The National Energy Bill PPC presentation 7 May 2008 Nhlanhla Gumede Deputy Director General – Hydrocarbons & Energy Planning

The team Nhlanhla Gumede –Deputy Director General Hydrocarbons & Energy Planning Ms. Tshilidzi Ramuedzisi –Chief Director – Energy Planning

Energy policy formulation How do we evaluate the impact of our policies

Energy policy formulation Policy impacts depend on where you sit Source: Sadelec Report, 2003

The Bill Background Was first developed in 2003 to cover all EWP not covered that far Cabinet approved public consultation in 2004 Widely consulted in 2004 Withdrawn in 2006 to effect certain changes Focus now is largely energy security

Background Energy Security Framework Energy security is not only about security of supply Energy infrastructure planning Energy security Macro- economic framework Climate change (mitigation & adaptation) Demand management Standards & specifications Foreign policy Reserve margins Diversity of supply Import & Export policies Local production Energy Research

Background The essence of the Bill The National Energy Bill is essentially about –Provision of energy data and information –Energy development Alternative and future energy Efficient production & use Coordinated research on carriers & technologies –Security of supply (both carriers & feedstock) –Data driven strategy/policy/plans –Effective communication with stakeholders

Background Some facts Source: National Treasury, 2007

Background Some facts Source: Eskom Holdings Limited Annual Report 2007

Background Some facts Source: Eskom Holdings Limited Annual Report 2007 We have to shift this load to an appropriate thermal energy source

Background Some facts Electricity production capacity has run out –Current wholesale price - 3 US c/kWh –Current average domestic consumer – 6 US c/kWh (3 c/kWh is tax!!) –Some industrial customers paying a low 2 US c/kWh –Long run marginal cost – 9 US c/kWh –Short run marginal cost – 60 US c/kWh This short run marginal cost is largely due to domestic and commercial thermal load. South African economy cannot afford this short-run marginal cost!

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Invoerpariteit / Import Parity Uitvoerpariteit / Export Parity SAFEX Jul'08 Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Grain SA, 2008

Background Some facts Source: Energy Information Administration Conference, 2008

Background Some facts Source: Energy Information Administration Conference, 2008

Background Some facts – US biofuels Source: Energy Information Administration Conference, 2008

Background Some facts Source: Energy Information Administration Conference, 2008

Background Some facts Source: Energy Information Administration Conference, 2008

Background Some facts Source: Energy Information Administration Conference, 2008 Another view on peak oil

Background Some facts Source: Energy Information Administration Conference, 2008 Peak oil view - Lower Recovery Factors

Background Some facts Source: Energy Information Administration Conference, 2008 Peak oil view - Lower Initial-in-Place Estimates

Purpose of the Bill (1/3) Energy Security diverse energy resources, in sustainable quantities, and at affordable prices are available to the South African economy, in support of… economic growth, poverty alleviation, taking into account environment management requirements and interactions amongst economic sectors.” Energy security means “ensuring that…

Purpose of the Bill (2/3) Institutions To be responsible for the promotion of efficient generation and consumption of energy Energy modelling and planning Increased generation and consumption of renewable energies Energy research Contingency energy supply Holding of strategic energy minerals stocks Adequate investment in, appropriate upkeep and equitable access to energy infrastructure To establish institutions in support of the Bill …

Purpose of the Bill (3/3) Enabling provisions The furnishing of certain data and information regarding energy demand, supply and generation For all matters To provide measures for

General guiding principles Energy Bill development The Energy Bill does not seek to replace existing institutions but to strengthen them –Energy, like water, is an economic integrator –“Energy is the lifeblood of energy economy” –Economic decisions made w/o consideration of energy availability and price are problematic –Focuses on issues intended to strengthen energy security –Like water & land, to operate more like the competition law, in economic development matters (concurrency!) –On data, the intention is to complement data collection and facilitate sharing

General Guiding Principles Areas of concurrent mandate General Principles Addresses areas not contemplated in other legislation Programmes and initiatives to be established in consultation with Ministers who have concurrent mandates Appointment of members of Board and mandates to be done in consultation with relevant Ministers Regulations to be proposed and made in consultation with all Ministers whose areas may be affected by those regulations

General Guiding Principles Establishment of Institutions General Principles Must act as advisory or executing agents for the Minister on the mandate for which they were created Avoid creating entities with conflicting mandates Only take into account published Government principles Where relevant, must be established in consultation with other Ministers Not be driven by private agendas Constitution of governance structures May include representatives from industry as may be prescribed by the Minister in consultation with other Ministers May contain part-time members who are involved in the overseeing and decision-making duties and full-time members who are involved in the day-to-day operations and management of the entity

The Bill The structure Ch 1:Definitions & Objects of the Act Ch 2: Energy Supply, optimisation and utilisation –Provision of Data and Access to Data –Safety, Health and Environment –Energy Access by Households –Energy Related International Obligations Ch 3: Energy Modelling and Information Agency Ch 4: Integrated Energy Planning Ch 5: Energy Development Institute –Renewable Energy –Energy Efficiency –Energy Research Ch 6: Security of supply Ch 7: Energy Infrastructure Ch 8: General Provisions

