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Rural Energization and Rural Energization and Energy MarketsEnergy Markets

Presentation Presentation

Minister Phumzile Mlambo-NgcukaMinister Phumzile Mlambo-Ngcuka

Minister of Minerals and Energy Minister of Minerals and Energy

Republic of South AfricaRepublic of South Africa

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INTRODUCTIONINTRODUCTION It is estimated that 2 billion people world wide, It is estimated that 2 billion people world wide,

majority of whom live in developing countries, majority of whom live in developing countries, do not have access to modern forms of energydo not have access to modern forms of energy

The challenge for the world is to ensure The challenge for the world is to ensure increased access to affordable, clean, increased access to affordable, clean, sustainable and reliable energy sources for the sustainable and reliable energy sources for the world’s poorworld’s poor

Excellencies Chairperson, Ladies and Excellencies Chairperson, Ladies and Gentlemen allow me to present to you the Gentlemen allow me to present to you the

African Context..African Context..

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Whilst Africa represents 13% of the worlds Whilst Africa represents 13% of the worlds population, it only consumes 3% of worlds total population, it only consumes 3% of worlds total energy.energy.

Africa is a major net energy exporter including non-Africa is a major net energy exporter including non-commercial fuels like wood, biomass and charcoal. commercial fuels like wood, biomass and charcoal.

Africa is a heavy user of traditional fuels, primarily Africa is a heavy user of traditional fuels, primarily biomass. In 1994 according to the World Bank, biomass. In 1994 according to the World Bank, around 65% of Africa’s total energy consumption around 65% of Africa’s total energy consumption were made of biomass, which is collected by women were made of biomass, which is collected by women and girls, which is largely unpaid labour.and girls, which is largely unpaid labour.

Less than 8% of the continent’s 722million people Less than 8% of the continent’s 722million people have access to commercial energy, 452 million are have access to commercial energy, 452 million are located in rural areas and approximately 300 million located in rural areas and approximately 300 million thereof are poverty stricken earning less than US$ 1 thereof are poverty stricken earning less than US$ 1 per day..per day..

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Evidence clearly indicated that access to Evidence clearly indicated that access to the services which modern energy the services which modern energy provides is a prerequisite for sustainable provides is a prerequisite for sustainable social development and economic growth, social development and economic growth, which is necessary if Africa is to which is necessary if Africa is to successfully address human development successfully address human development and the divide between the continent and and the divide between the continent and the developed world.the developed world.

In the continent starved of access to In the continent starved of access to efficient and reliable sources of energy the efficient and reliable sources of energy the benefits of energy supply are convincing.benefits of energy supply are convincing.

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Some North African Countries and South Africa have Some North African Countries and South Africa have progressed significantly in case of Rural progressed significantly in case of Rural Electrification e.g. South Africa has achieved 70% Electrification e.g. South Africa has achieved 70% electrification.electrification.

However, SA has not aligned its electrification However, SA has not aligned its electrification strategy effectively with poverty alleviation, job strategy effectively with poverty alleviation, job creation and urban planning programs.creation and urban planning programs.

An urgent exist to introduce appropriate, efficient An urgent exist to introduce appropriate, efficient and energy saving production and processing and energy saving production and processing technologies. technologies.

Both issues of accessibility and energy consumption Both issues of accessibility and energy consumption patterns are important for the sustainable patterns are important for the sustainable development of South Africa and the whole African development of South Africa and the whole African continentcontinent

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Managed Liberalization and Managed Liberalization and

Challenges Facing SAChallenges Facing SA

The whole energy sector in South Africa is The whole energy sector in South Africa is under review in order to achieve the under review in order to achieve the

following objectives:following objectives: • Improved social equity through Universal Access, Improved social equity through Universal Access, • affordability of energy sourcesaffordability of energy sources• Improving energy governance Improving energy governance • reliability and security of supplyreliability and security of supply• minimizing impact of energy use on the minimizing impact of energy use on the

environment environment

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The South Africa Energy The South Africa Energy SectorSector

Liquid FuelsLiquid Fuels• South Africa is a net importer of petroleum South Africa is a net importer of petroleum

productsproducts• Access, affordability, jobs, better utilization Access, affordability, jobs, better utilization

of technology and security of supply is one of technology and security of supply is one of key consideration in the developments of key consideration in the developments that governs the liquid fuels sectorthat governs the liquid fuels sector

• Greater but not complete liberalization is Greater but not complete liberalization is envisaged to bring greater benefits to the envisaged to bring greater benefits to the country’s liquid fuels marketscountry’s liquid fuels markets..

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Renewable EnergyRenewable Energy• More green energy in the South African More green energy in the South African

energy mix, is envisaged energy mix, is envisaged • Initiatives are in place to increase access, Initiatives are in place to increase access,

consumption and affordability of Renewable consumption and affordability of Renewable energy sources in the medium to long-termenergy sources in the medium to long-term

• greater control of technology is needed to greater control of technology is needed to achieve these objectivesachieve these objectives

• hybrid solutions that are relevant to South hybrid solutions that are relevant to South Africa are currently being developed.Africa are currently being developed.

