2. 1 DEPARTMENT OF ENERGY PRESENTATION ON THE INTEGRATED NATIONAL ELECTRFICATION PROGRAM (INEP) 10 September 2013

3. Annual Report Presentation 1.Introduction 2.Key focus areas 3.Allocation 13/14 financial year 4.Socio-Economic Impact 5.Universal access challenges 6.New Household Electrification Strategy 7.Additional aspects 8.Way forward 2

4. Introduction 3

5. INEP’s response to the 12 Government Outcomes and PICC INEP contributes to the following DoE and Government’s Outcomes Based Planning Approach: Outcome 4 – Decent employment through inclusive economic growth; Outcome 6 – An efficient, competitive and responsive economic infrastructure network Outcome 7 – Vibrant, equitable and sustainable rural communities with food security for all Outcome 8 – Sustainable human settlement and improved quality of household life and Outcome 9 – A responsive, accountable, effective and efficient local government system. INEP is also reporting into SIP 1, 4, 6 and 10 of the PICC process. 4

6. Key Focus Areas for 2012/13 5

7. 6 Close to 5.7 million households were connected to the grid between 1994 and 2013/14. In the period from 2002 to 2013/14 – 68 115 households were supplied with non-grid technology (Solar panels – Renewable Energy) Eastern Cape- 13 202 Kwazulu Natal- 44 532 Limpopo- 10 381 Electrification progress Non-grid electrification programmes will in future not only be implemented in concessionary areas, but in a limited basis in other areas of the country. Province Electrified Houses: Municipalities & Eskom Eastern Cape 1 018 398 Free State 363 529 Gauteng 672 320 KwaZulu Natal 925 102 Limpopo 987 835 Mpumalanga 544 327 Northern Cape 133 537 North West 658 209 Western Cape 386 707 Total 5 689 964

8. MUNIC PROGRAMME 2012/13 – PERFORMANCE APRIL 2013 PROVINCE ALLOCATION R’000 TRANSFERRED R ‘000 EXPENDITURE R’000 PLANNED CONNECTIONS CONNECTIONS ACHIEVED YTD Actual Connections INCLUDING ROLLOVERS EC 279,400270,420 116,5911649429967601 FS 79,30069,300 24,49538279323258 GP 168,000188,000 91,328785938746216 KZN 234,000240,000 38,270164915494684 LIM 125,300132,500 64,33013078484310255 MP 74,94375,823 31,527593122485390 NW 49,30043,300 11,67738525464292 NC 59,90060,800 32,01935908872892 WC 61,30071,300 39,646272524016032 TOTAL R1,151,443 R449,88373 84719 27650 620 7

9. ESKOM PROGRAMME 2012/13– PERFORMANCE APRIL 2013 PROVINCEALLOCATIONTRANSFEREDEXPENDITURE PLANNED CONNECTIONS CONNECTIONS ACHIEVED YTD Actual Connections INCLUDING ROLLOVERS EC R488,340,000 R 398,287,77922,2271715121480 FS R39,118,000 R 22,590,440 2,815 33263559 GP R104,882,000 R 86,620,958 9,568 968812843 KZN R510,292,000 R 527,353,057 26,111 1796320653 LIM R233,028,000 R 175,898,147 22,198 2355326812 MP R108,566,000 R 85,843,897 9,385 1056812082 NW R246,988,000 R 123,921,150 12,779 1051612062 NC R36,108,000 R 14,871,096 1,338 15111643 WC R110,046,000 R 68,879,182 7,803 86189907 TOTAL R1,879,368,000 R 1,504,265,708114 224102 894121 041 8

10. 9 TOTAL ALLOCATION R’000 Planned Connections Total Expenditure to date R’000 Connections Achieved to Date R 86 40013 310R 58 3279 343 Non grid – Solar home systems 2012/13 Financial year

11. Target of 180 000 was exceeded Improved efficiencies as a result of being more involved in the operational activities of implementers. Good co-operation from Eskom and Municipalities 10 INEP PERFORMANCE (12/13) Entity MTEF Allocations Connections INEP (including roll-overs) Connections Own funding Total Connections Eskom (bn) R 1,879 368121 04121 831142 872 Municipalities (bn) R 1,151 44350 620 Non-grid (mil) R 86 4009 343 Total R 3,117,211 181 00421 831202 835

