Energy Security Masterplan – Phase 2

Presentation to the Parliamentary Portfolio Committee on Minerals and Energy

18 June 2008

2

Introduction - Energy Masterplan

• Cabinet approved Phase 1 of the Energy Masterplan

• Phase 1– Energy Security framework

– Energy planning approach

– Liquid fuels short to medium plan

• Phase 2– Electricity industry short, medium and long term plan

– Integration areas between electricity and liquid fuels industries

3

Introduction – Masterplan (Phase1)

• The Masterplan seeks to:– achieve goals that have been set for the sector

– Address current challenges

– set security of supply standards

– Set appropriate reserve margin

– Incorporate climate change challenges

4

Presentation Outline

• Energy security framework

– World electricity

– RSA electricity

• Development of the masterplan

– Goals

– Situational analysis

– Demand forecast

– Decision making

– Interventions

– Implementation matrix

– Recommendations

5

World Electricity Generation: Primary Energy Mix 2005

Source: World Nuclear Association, 2007.

Coal 39%

Oil 10%Gas 15%

Nuclear 16%

Hydro 19%

6

South Africa (2004) vs. Eskom (2006/7) Primary Energy Mix

South Africa Total Energy Supply (2004)

Coal (68.18%)

Crude Oil (19.40%)

Renewables (7.98%)

Nuclear (2.78%)

Gas (1.61%)

Hydro (0.06%) Source: Digest of South African Energy Statistics 2006 (Department of Minerals and Energy)

Eskom Electricity Generation Mix (2006/7)

Coal (88.23%)

Nuclear (4.83%)

Imports (4.71%)

Pumped storage (1.21%)

Hydro (1.00%)

Diesel - Gas Turbines (0.03%)

Source: Eskom Holdings Annual Report 2007

7

Map of Power Stations

8Source: Eskom Holdings Limited Annual Report 2007

South Africa:Electricity Demand Profile Shape (National Electricity Grid)

9

Security of Supply:Eskom Weekly Peak Demand (2006 vs. 2007)

Week-on-Week (2006 vs 2007): Peak Demand(with and without Load Reduction added Back)

25 000

26 000

27 000

28 000

29 000

30 000

31 000

32 000

33 000

34 000

35 000

36 000

37 000

38 000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Week

Dem

and

(M

W)

2006 (Load Reduction Added Back) 2007 (Load Reduction Added Back) 2006 (Load Reduction not Added Back) 2007 (Load Reduction not Added Back)

Peak Demand 35 142 MW

Peak Demand (Load Reduction added back) 35 807 MW

Week-on-Week Growth 5.10 %

Year-on-Year Growth (Winter Peak) 4.90 %

Week 33: Peak Demand Statistics

10

Definition: Generation Reserve Margin

• The installed capacity of a power system must exceed the expected demand to allow for: Generator breakdowns (forced outages) Planned maintenance. Load forecast uncertainty. Security across the whole system, taking into account location of

plant, location of load and regional transmission capacity.

• The reserve margin is the amount of reserve capacity, expressed as a percentage of the annual peak load. Example: If peak load = 40 000 MW and installed capacity = 44 000 MW,

the reserve margin = 10%.

• Smaller reserve margin increases the risk of supply interruption. Too large a margin results in unnecessary investment expenditure. Security vs. Cost.

11

South Africa (National Electricity Grid):

Capacity and Maximum Demand at Winter Peak (1996 – 2006)

Source: Eskom Holdings Limited Annual Report 2007

12

Electricity Masterplan

13

Overview of masterplan

• Sets goals for the sector

• Sets key assumptions

– Demand projections

– Economic outlook

• Formulated based on

– White Paper on Energy

– Regulatory policy framework

14

Goals

• Supporting economic growth and development

• Improving the reliability of electricity infrastructure

• Providing a reasonable priced electricity supply

• Ensuring the security of supply as set by the security of supply standards

• Diversifying primary energy sources

• Increasing access to energy services

• Meeting renewable energy targets as set in the White Paper

15

Process followed

– Generation• Adoption of a security standard for electricity supply

• Appropriate investment level

• Reserve margin

– Transmission• Removal of transmission constraints WC, EC, KZN

– Distribution infrastructure• Universal access

• Bulk infrastructure

16

Process followed

• Acceleration of DSM and energy efficiency

17

Planning assumptions

• Detailed studies to be undertaken

• Integration opportunities of electricity and primary energy sources

• Nuclear energy is not considered

• Imported electricity is not included

• Assumed economic forecast

• Consideration of driving forces and supply chain challenges

18

Decision making considerations

• Environmental Impact Assessments (EIA)

• Site selection

• Climate change

• Renewable energy

• Funding and resourcing

• Skills management and development

• Research and Technology

• 2010 FIFA World Cup

19

South Africa: Electricity Demand/Capacity Forecast(4% Growth Rate related to 6% AsgiSA GDP Growth Rate)

Source: Eskom

Capacity Outlook of Eskom Position (MW)

30 000

35 000

40 000

45 000

50 000

55 000

60 000

65 000

70 000

75 000

80 000

85 000

90 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Years

MW

Build New Base Load (Pulverised Fuel Proxy)

Build New Base Load CCGT Plants

Build New Pumped Storage Plants

Build New OCGT Peaking Plants

Return to Service Mothballed Plants

Total DSM Capacity Conserved (MW)

Import from Cahora Bassa Hydro (firm)

Total Existing System incl Decommissioning Options

Peak Demand before DSM of Eskom Position (MW)

TOTAL CAPACITY CONTRIBUTION (MW)

20

System demand focus

2005 Max System demand

2026 business as usual (BAU)

2026 projected 6% growth

2026 “BAU” plus projected 6%

Total (MW) 33658 60242 20757 80999

Imports 2300 3137 6584 9732

3.5% Tx losses

1138 2108 726 2835

Botswana 370 376 376

Mozambique 1057 1676 4224 5900

Namibia 198 95 95

Swaziland 132 146 0 146

Zimbabwe 541 744 2371 3214

21

Planned interventions

22

In summary…

• In the short-term– Demand side management

– Peaking plants

– Cogeneration projects.

