National Energy Bill: briefing by Department of Minerals and Energy & adoption

NCOP Economic and Business Development

01 September 2008
Chairperson: Mr J F Sibaya
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Meeting Summary

The Committee was briefed on the Bill and approved it without amendments. An informative background to the National Energy Bill in light of current economic conditions was provided by the Department of Minerals and Energy. The Bill, premised on the Energy White Paper of 1998, and aimed to cover the gaps in that White Paper and other legislation on energy security - using an Energy Master Plan. The Bill provided for a National Integrated Energy Modelling System (NIEMS), increased generation and consumption of renewable energies, security of supply, contingency energy supply, energy infrastructure and measures for appropriate energy data collection. The Department encouraged the Committee to advocate for making the financing of energy security a top priority.

Meeting report

Mr Nhlanha Gumede, Deputy Director General: Hydrocarbons and Energy Planning first noted that they were looking at a D version of the Bill as a change had been made to the Bill in the National Assembly while it was being voted on. Clause 13(2)(a) has been deleted from the Bill:

(2) As from the date of commencement of this Act—
(a) the person who immediately before that date occupied the office of Chief Executive Officer of SANERI, is deemed to be the Chief Executive Officer of the South African National Energy Development Institute and continues to hold that office, without any interruption, for remainder of the period for which he was appointed as the Chief Executive Officer of SANERI;

Mr Gumede went on to explain the objects and purpose of the Bill, starting with a brief look at the long title of the Bill and moving on to the important provisions in the Bill itself. Attention was given to environmental and safety considerations, biofuels in South Africa and the formulation of energy policy in light of US demands for corn in its manufacture of bio-ethanol. He challenged the Committee to look at the effect on CPIX inflation on the poor, seeing that food constituted almost half of the poor’s expenditure. He emphasized the impact that energy policy had on the poor. He looked at the balance of payments and the impact that high oil prices had on it. The consumption of oil, if it increased at the same rate as present, would present a problem globally.
 
He went on to speak of the energy problem in South Africa. He looked at the daily peaks in electricity demand that the power grids found difficult to meet. He emphasized the fact that to meet the demand during peak times, especially in early evening in winter, the use of electricity was a very expensive option and urged the Committee to make the decision to ensure another option was found.

The cost of different electricity production methods was discussed, with coal-powered stations being the cheapest and the use of diesel being the more expensive option. He then looked at the price, production and consumption of maize, which showed that as the price decreased, less was produced.

The Bill filled gaps in the previous legislation, based on the Energy White Paper of 1998. This Bill focused on energy security for South Africa. NEDLAC and stakeholder participation was wide. The problem was the assumption of the Energy White Paper in 1998 compared to the situation today was a reliance on the mechanism of the market to drive demand and prices. The Bill sought to interface with a number of bills and legislation already passed, which mainly dealt with governance and redress issues, to secure energy for the future – including security of supply (plus reserve margins and contingency energy supplies), addressing climate change and ensuring good relations with states that provided South Africa with crude, such as Saudi Arabia and Iran, to ensure resourcing remained secure. The new links with Venezuela were not as positive as it sounded as it was difficult to process the high-sulphur content crude in South African refineries.

There was emphasis on the need for collective measures to combat energy security issues, including diversifying supply, state involvement in research, good relations with suppliers and increasing reserve margins. The National Energy Bill was mostly about state involvement in key aspects of energy production and the issue of energy availability and price. Historically, states expanded on the back of easily available energy resources. The Energy White Paper of 1998 formed the core of the new Bill, expressing the need for more energy data in South Africa so that one could know how to make decisions about energy planning and modelling (forecasts that are based on current data). Thus how the elected representatives made decisions had to take account of modelling – demand driven energy planning, then needs-appropriate modelling systems. The need for more data collection was paramount in the achievement of efficient planning and modelling and for this more resources were needed.

The Department emphasized the need to use gas in cooking as it would decrease electricity use. The Integrated Energy Plan (IEP) and the National Integrated Energy Modelling System (NIEMS) looked at supply and demand as well as conversion and infrastructure requirements. They then looked at four modules of demand: residential, commercial, transportation and industrial and then looked at where the supply was sourced – oil, gas, nuclear, coal and other sources. The Department presented a bottom-up approach – looking at the individual end use services in the four demand modules and how to maximise efficiency and account for their CO2 emissions including a cap on emissions, to finding where the energy supply was sourced and ensuring these sources complied with the integrated plan.