12. Allocations 13/14 Financial year 11

13. Allocations 2013/14 2013/14 (R’000) MUNICIPALITIES R 1,314,772 PLANNED CONNECTIONS 103,864 ESKOM (NATIONAL) R 2,141,027 PLANNED CONNECTIONS 157,839 NON - GRID R 91,150 PLANNED CONNECTIONS 15 000 TOTAL PLANNED CONNECTIONS 276 703* TOTAL ALLOCATIONS R 3,546,951 12 Connections might change as projects are moving from design into implementation phase.

14. Connection and Bulk Allocations for 2013/14 PROVINCE Total Allocation (R’ 000) Eskom allocations (R’ 000) Munic allocation (R’ 000) Adam allocation (R’000) Eastern Cape 1 083 674 697 774290 90095 000 Free State 197 882 17 78295 10085 000 Gauteng 270 000 97 000173 0000 KwaZulu Natal 760 915 399 193261 722100 000 Limpopo 460 419 301 119159 3000 Mpumalanga 283 429 172 029111 4000 Northern Cape 94 270 17 17057 10020 000 North West 413 000 343 85049 15020 000 Western Cape 212 210 95 110117 1000 Total R 3,775,799 R 2,141,027R 1,314,772R 320,000 13

15. MUNIC PROGRAMME 2013/14 – PERFORMANCE JULY 2013 PROVINCE ALLOCATION (R’000) TRANSFERRED (R ‘000) EXPENDITURE (R’000) PLANNED CONNECTIONS CONNECTIONS ACHIEVED YTD Actual Connections INCLUDING ROLLOVERS EC 290 900 42,000 0 1466102591 FS 95 100 55,500 0 39830939 GP 173 000 123,407 0 1148805279 KZN 261 722 69,222 0 1798502257 LIM 159 300 85,000 0 1654102623 MP 111 400 10,630 0 767101682 NW 49 150 8,500 0 238501023 NC 57 100 28,300 6,321 32850911 WC 117 100 71,350 19,701 83575881633 TOTAL R 1,314,772 R 493,909 R 26,022 86 35658818 938 14

16. ESKOM PROGRAMME 2013/14– PERFORMANCE JULY 2013 PROVINCE ALLOCATION (R’000) TRANSFERED (R’000) EXPENDITURE (R’000) PLANNED CONNECTIONS CONNECTIONS ACHIEVED YTD Actual Connections INCLUDING ROLLOVERS EC 697 774 R202,687,607.28R 84,330,003.77 35,0002,9795,508 FS 17 782 R 9,543,331.06R 8,325,085.34 1,486475 GP 97 000 R 28,731,343.55R 15,962,643.27 8,7371,1341,936 KZN 399 193 R151,834,369.44R280,575,238.03 35,1192,4889,433 LIM 301 119 R 47,065,702.39R 48,509,950.06 35,0004,1524,203 MP 172 029 R 34,053,376.37R 53,219,962.82 15,6123,2374,263 NW 343 850 R 82,058,350.76R 28,820,128.04 17,2639232,875 NC 17 170 R 1,639,300.63R 0.00 1,421130134 WC 95 110 R 34,059,514.62R 21,866,831.61 8,2012,2052,740 TOTAL R2,141,027 R591,672,896.11R541,609,842.94 157,83917,72331,567 15

17. Bulk allocation 2013/14 PROVINCEESKOMMUNIC R’000 EC R 266,513,230R 28,000,000 FS -R 27,000,000 GP R 291,042R 41,000,000 KZN -R 26,000,000 LIM R 7,068,000R 7,000,000 MP R 6,583,500R 17,620,000 NW -R 25,000,000 NC -R 13,500,000 WC R 36,920,062R 23,000,000 TOTAL R 317,375,834R 208,120,000 16