• In the medium to long-term– Mix of base load and peaking plants

– Demand side management

– Appropriate reserve margin

23Source: Eskom Holdings Limited Annual Report 2007

South Africa:Electricity Demand Profile Shape (National Electricity Grid)

24

Energy use by the residential sector

Residential energy useSpace heating12%

Lighting5%

Cooking41%

Other (Friges, radio and TV)

10%

Water heating32%

Source: Energy outlook for South Africa - 2002

25

Households of South Africa - 2001Main Energy Source for Cooking by

Region

48.3

29.8

82.3

39.3

82.3

97.1 96.6

34.1

27.1

6

0.7

40.1

10.6

27 38.6

3

25.8

7.5

73.2

38.5

55.3

17.9

14.7

21.331.6

21.4

Gauteng Nw/Lmp/Mpum

Ofs.NC KZN E.Cape W.Cape African C'red Indian /Asian

White

Electricity Paraffin Wood

Source: Stats SA - Census 2001

26

Households of South Africa - 2001Main Energy Source for Heating by

Region

50.2

24.8

76.8

37.2

78.6

97.2 93.2

22.0

18.6

3.5

2.4

42.2

18.5 34.3 44.5

7.5

30.4

13.111.3 9.0 12.9

3.7 0.9 0.3

5.9

73.6

37.746.5

11.7

15.4

11.029.8

12.7

Gauteng Nw/Lmp/Mpum

Ofs.NC KZN E.Cape W.Cape African C'red Indian /Asian

White

Electricity Paraffin Wood Coal

Source: Stats SA - Census 2001

27

Facts on domestic consumption

• Geyser – 4 kW

• 10 million households of electricity

• 2.5 million households own an electric geysers

• This is equivalent to 10 000 MW (at peak)

28

Planned Interventions

• Short term

– Demand side management

– Energy efficiency

– Fuel switching

– Metering

29

Planned interventions cont./

• Medium term

– Generation

• Cogeneration

• Capacity expansion plan programme

• Additional peaking power plants

– Transmission

• Expansion plans

• Total system capacity and reliability plan

30

Intervention plans cont./

• Medium term cont./

• Distribution

– Maintenance and refurbishment

– Expansion of distribution network

– Electrification of households

– Restructuring of the distribution sector

31

Long term Plan

DSM

Camden (PF)

Grootvlei (PF)

Komati (PF)

(1) (2) (3) (4) (5)OCGT

Atlantis

OCGT Mossel

Bay

OCGT IPP

PS (A) PS (B) PS (C) PS (D) PS (E)

Load Management and Energy Efficiency

2005 380 200 11%

2006 190 494 11%

2007 380 616 452 494 13%

2008 570 376 770 301 494 14%

2009 376 202 904 494 14%

2010 376 202 494 12%

2011 303 705 232 11%

2012 202 705 705 636 333 232 13%

2013 705 1 410 636 999 232 17%

2014 1 272 232 15%

2015 1 272 1 002 232 15%

2016 1 272 1 382 232 16%

2017 1 272 1 382 232 16%

2018 1 272 1 382 232 16%

2019 2 764 232 17%

2020 2 764 265 15%

2021 2 764 1 002 15%

2022 2 764 15%

2023 2 764 1 002 15%

2024 2 764 1 002 15%

Totals 1 520 1 128 909 2 115 2 115 3 816 3 816 20 730 1 386 753 904 1 332 1 002 1 002 1 002 1 002 5 023

Planned Reserve Margin

Year

Mothballed Peaking Pumped StorageBaseload

32

Implementation matrix

Action Time Frame Responsibility

Integrated Plan November 2007 DME

Capacity Expansion Immediate Eskom

Total system capacity and reliability

Immediate Eskom

Transmission expansion Immediate Eskom

Electrification 2007 onwards DME, Eskom and electricity service providers

Maintenance and refurbishment

2007 onwards Eskom and electricity service providers

Independent Power Producers

2007 onwards DME, DPE and Eskom

Accelerated DSM Immediate DME, Eskom, electricity service providers and liquid fuels industry

33

Summary of recommendations of phase 2 Masterplan

• Reserve margin – 19%

• Performance standard

– “1 day in 10 years”

– N – 1 transmission contingency

– Regulation of the investment in maintenance and rehabilitation of infrastructure

– Regulation of the quality of supply of electricity

34

Summary of recommendations

• Cabinet also noted:

– Electricity price path, to finance the implementation of this plan;

– Import/export of electricity;

– Cogeneration, DSM and other energy efficiency measures;

– Leveraging private sector participation (IPPs) in generation;

– Supply of gas for primary energy diversification;

– Attraction of energy intensive investments as a strategy for development

35

Consultation

• NERSA

• Eskom

• Municipalities

• Organised labour

• Organised business

I Thank You