The Energy White Paper promoted energy efficiency however it notes that government capacity to promote energy efficiency was limited and may need a separate agency to build capacity. Research to develop the alternative and renewable energy initiatives need to be supported and implemented by the DME. However there was a challenge as to funding.

In the Energy White Paper, the concern was also for security of supply. However, as it was developed in 1998, security of supply had not been emphasised as much of a problem as it was now.

Discussion
The Acting Chair, Mr J Sibaya (ANC), criticised the past policy decisions and rationale of the government leading to the present situation. He referred to page 15 of the presentation and asked about scarcity of energy data. He asked whether they had capacity and infrastructure to maintain the modelling system.

Mr Gumede replied that the planning and modelling design should remain within the Department and he said there was a shortage of skills and resources to complete some of the data capture and implementation.

Ms Ntembe (ID) enquired about the demand for diesel fuel during the 2010 Soccer World Cup. She asked if SA should shift away from diesel to provide back-up power and transport during the World Cup as it was a very expensive energy resource. She wanted to know how to make informed decisions for the future of energy in South Africa.

Mr Gumede answered that most economies gather data on persons who visit the country such as purpose of visit, customs and excise and this allowed the state to plan economically for the future. However one could never be sure whether the planning for 2010 was sufficient. In summary, SA needed better data collecting institutions. Perhaps SA needed to look at using compressed natural gas in buses instead of diesel, as one needed to look at cost. He recommended not moving to diesel as supply was shaky.

The Chair asked whether the Bill allowed the Minister to regulate how we use maize as a food or fuel supply. He asked how the Department would develop a more comprehensive plan for security of energy supply so that we did not over or under spend.

Mr Gumede replied that Clause 19(1)(e) provided that a renewable energy supply was provided for although the National Assembly, in an open debate with members, decided that maize should not be used for bio-ethanol.

Mr D Gamede (ANC) enquired about NIEMS and how establishment of the institution would occur. In particular, he asked how ‘optimal use of regional and local energy resources’ would occur and how would they implement this and what the alternative energy plan was. He specifically wanted to know about his own province, Kwa-Zulu Natal. He went on to ask about the price of gas in SA?

Mr Gumede answered that South Africans needed to develop their own country, to reduce imports and make use of coal resources more. The members need to ensure adequate decisions were made. He went on to say that KZN had a lot of biomass potential. At the moment, the price of gas in South Africa was about R25 per kilogram so it was very expensive.

The Chair asked about the provision in the Energy White Paper that addressed data scarcity and he asked why South Africa had this scarcity. He asked whether it was an issue of not having adequate researchers and personnel and what mechanisms were in place to address the scarcity. He then asked about energy supplies in case of war.

Mr Gumede answered that the DME did not have the capacity and resources to provide the data. Allocation of resources to the Department was not supported. The private sector was meant to take over some of this functioning, but this had not occurred. They had hoped to start a modelling agency, but this had to compete with other fiscal issues that were regarded as more important. Skills in this sector were hard to come by and were expensive. If South Africa was attacked and its main supply lines were destroyed, he estimated that South Africa had enough reserves to last a week.

Ms Ntembe then asked about the human resources that would need to be acquired to ensure the plan could be achieved and the funding for this. She commented on the fact that the cessation of data capture of visitor information in South Africa was a concern and she would like to know why this had occurred if it was so vital for planning.

Me Gumede replied that more provision should be made for energy and it should be given priority status. His Department was not well-resourced and this was an important area that was vital for the development of the South African economy. He charged the Committee to ensure energy took priority. The government needed to take cognisance of the geography of South Africa and its capacity for energy production.

The Chair agreed the issues raised were important and proposed that the Committee should seek an audience with the Minister of Home Affairs to discuss the matter of the data collection on visitors.

Voting on the Bill
The Committee approved the Committee Report on the Bill and all present agreed to adopt the Bill.
 
The morning session adjourned.

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