18. 17

19. ADAM allocation 2013/14 Once off infrastructure allocations PROVINCEMUNICIPALITIESALLOCATIONS ECKING SEBATA DALINDYEBO60,000,000 ECNELSON MANDELA35,000,000 FSNGWATHE20,000,000 FSMOQHAKA20,000,000 FSNALA20,000,000 FSMANGAUNG25,000,000 KZNMSUNDUZI100,000,000 NCSOL PLATJIE20,000,000 NWTLOKWE20,000,000 TOTAL320,000,000 18

20. Socio–Economic Impact Job creation (e.g. local labour) – about 1 permanent job = R800 000 to R1 mil spend on electrification. Training (e.g. municipal engineer interns and project manager) – 700 interns been trained at INEP and munics/metro, Community upliftment (e.g. business opportunities) Poverty elevation Access to basic services (e.g. electricity)..\..\Electrification general\Survey of Energy related behaviour and perception in SA - Residential Sector - 2012.pdf..\..\Electrification general\Survey of Energy related behaviour and perception in SA - Residential Sector - 2012.pdf 19

21. Universal access challenge 20

22. 21 Universal access challenge Households without electricity: ~3.3 million (Informal 1.2 mil and formal 2.1 mil) 75 % in Eskom supply area and 25% in municipalities supply area.

23. Universal access challenge (cont.) INEP established in 2001/02 - address backlogs of households in line with Energy White Paper (1998) recommendations. Newly built households to be electrified by the restructured Electricity Distribution Industry (EDI) - due to serious inefficiencies in the EDI over the last 10 years, INEP had to address not only backlogs, but also newly built houses and informal households. Not only connections had to be funded, but also ‘back bone’ network infrastructure. In addition to the above challenges, escalating electrification costs and limited funding, as well as the high growth rate of houses (formal and informal), resulted in a serious thread to reach universal access in the country. Despite its successes to date, the electrification programme will fall short in meeting its target of electrifying 92% of formal households by 2014, as defined as backlogs in 2001/02. It is expected that 84% of all formal households and 78% of all households in the country will be electrified by 2014. 22

24. Households electrified in South Africa 2011 Census: ±12,24 mil households out of ± 14,45 mil households are utilizing electricity as a lighting source; ± 85% of households have access to electricity for lighting purposes. Different types of households included into the total household figure (built on the same stand as the formal household): Houses/flats/rooms in backyard 423 000 Informal dwellings in backyards (shacks in backyard) 713 000 Room/flatlet on a property or larger dwelling/servants quarters/granny flat 120 000 Total 1,256 000 Majority of these households (about 90% plus) are not metered, estimated to be ± 1.1 mil. Network designs were not done to accommodate these additional households, hence will have to be upgraded. These households also do not qualify for inclining block tariff and FBE. About 2.2 mil households according to Census 2011 stats are without electricity, if the 1,1 mil households that are not metered are been added, total figure of about 3,3 mil. In line with the INEP stats for households that are not formally electrified (metered), hence ±77% households have a metered supply. 23

25. Universal access challenge (cont.) If universal access to electricity by 2014 is not practical, what is the most effective and realistic timeframe to reach universal access, given the various challenges in the electricity industry, raising cost of electrification, etc.? Hence a new approach to electrification is required - New Electrification Roadmap (Implementation plan) for South Africa was developed. In March 2012, DoE held an Electrification Indaba where all the relevant sector departments and stakeholders were invited to participate and agreed on the need for a new Electrification Roadmap. The Indaba resulted in a consultative working group process which the following relevent stakeholders were involved in defining the new Roadmap:  Eskom, DHS, DRDLR, DPE, SALGA, AMEU, CoGTA, MISA, NERSA, SANEDI, DBSA, National Planning Commision, National Treasury, MinMEC, NPC, PICC Secretariat, Commercial financial institutions and current non-grid concessionnaires. 24

26. Universal Access is function of Electrification Technology options and funding 25 Technology mix (base case) +R1 billion + R2 billion Additional funding per year 2031 2027 2037 Option 1 All grid 100 2022 Base case 2028 Option 3 (base case) Option 2, but non-grid within 3km 90 2019 2023 2030 Option 4 Option 3, but grid replaces mini-grids 87 2017 2020 2023 Option 2 Most cost efficient technology Option 70 2017 2021 2026 Option 5 Option 3, grid connection for informal households 78 2018 % of current un-electrified formal households to be connected to the grid

