder satisfaction survey was also not achieved due to poor response by the service providers for Q3.

The Community Rainfall Station which was one of the new developed products was scheduled to be launched on 23 March 2017 during World Meteorology Day. The completion of the 5- year marketing plans for sector specific products on weather and climate in targeted sectors was also partially achieved. Engagement programmes for two targeted key stakeholder groups was partially achieved. Resources have been recruited to assist with the development of the engagement programme for five stakeholder groups.

Employment equity statistics showed total staffs count of 438 with 5 people in top management and 11 in senior management positions. The race distribution showed a spread of 69.81% Africans, 19.41% whites, 8.45% coloureds, 2.97% Indians, 2% foreigners and 3% of employees with disability.

Mr Lulana Gumenge, Chief Financial Officer, SAWS, said the organisation was in a very healthy financial position. As at the end of the last financial year, there was a surplus of R 7.7 million.  This was made possible by controlled expenditure and met targets.  The total revenue was 9.89% above budget. Aviation revenue was 20.39% above budget and non-regulated commercial revenue was 14.20% above budget. Total expenditure excluding depreciation and amortisation amounted to R246.4 million which was 3.98% (R10.2 million) below the year-to-date budget of R256.7 million.

Discussion

The Chairperson wanted to know if the second part of the presentation which is on the former executives of the board would be presented or not.

Ms Ngcaba replied that the Minister would love to lead the discussions on the subject matter but since she was not present there would be no presentations made on the subject.

The Chairperson also wanted information on the status of the senior management team.

Ms Kgari replied that the Chief Financial Officer (CFO) was under suspension and an internal process had been instituted. She would not want to divulge a lot of information so as not to prejudice the internal process.

Ms Judy Begumont, Deputy Director-General: Climate Change and Air Quality, DEA, said she took responsibility for the non-inclusion of the information regarding the status of the senior management team in the presentation, because she did not think there was a need for that.

The Chairperson in his follow up remarks noted that the correspondence sent indicated that there was a need to update the Committee on the status of the senior management. He was not impressed about the lack of documents or a presentation indicating the status. He impressed it on Ms Begumont that whenever the Committee asked for information, it was not a question of choice but such information must be presented in compiled reports. He was of the opinion that the Committee was being undermined.

Mr R Purdon (DA) said he was unimpressed with the presentation, because of the mistakes in the presented documents. He felt SAWS was very unprofessional.

Mr S Makhubele (ANC) noted the confusion with the presentation especially with respect to the instructions from the Minister. He suggested that the interaction be postponed to a further date when the Minister will be available.

Department of Energy (DoE) on the Integrated Resource Plan (IRP) Update

Mr Jacob Mbele, Acting Deputy Director-General, DoE, said certain assumptions were made in this process such as the demand and forecast, economic parameters technology and fuel costs and other assumptions such as carbon dioxide emissions constraints, renewable energy annual build limits, existing plant life. All costs are based on the Electric Power Research Institute (EPRI) 2016 report and the nuclear costs are based on a DoE study.

With regards to the final energy demand forecast projects, the high-less energy intensity forecast has an annual average energy growth of 2.17% and was used in the development of the base case while the low forecast had an annual average energy growth rate of 1.31 %. The economic parameters used are the exchange rate which was 11.55 USD to the Rand as at January 2015, the social discount rate of 8.2% real pre-tax and the cost of unreserved energy at R77.30kWh. These parameters are like those used in IEP. The technology overnight cost is the cost of a construction project if no interest was incurred during construction, as if the project was completed "overnight.” The technologies used here are coal, nuclear, wind hydro and the photovoltaic (PV) cells.

PV prices have fallen faster than it was envisaged in the 2010 learning rates. The learning rates can be defined as the fractional reduction in cost for each doubling of cumulative production or capacity. The PV learning rates were adjusted with the assumptions that costs will still fall a further 20%. The drop was capped at 20% based on International Technology Roadmap for Photovoltaic (ITRPV) paper that indicated that 21% fall in costs will continue. Following input from some stakeholders, this stance was being reviewed, because PV prices are already low and this had minimal impact on the volume of renewables.

