Ms. Tshilidzi Ramuedzisi Chief Director: Energy Planning Integrated Energy Plan: Introduction and Background 1

CONTENTS Scope and context of IEP IEP Governance Structure IEP Process and Methodology Progress to Date and Way Forward

Integrated Energy Plan Integrated Electricity Plan (IRP) Liquid Fuels Plan Gas Infrastructure Plan

What does IEP seek to achieve? Inform regulation of the sector Energy sector Minimise Cost of cost of energy Climate change (Clean energy) Demand management Energy security Access to energy Diversity of supply Safety

IEP Governance Structure

WG/SWGKey PurposeKey Deliverables IEP Steering Committee Oversee the IEP development process Approve ToR for SWGs Recommend approval of key deliverables to DG and Minister IEP published for public comments by 31 March 2011 IEP Report WGDefine modeling approach and methodology Selection of adequate energy modeling tool/system Define policy questions Define scenarios Define key modeling parameters and values IEP Report IEP Strategy SWGDraft IEPS with a clearly defined framework for the IEP development process IEP Strategy

IEP Governance Structure WG/SWGKey PurposeKey Deliverables Stakeholder Engagement WG Define stakeholder engagement framework Ensure stakeholder representation and stakeholder engagement processes implemented Define communication strategy and ensure implementation thereof Stakeholder Engagement Framework Stakeholder Engagement Implementation Plan Technical WGDetermine data requirements and develop Energy Data Inventory for modeling exercise Collect data required for modeling exercise Conduct modeling exercise Conduct analyses of model outputs Energy Data Inventory Centralized Energy Database Technical Report

IEP Methodology Defines process that will be followed in development of IEP Ensures transparency of process to improve repeatability and enhancement Clarifies distinction between conceptual and technical processes Scenario-Based Methodology –Enables systematic and structured approach to consideration of complex and competing objectives –Forces one to consider only those key variables which have the most significant impact –Structured approach to testing various policy options, often with competing objectives

PROBLEM FORMULATION National Objectives DoE Mandate TECHNICAL PROCESS Develop Reference Energy System and Energy Demand Model Model Base Case Model Test Cases Within each Plausible Future: Project Demand Test ‘Base Case’ Test ‘Test Cases’ Key Policy Question Define Plausible Futures Define Policy Options Evaluate Outcomes Recommendations Model Output/Results

Defining of Plausible Futures Premised on the principle that the future is unknown and an indeterminate set of futures can unfold Allows focus on those factors that affect the economy which can have most significant impact on the realisation of objectives The demand trajectory will be shaped by the assumptions which describe particular future Objective is to develop plan which is robust or flexible enough for different pictures of the future

Plausible Futures Plausible Future 1 Constrained Global Environment Unfavourable Socio- Economic Development Plausible Future 2 Constrained Global Environment Favourable Socio- Economic Development Plausible Future 4 Constrained Global Environment Unfavourable Socio- Economic Development Plausible Future 3 Relaxed Global Environment Favourable Socio- Economic Development Socio-Economic Factors Factors influenced by Global Environment

Key Driving Forces Socio-Economic Factors Key Driving Force Key IndicatorGovernment Goal Average over between 1993 and 2008 CurrentUnfavourable Local Socio- Economic Development Favourable Local Socio- Economic Development Local Economic Growth GDP6% per annum 3.50%3.10%Less than 4%Greater than 4% CPIX3-6%6.81 (Between 1998 and 2008) 11.30%Less than 3% or greater than 6% Between 3-6% CPI3-6%6.65%11.50%Less than 3% or greater than 6% Between 3-6% Poverty Levels Inequality measure (Gini Coefficient) Reduction in income inequality Greater than 0.5Less than or equal to 0.5 Poverty Headcount Index Meeting basic needs of all South Africans 48%39%Some South Africans still living below poverty line No South Africans living below poverty line ILLUSTRATION

Key Driving Forces Global Environment Key Driving ForceKey IndicatorUnfavourable Global Environment Favourable Global Environment International Stability International Commodity Prices High prices of commodities in international markets (i.e. Price of crude oil > $150/bbl) High prices of commodities in international markets (i.e. Price of crude oil <$150/bbl) Regional Stability Regional Commodity Prices High prices of commodities in regional markets Lack of cooperation amongst regional players Competitive prices of commodities in regional markets Cooperation amongst regional players Level of global competition for technology International technology prices High levels of global competition for technology driving technology prices up Healthy levels of global competition for technology driving technology prices up Lead time for delivery of equipment needed to build new energy infrastructure Long lead times Acceptable lead times Availability and cost of funding from international markets Sovereign credit rating Unfavourable sovereign credit rating Good sovereign credit rating Large enterprises credit rating Unfavourable credit rating of large enterprises Good credit rating of large enterprises ILLUSTRATION

Defining Policy Options to be tested Energy planning is about making choices, often between imperatives with competing objectives Classification of policies –Existing and implemented –Approved but not yet implemented or effected –New and future policies to be considered Choosing the most appropriate set of policy options to achieve objectives

NEXT STEPS Activity Presentation of IEP Methodology to Cabinet Approval and publishing of Plausible Futures Public Participation Workshops Finalise Scenarios and Test Cases to be considered in IEP Conduct technical work Analysis of Results Draft recommendations for IEP

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