• Integration of grid and non-grid Integration of grid and non-grid technologies is currently being implementedtechnologies is currently being implemented

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NuclearNuclear• One of the country’s key energy policy One of the country’s key energy policy

objectives is the security of supply and objectives is the security of supply and diversification of primary energy sourcesdiversification of primary energy sources

• currently the Pebble Bed Modular Reactor currently the Pebble Bed Modular Reactor (PBMR) is at its feasibility study stage(PBMR) is at its feasibility study stage

• the Challenges facing the country are on the Challenges facing the country are on waste storage and human resources waste storage and human resources development in this sector.development in this sector.

• PBMR’s ability to increase access to PBMR’s ability to increase access to energy would further assist the country in energy would further assist the country in its quest to increase affordable energy its quest to increase affordable energy sources for millions of our urban and rural sources for millions of our urban and rural poor.poor.

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ElectricityElectricity• The government’s vision and mandate is The government’s vision and mandate is

to optimize the operation of the to optimize the operation of the Electricity Supply Industry so as to Electricity Supply Industry so as to maximize its potential to provide maximize its potential to provide adequate, reliable and low cost adequate, reliable and low cost electricity to the people and industries.electricity to the people and industries.

• In line with this vision restructuring is In line with this vision restructuring is currently in progress in the generation, currently in progress in the generation, transmission and distribution sectors. transmission and distribution sectors.

• Our electricity generation is largely Our electricity generation is largely dependent on coal, which has serious dependent on coal, which has serious environmental implication for the environmental implication for the countrycountry..

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Electricity continued…..Electricity continued…..

• We believe that significant economic benefits We believe that significant economic benefits will be realized if our Electricity Supply Industry will be realized if our Electricity Supply Industry restructuring is carefully designed.restructuring is carefully designed.

• To this effect the government has embarked on To this effect the government has embarked on managed liberalization of the generation sector managed liberalization of the generation sector which will see the introduction of private sector which will see the introduction of private sector participation in the medium to long-termparticipation in the medium to long-term

• the policy permits free non-discriminatory the policy permits free non-discriminatory access to the transmission network, which is a access to the transmission network, which is a natural monopoly and natural monopoly and

• the consolidation of the distribution sector, the consolidation of the distribution sector, which will see the number of distributors being which will see the number of distributors being reduced from 250 to 6 Regional Electricity reduced from 250 to 6 Regional Electricity Distributors Distributors (REDs(REDs))

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Electricity continued...Electricity continued...

• In line with New African Initiative’s vision In line with New African Initiative’s vision an African Power Pool(Pan African Grid) an African Power Pool(Pan African Grid) will ensure access to both public and will ensure access to both public and private utilities, further increasing private utilities, further increasing regional and continental electricity regional and continental electricity cooperation in generation and cooperation in generation and transmissiontransmission..

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Critical Success factorsCritical Success factors Access to affordable energy for poverty Access to affordable energy for poverty

alleviationalleviation reliable and security of supply to sustain reliable and security of supply to sustain

accelerated economic growth that will result in accelerated economic growth that will result in the followingthe following• growth in GDPgrowth in GDP• creation of significant multiplier effect in the creation of significant multiplier effect in the

economyeconomy• forward linkages resulting in stimulation of forward linkages resulting in stimulation of

projects e.g. appliance manufactureprojects e.g. appliance manufacture• attracting FDI and maintaining competitive positions in attracting FDI and maintaining competitive positions in

global marketsglobal markets• creation of synergies with other infrastructure servicescreation of synergies with other infrastructure services

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EnvironmentEnvironment• The challenges of environment can be The challenges of environment can be

addressed byaddressed by– reliving pressure on local fragile African reliving pressure on local fragile African

environment caused by biomass environment caused by biomass collectioncollection

– reduction of the enormous amount of reduction of the enormous amount of energy wasted e.g. gas flaring energy wasted e.g. gas flaring

– the use of existing world class resources the use of existing world class resources e.g. development of the African Hydro-e.g. development of the African Hydro-energy potential(Nile, Inga, Cahora energy potential(Nile, Inga, Cahora Bassa)Bassa)

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Institutional Arrangements and fundingInstitutional Arrangements and funding• Energy supply to the residential sector will Energy supply to the residential sector will

require US$ 70 billion over the next twenty require US$ 70 billion over the next twenty years and US$ 350 billion to reach 100% years and US$ 350 billion to reach 100% electrification levels of the residential sectorelectrification levels of the residential sector