On the carbon dioxide emission trajectories, it was projected that there will be a steady decline in the emission of carbon dioxide. On possible Eskom plant performance scenarios, a high plant performance depicts the aspirational position that quickly restores the energy availability factor (EAF) and was aligned to Eskom’s design- to-cost (DTC) target. The medium plant performance was based on Eskom’s Shareholder Compact and the corporate plan target. Eskom plants have a 50-year life and air quality retrofit schedule while for the non-Eskom plants; various decommissioning dates have been proposed. These decommissioning will result in planned and unplanned outages ranging from 4% to 20%. On the installed capacity and energy mix contribution technology, there were certain base case observations:

• System commissions new capacity earliest 2022;
• Initial capacity comes from a combination of PV, wind and gas
• New base load commissioning is highly linked to Eskom’s plant retirement schedule
• Nuclear is commissioned by 2037
• 1000MW of Hydro come in around 2030
• The system commissions conventional base load (Coal) by 2028
• Observation on coal, nuclear and hydro quantity and operation date made above can change significantly based on changes to the assumptions

With regards to the energy mix, gas and renewables will form the biggest chunk of installed capacity by 2050 with a significant reduction in installed capacity from coal. While installed capacity from coal is reduced significantly, coal and nuclear will contribute the most to the volume of (energy mix) energy supplied by 2050. This was not a final plan and cannot be the basis for any decision at this stage and was subject to further analysis, scenarios and sensitivity tests, following the public consultation process.

A total of nine public workshops were held in all provinces during December, January and February. A total number of 63 presentations were made by the public and there were 640 attendees. Key issues raised revolved around process, timing of consultants, demand forecast, annual build limits on renewables, the cost of renewables and the technologies missing from the preliminary base case. The next steps to be followed these workshops will be collation of all comments received, producing a “credible base case”, run scenarios and produce a draft IRP balanced scenario which was to be completed at the end of May. It is hoped that by the end of August 2017, Cabinet would have approved the draft policy adjusted IRP.

DoE on the Integrated Energy Plan (IEP) Update

Mr Motlatsi Seotsanyama, DoE Specialist, said the White Paper on the Energy Policy of the Republic of South Africa was developed in 1998. It formed the foundation and informed the development of energy policy in South Africa. The IEP takes into consideration existing policies and this informs development of future energy sector roadmaps, providing feedback to the development and review of external policies. The IEP is linked to several other plans like transport, environmental, carbon policy, water policy and industrialisation policies. All the assumptions from these plans are looked at and then incorporated into the IEP. There are eight key energy planning objectives associated with the IEP. These are

• Ensuring security of supply
• Minimising cost of Energy
• Promoting job, creation and localisation
• Minimising environmental impacts
• Minimising water consumption
• Diversifying supply sources
• Promoting energy efficiency
• Promoting energy access

The draft IEP report was approved by Cabinet for publishing for public consultation in June 2013. From September to November 2013, wide consultations were held through public stakeholder workshops in nine provinces and substantial inputs were obtained. The energy systems externalities can be positive and negative. Extraction for example affected water negatively. Demand effected climate change, causing air pollution and at the same time tended to help in switching to cleaner fuels. The job categories considered in the IEP are direct jobs, supplier jobs, indirect jobs, induced jobs, permanent jobs and temporary jobs.

The various scenarios which are the base case for the IEP were shown. The change in IEP development framework was to enable a focused approach on the critical energy sub sectors which are electricity supply, liquid fuel supply and gas. In terms of transport demand modelling, the number of vehicles sold was usually taken into consideration, the efficiency of the vehicles, their activities in terms of kilometres travelled and their efficiency. These factors helped to calculate the energy demand. Diesel was the most consumed in the transport sector because of the number of trucks on the roads and this can also be attributed to the mining and agricultural sectors.

Mr Robin Naidoo, DoE Specialist, spoke on the various scenarios for liquid fuels supply. The variables which are analysed with regards to the liquid fuels supply are total capacity, production, emissions, water consumption, feedstock consumption, costs and jobs. These variables fit into the eight key objectives of the IEP. In terms of total capacity, there was a need to look at the existing refineries in South Africa, which assumingly will remain operational until 2050. Sasol refineries are coal to liquid and PetroSA was gas to liquid and it was assumed that stock will run out. PetroSA was expected to run out of stock around 2030 and Sasol around 2040. Sasol was not projected to run out of coal, but rather gas since it also uses gas. In terms of the new refineries which will be built, certain scenarios have been taken into consideration and it was proposed that a new crude refinery will be built in 2026. Adding the new refineries and existing capacities will likely bring the total capacity to about 800 000 barrels per day. The imports will rise with the closure of the refineries and in 2027, 2040 and 2045 new coal refineries will be built.

