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Sandton
The
timing of this conference and its theme – Energising Africa, could
not have come at a more opportune time. The matter of carefully
plotting the energy path for our continent is one of the most
critical issues of our time, particularly in Southern Africa where
massive investments are required to rebalance the supply and demand
for power. In my view, this conference has been about what we as
Africans living in the sub-region can do for ourselves, but together
with partners. The choices we make, the way we plan the next energy
inputs, and the way we fund these massive projects will determine
whether we achieve sustainable energy systems or we plod along from
one crisis to the next. The discussions at this conference as well
as recent developments on the policy and regulatory front in South
Africa give one much hope that the future will be
sustainable.
My remarks this afternoon will be confined
mainly to the power sector - however the issues will broadly be
applicable to the broader energy sector. I will not try to capture
and synthesize all that has been discussed over the past two days as
that would be impossible in the time available. I trust however that
my remarks will highlight what have been the pointers for the path
we must follow.
The vision of an interconnected power
system
As far back as the late 1980, the power utilities
and the governments of Southern Africa have espoused the vision of
an interconnected power system. The system would comprise the hydro
generation resources found in the northern part of SADC, which would
be connected to the coal/nuclear systems of the south by a network
of high voltage transmission lines. Much has been done over the past
decade and a half to build towards this vision. The formation of the
Southern African Power Pool in 1995 was a major milestone towards
this goal. Today the SAPP has a robust trading system for the
week-ahead and day-ahead markets. Another important institutional
milestone was the formation of the Regional Electricity Regulation
Association (RERA) in 2001. Its task is to harmonise the regulatory
frameworks within the SAPP region. On the project side, there have
also been some significant developments: the MOTRACO transmission
system that connects the networks of South Africa, Swaziland and
Mozambique as well as supplying the Mozal smelter in Maputo; the
400kv interconnector into Namibia from South Africa; the
transmission line into Zimbabwe from South Africa via Botswana.
These investments, significant as they may have been, have not gone
far enough in realizing the intended vision.
The Status of our Energy
Systems
The remarkable thing about the energy of systems
of Southern Africa is that they are substantial. The electricity
system in South Africa has 40 503 Mw of installed generation
capacity, 381 700 Km of transmission network and over 8 million
customers. The rest of the region has an additional generation
capacity of 11 623Mw. The region has a mature electricity trading
system that has been in operation since 1995. The Southern African
Power Pool has 9 interconnected members, 6 of whom actively trade
power. The Inga River, with hydro potential of a total 40 000
Mw is potentially the jewel in the crown but also probably the most
elusive of projects in our region. In neighbouring Angola is a
further 6 000 Mw hydro potential in the Kwanza Valley.
This
paints a fairly satisfactory picture of our energy systems in the
region yet we all know that there is much vulnerability in the
medium term. The issues pointing to this vulnerability are the
following:
- About 75% of the population in South Africa has
access to electricity whilst the figure for the rest of the
sub-region is 15%.
- The system reserve margin sits at an average 9%
of total capacity causing a high probability of load
shedding.
- Ageing plant in all utilities which has had to
be operated at maximum levels due the tightness of the
system.
- CO2 emissions from the Eskom fleet of power
stations were 221, 7 metric tons in 2009.
- After many years of no real increases in the
price of electricity, the system in South Africa apparently
requires consecutive increases of 35% over the next three years in
order to meet operating costs as well as cater for the build
programme – we now know that an average 25% was awarded
yesterday
What is becoming increasingly clear
is that the sustainability of our energy systems is not assured
given current vulnerabilities. The question is: which is the path to
achieving energy systems that serve the region and its people, and
are sustainable in all respects in the long term.
The
Road to Sustainable Energy Systems
Sustainability in the
context of this discussion is to be understood in its most
comprehensive meaning: The ability to endure – where sustainable
development is that which meets the needs of the present without
compromising the ability of future generations to meet their own
needs. Human beings prosper where they are economically, socially,
ecologically and environmentally sustainable. The right balance has
to be struck in meeting all these objectives in order to attain true
sustainability. The balance between economic growth, social
development, energy security and mitigating climate change by
seriously reducing green house gas emissions must be assured in our
future power systems.