The Bill Data, Safety, Health, Environment Provision of Data Mandatory provision of any data and information required for the purposes of the energy modelling and planning Connection to any data and information management system, or any other system within the public administration for the acquisition of energy data and information Safety, Health & Environment Programmes to minimise the negative safety, health and environment impacts of energy carriers through the prescription of standards and specifications (in consultation with DTI and DEAT) Energy Access by Households Programmes to provide for the universal access of appropriate forms of energy to all South Africans at affordable prices Energy Related International Obligations Measures to give effect to the energy implications of international agreements entered into or ratified by the Republic

The Bill Integrated Energy Modelling & Planning Drivers for change Energy crisis show need for coordinated planning –Liquid Fuels in 2005 –Electricity in 2006, 2007 & current Disparate plans create potential for contradictory initiatives and activities No integrated or coordinated view of- –energy sector –impacts of the different plans The need for the ability to develop –numbers driven energy plans –a tool to evaluate proposed energy policies

The Bill Integrated Energy Modelling & Planning Provision of high-quality, policy-neutral energy information, in manner that promotes sound policymaking, efficient markets and public understanding, to –Cabinet –National, provincial & local governments –Markets (for efficient market operation) –Public (communication) Planning An integrated planning approach to ensure that all the constituting elements are addressed in a coordinated manner Modelling An integrated energy modeling capability which would be instrumental in the development of energy plans and evaluation of options that are proposed by policy- makers Requires

Establishes an Integrated Energy Modelling Agency entity to –Collect, compile and analyse energy data, information –Publish reliable energy data, information & analyses daily, weekly and monthly energy reports annual energy reviews short and medium-term energy forecasts –Analyse impact of proposed energy related programs, plans, policies and strategies Prepare reports on energy issues and legislation for Cabinet Prepare special analyses on energy issues and legislation for the Minister Prepare requested analysis for policy making departments The Bill Integrated Energy Modelling

Development of an annually reviewed and published Integrated Energy Master Plan –25-year planning horizon –produced in an integrated and coordinated manner –based on Energy Security principles –informed by the output of the Energy Modelling activities –informed by other plans from all demand, supply, production sectors whose plans impact or are impacted by the Master Plan The Bill Integrated Energy Planning

The Bill Integrated Energy Modelling & Planning Entity 1Entity 2Entity …Entity 3 Coordination Entity…Entity n Integrated Energy Planning Policy, Options, Strategies Other factors Policy - Neutral Modelling Government Departments SOEs Modelling Agency Individual Policies, Strategies, Plans, (Infrastructure)

The Bill Integrated Energy Modelling & Planning Example

The Bill South African National Energy Development Institute (SANEDI) Created using “existing” entities to –Promote of renewable energies –Implement of energy efficiency programmes –Research and develop energy technologies & carriers Transitional provisions –CEO of SANERI will be transferred to new entity for period equivalent to remainder of his contract –All personnel from existing entities to be transferred to new entity –All assets and liabilities from existing entities to be transferred to new entity

The Bill SANEDI: Renewable Energy Division Creates opportunities to enable increased consumption of renewable energies –Establishment of a Tradable Renewable Certificates System –Framework for any other RE programme –Legally creating Renewable Energy Finance Office –Prescription of measures and incentives to promote the production, consumption, investment, research and development of renewable energy

44 The Bill SANEDI: Energy Efficiency Division Key issue Unsustainable energy uses and limited implementation of energy efficient practices in SA economy Each energy carrier to pay for its own efficiency program Functions of EE Division Undertake energy efficiency measures as directed by Minister Increase energy efficiency measures throughout the economy Optimise utilisation of finite energy resources Prescribe standards and technologies to promote efficient use of energy Facilitate use appropriate energy carrier for an application

The Bill SANEDI: Energy Research Key issue Continued expansion of research in energy developments and technologies Functions Directs, monitors, conducts and implements energy research and technology development Promotes energy technology innovation Conducts research and develop technologies in line with the principles of the energy security framework Provides for economic growth and development through its functions

The Bill Security of Supply Key issue Inadequate stock held by energy industry Requirement to hold commercial and strategic stock Recommendation Definition of measures that will ensure minimum levels of disruption in supply Minister to prescribe quantities of primary energy and “finished energy carrier” to be kept nationally Definition and implementation of energy rationing & emergency measures

The Bill Security of Supply - Liquid fuels industry Recommendation Creation of National Liquid Fuels Reserve Stock capability Measures to ensure minimum levels of primary energy carriers Functions Specify quantities of primary energy and finished product required nationally Sources funding for the acquisition of stocks Manage all stocks and logistics on behalf of the state Put in place operational structures, systems and processes Implement and execute emergency reaction plan

The Bill Energy Infrastructure Key issue Uncoordinated infrastructure investments and developments Recommendation Measures to facilitate adequate investment in infrastructure Coordinate upkeep of infrastructure and benchmarking Ensure a holistic approach to infrastructure developments and planning

Thank You