27. 26 Provincial non-grid potential Using these rules, it is expected to deploy around 300,000 solar home systems and reach universal access for formal households in 2025 South Africa Time to electrify formal households Total connections 2013 – 2025 Million households Grid Non-grid 90% 10% 2025 1 84 73 19 28 16 37 26 11 The highest potential for Non-grid is in KZN and Eastern Cape 0.3 3.1 1 Assumes existing INEP annual funding and DoHS contribution of R2,000 per household for new RDP houses (40,000 houses per annum); assumes total of 50,000 new formal households per year from DoHS formalization process Thousand households

28. New Household Electrification Strategy 27 The Cabinet Approved (26 June 2013) the implementation of the new Household Electrification Strategy based on the following focus areas: a)The defining of universal access as 97% of households, as full electrification is unlikely to be possible due to growth and delays in the process of formalising informal settlements; b)The electrification of about 90% of households through grid connection and the rest with high-quality non-grid solar home systems or other possible technologies based on cost effective options in order to address current and future backlogs; c)The development of a master plan to increase efficiency in planning and the delivery process to ensure more connections, including a workshop on the Plan to which all members of cabinet would be invited to; and

29. 28 The Cabinet Approved the implementation of the new Household Electrification Strategy based on the following focus areas (cont..): The consideration of the proposed delivery targets, taking into consideration views with regard to- i.the proposed change to the delivery dates for universal access from 2014 to 2025 ii.the concern that the new proposed target of 25 000 households will contribute to the backlog with regard to the targets set by the Presidential Infrastructure Coordinating Commission(PICC); and iii.funding provided by the National Treasury to speed up connections New Household Electrification Strategy

30. 29 Grid and Non – Grid Opportunities Least cost approach (benchmark) cost per connection R12000 – Urban setup cost per connection R17000 – Rural setup Critically analysing major infrastructure need/cost vs the IPP establishment and acceptance Generation Capacity vs available network capacity – time frames to electrify outstanding households Universal Access per Ward/Municipality in the next 2-3 years

31. 30 New Household Electrification Strategy – Example Western Cape

32. New Household Electrification Strategy – Example West Coast District - Bergrivier 31

33. Additional aspects 32

34. Eskom has progressed very well with addressing the so- called “island electrification” in KZN. 14 959 households identified falling into this category in 2011/12 – 10 186 been electrified (4773 outstanding) Master plan development – DoE in collaboration with Eskom. DBSA “front loading” process to fast track certain high backlog Municipalities as part of INEP long term planning. Experiencing some challenge with this programme 33 Additional aspects

35. Sustainable Energy for All (SE4ALL) The targets set for 2030 by the UN’s "Sustainable Energy for All" initiative are as follows ensuring universal access to modern energy services; doubling the global rate of improvement in energy efficiency; and doubling the share of renewable energy in the global energy mix. The SE4All objectives within a South African framework This UN initiative is fully in line with South Africa’s energy policies and goals as outlined in policy and regulatory frameworks such as the Energy Policy (1998), the Energy Efficiency Strategy (2005), and the IRP-2 2011. 34

36. Way forward 35

37. Way forward If universal access to electricity is to be reach by 2025, the following is needed: –Adequate funding for capital projects, –Implementation in line with the Master Plan. –Need to solve the serious challenges in the EDI - difficult to run a electrification programme where network upgrading of billions of rands are required, –To solve some serious network constrains – can’t roll out connections in majority parts of KZN and EC, –Improvement of the turn around time for IEA approvals, vast areas in EC and KZN have land claims on them, tribal vs municipal land rules, house not build as planned, etc –Good co-operation between National Government and other spheres of government, –Resources wrt municipalities to be improved, political intervention, long procurement processes, lack of responsibility and accountability, –Clean and good administration for delivering infrastructure projects requires about 40% additional staff, while additional staff allocations of this level in public sector is not allow, therefore this function has to be fulfil by operational staff and hence productive time for delivering a service is been lost and –INEP to be resourced effectively. 36

38. Electrification in perspective 37

39. 38

40. 39 Thank you