I want to suggest that there are five
pillars on which the creation of sustainable energy systems will
rest; a shared vision; addressing societal
needs; environmental sensitivity; creation
of capable institutions; and creation of an investment climate.
- Shared
Vision. Our power systems in the sub-region are already
interconnected. We need to have a shared vision that recognizes
that we have this “macro system” which supersedes political
boundaries. Within it, we have a series of “micro systems” that
largely reflect socio economic development patterns that have
emerged within national boundaries over time. At both levels, the
electricity sector has numerous stakeholders -governments,
business and civil society. Electricity touches everybody’s life
whether they are connected to the electricity grid or not. Getting
a shared vision of how we would like our future systems to look is
a matter that all stakeholders must have a say in. The vision of
an interconnected system for the SAPP area has been driven by
utilities and governments with business and civil society not
involved. This must change and meaningful participation has to be
driven from the organs of society and business, and be
incorporated within the institutional frameworks for planning and
developing the energy systems. I am suggesting the notion of
coalitions among stakeholders, coalescing around a shared purpose
of the power systems that serve them. This would be distinct from
the notion of “public participation” as currently
legislated.
Societal Needs. The need to
involve society in determining future power systems is not new.
However, in the face of the shortage of supply, and the increasing
costs of supplying electricity, this need has been extenuated with
people both desiring and needing to be empowered to make decisions
that resolve their problems. At a recent WWF event, the
Sustainable National Accessible Power Planning (SNAPP) tool was
launched. This is a web based tool that allows anybody to
undertake scenario planning with regards to dealing with the
current shortfall in supply. The financial as well as the
environmental costs of technology choices employed to meet the
required demand can be discovered using this tool. I think this is
a most innovative development which should also help the public
engage in the energy debate from a more informed perspective.
The introduction of renewable technology, self generation
and mini grids, which tend to be much smaller systems, bodes well
for the continued empowerment of communities about energy systems.
This is to be encouraged. There is an added relevance for
communities still unserved by modern means of energy delivery. The
cost and the consequences of using rudimentary energy carriers
such as firewood and paraffin is a burden that needs to be lifted
from the poorest in our society. These factors must be taken into
account if we are to work towards more sustainable energy systems.
- Environmental Considerations.
South Africa is ranked amongst the top 20 carbon dioxide emitters
in the world. As a developing country it has relied on the most
accessible energy resource to provide the energy required to
improve the lot of its people. However due to climate change
impacts this has to be mitigated. The stance taken by South Africa
is to stabilize CO2 emissions between 2020 and 2035 after an
initial increase up to 2020, and then to reduce emissions between
2035 and 2050. In order to achieve this, we need to simultaneous
bring about effective energy efficiency in the current use of
energy, introduce non-emitting technologies at scale, while at the
same time increasing the net available amount of energy. Our
planning therefore needs to be bold in the introduction of
renewable energy, and it also needs to include other sustainable
technologies such as large scale hydro power, clean coal and
nuclear generation. Given the extent of our current “macro system”
in the region, and the predominance of resource – based industries
in our economy, we will always need in our mix reliable base-load
power. I believe Carbon Capture and Storage will have to be a
significant mitigation strategy in our energy future. Beyond our
base load requirements, the application of technologies such as
solar water heating, solar photovoltaic and CSP, wind turbines,
biomass, etc. will have to be maximised. The targets of 1 million
solar water heaters installed within 5 years, and a total 10 000
Gwh production from renewable energy by 2014 will have to be
achieved. In fact, to meet the recently made commitment at
Copenhagen to reduce our emissions by 42% in ten years, we will
have to increase our current renewable energy targets
substantially.