• It is further estimated that to sustain GDP It is further estimated that to sustain GDP growth of 7 % per annum for the next 10 growth of 7 % per annum for the next 10 years and 5% per annum there after years and 5% per annum there after development costs of ESI over the next 20 development costs of ESI over the next 20 years amounts to US$ 610 Billion all economic years amounts to US$ 610 Billion all economic sectorssectors

• In order to achieve these robust institutional In order to achieve these robust institutional and administrative arrangements should be in and administrative arrangements should be in place place

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Institutional Arrangements and FundingInstitutional Arrangements and Funding....• African governments and their energy African governments and their energy

utilities, thus need to satisfy these critical utilities, thus need to satisfy these critical success factors for private sector success factors for private sector participation in infrastructureparticipation in infrastructure

Planning- Defining Africa’s FuturePlanning- Defining Africa’s Future• key issues to ensure successful execution of key issues to ensure successful execution of

projects areprojects are::– Data accuracy Data accuracy – technical competencetechnical competence– correct costs estimatescorrect costs estimates– schedules schedules – energy modelingenergy modeling

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ImplementationImplementation• In order to successfully implement the major In order to successfully implement the major

projects that area required to meet the projects that area required to meet the projected demand and the poverty alleviation projected demand and the poverty alleviation programs in Africa concerns of domestic support programs in Africa concerns of domestic support organizations, groups, investors and other organizations, groups, investors and other international organization are recognized. The international organization are recognized. The implementation issues are identified as:implementation issues are identified as: – Contracting-identification of suitable contractors Contracting-identification of suitable contractors

and their successand their success– Management-projects should be managed by Management-projects should be managed by

Africans to ensure sustained success in Africans to ensure sustained success in implementationimplementation

– Construction-obstacles encountered should be Construction-obstacles encountered should be addressed and mitigation factors addressedaddressed and mitigation factors addressed

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Critical ActionsCritical Actions THETHE VISION OF THE NEW AFRICA INITIATIVE AREVISION OF THE NEW AFRICA INITIATIVE ARE:: By year 2020 35% of the continent will have access By year 2020 35% of the continent will have access

to reliable energy to reliable energy Energy supply will enable an economic growth of 6% Energy supply will enable an economic growth of 6%

over 20 years over 20 years To achieve these targets the Continental Energy To achieve these targets the Continental Energy

sector priorities are;sector priorities are;• Rehabilitation of InfrastructureRehabilitation of Infrastructure• Reinforce national gridsReinforce national grids• Develop regional power poolsDevelop regional power pools• establish coordination forumsestablish coordination forums• exploit “waste to energy” opportunities (flared gas, exploit “waste to energy” opportunities (flared gas,

discard coal) discard coal)

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Other identified green fields projectsOther identified green fields projects • Regional Transmission interconnectionsRegional Transmission interconnections

– Zambia-Tanzania-Kenya interconnectorZambia-Tanzania-Kenya interconnector– Pan Africa grid (7 projects)Pan Africa grid (7 projects)

• Power generation Hydro-projectsPower generation Hydro-projects– River basin hydrological studiesRiver basin hydrological studies– DRC Inga 3 developmentDRC Inga 3 development– Mozambique development of Mepanda Mozambique development of Mepanda

UncuaUncua– Zambia development of lower KafueZambia development of lower Kafue

• Gas projectsGas projects– West African pipelineWest African pipeline– Supply of LNG Supply of LNG

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Other identified green fields projects…Other identified green fields projects…• Liquid FuelsLiquid Fuels

– Refinery Increase Capacity of Natref (South Africa)Refinery Increase Capacity of Natref (South Africa)– Development of Lobido, AngolaDevelopment of Lobido, Angola

• Rural Energisation ProjectsRural Energisation Projects– Rural Energization of South Africa(US$100 million per Rural Energization of South Africa(US$100 million per

annum)annum)– SADC project for biomass conservationSADC project for biomass conservation– Alternatives to fuel wood -GelfuelAlternatives to fuel wood -Gelfuel

All of these area some of the projects scoped All of these area some of the projects scoped and being investigated and are part of the New and being investigated and are part of the New Africa Initiative business plan.Africa Initiative business plan.

Most of these projects offer a life time Most of these projects offer a life time opportunity to ensure rural development as a opportunity to ensure rural development as a core plan of NAIcore plan of NAI

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As Africa gears itself for As Africa gears itself for comprehensive energy interventions comprehensive energy interventions energy efficiency need to be given energy efficiency need to be given prioritypriority

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CONCLUSIONCONCLUSION There is no size feeds all solution for AfricaThere is no size feeds all solution for Africa

Approaches to the African Energy markets Approaches to the African Energy markets need to be responsive to the issues at hand to need to be responsive to the issues at hand to provide sustainable interventions and multiple provide sustainable interventions and multiple benefits benefits

Africa’s growth is dependent on what is done Africa’s growth is dependent on what is done to energize the rural poor in an affordable to energize the rural poor in an affordable manner whilst creating economic manner whilst creating economic opportunitiesopportunities..