Discussion

Ms H Kekena (ANC) asked why South Africa did not import its fuel needs from the neighboring African States such as Angola but chose to import from Saudi Arabia.

Mr Purdon (DA) related the demand focus and energy drive to the projected growth of the economy and wanted to know why it was not part of the presentation. Talking about the 50-year life cycle for the existing plants, he asked if the new plants such as Medupi also had a 50-year life span. He agreed with Ms Kekena and asked why there was no collaboration with neighboring African countries to supply the import needs of South Africa with respect to petroleum products and finally he asked about fracking in South Africa.

Mr  Makhubele speaking about the various scenarios taken into consideration in the IRP and IEP wanted to know if the affordability of energy by members of the public was taken into consideration in the various possible scenarios. He also asked about embedded generation sources and wanted to know if such energy sources could be integrated into the grid. Lastly he asked if the DoE agreed with Eskom on the various scenarios in both the IRP and IEP.

The Chairperson also spoke about the statements made by Eskom on the renewables and stated that there was the need for Eskom to come make some clarifications on that. He spoke about the German energy situation where the country is gradually moving away from coal dependency by 2050 but all the scenarios of South Africa still showed that coal will be part of the mix in 2050. He wanted to know if the scenarios represented a commitment on transitioning away from coal. He also asked if DEA was part of the process of both the IEA and IRP. He wanted the view of the DoE on the need to introduce legislation to force industries to comply with the reduction of carbon emission.

Ms Begumont replied that DEA had prepared a lot of detailed comments with regards to the IRP and IEA but the Department and DoE were working in partnership and constantly engaging. The reduction of carbon emission and a proper air quality plan in the transport sector is not as easy as that of the electricity sector. She noted that this can be easily regulated and controlled in the electricity sector.

Mr Ompi Aghane, DDG: Policy, Planning and Clean Energy, DoE, talked about the inter-relationship between the various fuel sources and the approaches which are focused on the IRP and he mentioned the treaty signed with the Democratic Republic of Congo (DRC) in terms of the Inga project. One of the objectives of DoE was to interconnect the Southern African Development Community (SADC) region. The biggest difference between South Africa and Europe was the level of interconnectivity. He debunked the claims that Germany will not utilise coal but noted that the plan was to reduce the generation of coal in its contribution to the energy mix of Germany but coal will still play an important factor because the rest of Europe still uses coal. Germany was also reducing its deployment of nuclear plants for energy. On the question of rooftop photovoltaic power station and its connectivity to the grid, he noted it was a critical point because it addresses the viability of the sector. Eskom was the monopoly generator because it controlled most the consumers. The municipalities however had the constitutional right to generate and regulate their own electricity and this will make the demand more contested. As Eskom increases its prices, cheaper generation options will arise and Eskom should take note of that. On the question of agreement with Eskom, he told the Committee that the DoE agreed with Eskom but have a lot of areas of disagreement hence he supported the need for a legislation which will help in reducing these tensions that arise between various government agencies as they attempt to implement government policies. He also agreed that there is the need for more engagement between DoE and DEA and DoE and Eskom. On the question of liquid fuels and crude, he noted that this was a legacy issue and was determined by the so called “7 sisters’’ which are the independent oil companies comprising of Shell, Chevron, BP and others. The government cannot regulate where these companies source the crude oil from or where they import the products from hence DOE cannot determine where these products come from.

Mr Mbele responded to the question of the correlation between demand, supply and the economy. The variables used were not included in the presentation but a GDP of about 4% growth was included in the calculations of the electricity projections. On affordability, he noted that this was included in the modelling. Talking about the 50-year plan for the plants, the planning period did not count for the new plants therefore they will still be online at that 50-year timeline.

Mr Aghane referred to clean coal technology and said that there were test injection points which had been identified for this initiative. Carbon can be removed from the generation plants using modern technology and coal will not be completely abandoned in energy mix.

The Chairperson reiterated the need for a cleaner and low carbon economy. He lauded the professional way the presentations were prepared and presented.

The meeting was adjourned.