- Investment Climate. Generally,
investment in power infrastructure has lagged behind. Several
reasons have led to this including low tariffs resulting in
unattractive returns for investors; a substantial increase in the
cost of new plant; very high increases in the cost of primary
energy driven by global markets; and increasing maintenance costs
as the plant has aged. The current 5 year build programme of South
Africa runs into several hundreds of billions of Rand (R385bn at
last count). Shareholder capital injection and debt-raising in the
financial markets by the incumbent utility is no longer sufficient
to ensure that the required projects will be executed when needed.
It is now imperative that a sustainable investment climate is
created for the private sector to invest in power generation.
Tariff adjustment would be a major contributor to the creation of
an investment climate but would certainly not be the panacea.
Robust policy and institutional frameworks would also have to be
put in place to provide a secure and sustainable investment
climate.
- Institutional Capacity. A
robust institutional framework would encompass strong and
independent regulation, a set of congruent and binding policies
that regulate the Electricity Supply Industry, and transparent
market mechanisms. These measures are all within the realm of
public policy formulation. Whilst much has been done in the past
few years, much more needs to be done in order to provide
assurance for long term investment by both the public and private
sector. For example, the long term funding mechanism for the Eskom
build programme is yet to be finalised. The rate at which tariffs
have to increase in order to meet the capital requirements is not
sustainable for consumers which means finding other mechanisms as
well. The cost recovery mechanisms that underpin the REFIT tariffs
that have been promulgated have still to be announced. The real
potential exists to start moving towards binding directives for a
more sustainable energy system under the SADC Secretariat so as to
harmonise institutional measures across the SADC region. I believe
sectoral reforms driven by the “coalitions” can lead the way to
greater regional integration ahead of the political reforms. This
is particularly so for the power sector which is not only highly
interdependent, but already has a decade and a half of experience
in co-operation.
Way Forward
The five pillars for the creation
of sustainable energy systems in Southern Africa need to be dealt
with holistically. The vision of an integrated sustainable system
has merit but governments and utilities should not be the only ones
looked upon to bring this about. I would like to suggest that
organized business and civil society also need to be a key part a
coordinating institution focused on creating a sustainable energy
system for the sub region. I suggest that a body or commission
integrating all these players under the aegis of SADC needs to be
formed. The details of such a body one could engage on at another
time but I would think its remit needs to encompass the following
three undertakings.
- Planning for Efficient Investment.
Conceptually, the notion of northern largely hydro system,
integrated with a southern coal/nuclear system by a high voltage
transmission network is valid. What is needed is to invest in such
a system in a manner that maximises the utilization of renewable
resources and optimizes investment to avoid stranded assets. To
maximise renewable energy investments requires prioritizing areas
where different technologies are most optimal, e.g. the best
location for solar, wind and hydro; and ensuring that such
projects enjoy the right incentives and support from the global
climate change regimes such as the CDM under the UNFCC. Such
projects should also benefit from specific public sector support
such as tax breaks, import duty exemption and so
on.
Base load power will continue to be a requirement
particularly due to the role of mining, beneficiation of raw
minerals and manufacturing. We must use the most sustainable and
commercially viable means of providing this power. The risk of
stranded assets, given the Eskom plans as well as the other base
load initiatives in the region must be avoided through coordinated
planning. Mmabolo, Kusile power stations, and other smaller
IPP plans are a case in point.
- Financially Sustainable System. The region
has lived through an era of uneconomic tariffs which is now
proving to be a significant impediment to investment. A
progressive but determined effort must be made to move to cost
reflective and economical tariffs. However, the issue of
affordability for the poorest must be taken into account. The
programme of free basic electricity and other means of indigent
support must be part of the tariff programme.
The
enhancement of the SAPP power trading system must be supported and
expanded to include renewable energy trading.
- Public Accountability. It is incorrect to
assume that the public is informed and involved because
institutions of government are involved. Activism is to be
encouraged in practical ways as well. More than in any other
sector, a sustainable energy system is dependent on the attitude
and behavior of the consumer. We have a legacy of waste as a
result of inappropriate tariffs in the past – what better way to
overcome this than by involving the consumer in the issues of the
future provision of energy. Much is also to be gained from the
full involvement of the users in the future planning of the energy
system so that all needs are catered for.
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