Electricity Regulation Act, 2006 (Act No. 4 of 2006)

SUMMARY KEY COMMENTS FOR DRAFT IRP 2018

COMMENTS

RESPONSE

NO. OF COMMENTS

A. POLICY & PROCESSES

1

The overall methodology of the draft IRP document was welcomed and deemed to be clear and concise. A proposal for future iterations of the IRP is to include independent experts (organisations and individuals) and international organisations.

The process of future iterations of the IRP will be looked at following the announcement about electricity planning made by the President during the State of the Nation Address.

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2

The publication of the IRP in English only and not in other official languages was raised as a concern as it limits participation by other members of the public.

This request is noted. It is proposed that a condensed final approved version of the IRP (possibly in graphics) be developed and published. This will obviously lag the final published IRP.

3

Publication of documents electronically on the Department website and through government gazette was raised as a concern since not everyone has access to the internet.

Noted. A workable solution needs to be found and suggestions are welcome. In the past, the IRP consultation process was expanded to cover all provinces and to include all communities, but this proved to be ineffective for whatever reason

4

It was stressed that the IRP must be revised more regularly, at least every 2-3 years, due to technology advancements and changes in other assumptions.

The regulations for planning provide for a timeline regarding IRP updates

5

The promulgation of this IRP was encouraged to be released soon and articulate the status of the Ministerial determination on gas and how it will be included into the proposed new built program that is planned for 2026.

As stated in the draft IRP, Ministerial Determinations issued will be looked at and revised in line with the latest approved IRP. This will be done in concurrence with NERSA as required by law.

7

There was a concern on the silence of the IRP with regards to cross border coal based power projects. While another view cautioned against the reliance on cross border projects in general.

South Africa still supports the development of strategic regional power resources in support of regional economic development. The strategic merits of each cross-border power opportunity will be weighed in line with government policy

8

Concern was raised about the alignment of the draft IRP to the National Development Plan and other policies such as the Nuclear Energy Policy of 2008 as the plan does not contain additional nuclear capacity.

Each technology option is justified by its merits when considered against other options under a modelling scenario. The draft IRP does not contradict the Nuclear Energy Policy, in fact IRP2010-2030 is proof of that. What is under consideration is whether there is a need for nuclear prior to 2030

B. DEMAND

9

Concern is raised regarding the projected electricity demand.

The drivers of demand are explained in detail in the draft IRP. Projected demand has been re-based to 2017 actual demand as a starting point and we utilize the “cone” in respect of low, medium and high scenarios of demand. This ensures that we take all possible demand scenarios into account, and only have to adjust the pace of implementation as the actual demand manifests. The likely impact of distributed generation is acknowledged and the draft IRP states that distributed generation registered or licenced by the NERSA will have to be discounted from the projected demand when Ministerial Determinations are made. Historic trends with regard to electricity intensity, energy switching and levels of energy access suggest that even if the economy turns electricity demand growth will likely not go to the rates seen pre-2007.

As no one has a crystal ball for the future, frequent revision of the IRP will ensure upwards or downwards adjustments to the demand forecast can be incorporated.

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C. MISSING TECHNOLOGIES

10

There are concerns raised about technologies that did not appear on the plan, including CSP, biomass, fuel cells, battery storage, mini-hydro and others.

Most of the technology options relate to utility scale technologies. Technologies that do not appear in the draft IRP could be either due to scale (relatively small) or because of cost and system requirements. Stakeholders have made suggestions that capacity procurement in the future must be based on system requirements and not technology to allow technologies to compete based on their ability to provide for system requirements at the least possible cost.

20

11

To encourage flexibility of the plan, it was proposed that the use of technologies and primary energy titles be done away with a rather outline the characteristics of the particular planned generation – base load, midmerit, renewable etc.

See response to 10

12

The EPRI study does not contain any information cogeneration

See response to 10

13

There is a view that Electric Vehicles will soon form part of the South African transport system and the IRP should include them in its analysis.

The role and impact of EVs on the power system has been taken into consideration. EV influences on the IRP are projected to be minimal in this IRP window up to 2030. Future iterations will include a scenario to test EV penetration

D. GENERAL

14

There was a suggestion that provisions to be made for Local Government to directly arrange for either self-generation or concluding their direct procurement with independent service providers outside of Eskom.

The IRP is about supply and demand balance. It is only at the point where a Ministerial Determination is made that their procurer and buyer are determined.

The suggestion is therefore noted.

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15

There is also a proposal by local government that IRP must be done in a bottom up approach with full involvement of local government.

The suggestion is noted and could be considered for the next iteration of the IRP. Municipal capacity to undertake this role varies across the municipalities. Following both approaches (top down and bottom up) has proven to be very useful in other energy planning jurisdictions

16

Concerns were raised about the IRP being silent on the role Eskom in the future. Especially in renewable energy.

See response to 10.

Further capacity allocations and the role of Eskom will be guided by the work be carried out as part of its reconfiguration and turn around. The policy position does not preclude Eskom from building RE plants; challenge is that the scale Eskom is used to is much larger than for RE-type technologies.

17

The 3 year procurement gap for renewables was raised as a concern and it was indicated that it is not good for the sector localisation.

The concern is noted and will be looked at taking into account costs, system requirements and implications for the energy mix.

E. COAL

18

The inclusion of 1000MW of coal through policy adjustment was raised as a concern. Issues of concern raised include:

Noted. All adjustments or deviations from a least cost plan come at additional costs. This must be considered on the basis of cost vs benefit.

Procured projects are expected to comply with all environmental requirements. In so far as the draft IRP is concerned, the inclusion of the coal projects would be subject to non-violation or exceedance of emissions constraints limits imposed.

In order not to pre-empt the outcome of the court challenges, the projects are included provided they comply with prevailing environmental legislation.

Funding for these projects is indeed a risk. The Department will have to monitor these projects and decide on the “dead stop date” without compromising security of supply.

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19

There are also those who supported the inclusion of 1000MW of coal. While they welcomed this inclusion, they are demanding that the allocation be increased to include:

RSA has an abundance of coal; the strategic value of considering imported coal projects under the IRP would have to be evaluated against government policy. As indicated the draft IRP will make reference to coal projects, without indicating that it is for imported coal projects.

Ministerial Determinations issued under the IRP2010 will be reviewed in consultation with NERSA, once the updated IRP is approved.

20

Eskom current coal challenges (cost and availability) were raised as a concern. The concern is that the IRP is quiet on this challenge and its impact on Eskom meeting the projected demand.

Part of IRP technical studies include a “system adequacy” test which takes care of this concern. Eskom is also required as part of their license condition to submit to NERSA medium term system adequacy outlook. This report also looks at primary energy projections.

Government is also looking to resolve the coal sector regulatory issues through a revised Mineral and Petroleum Resources Development Act.

21

Clarity was sought regarding the inclusion of “ Cleaner Coal”

These include:

Cleaner coal in the form of HELE is included in the assumptions. For the costs to be revised, this must be based on at least one operational project experience (ideally 3) anywhere in the world, to substantiate claims by manufacturers etc.

22

There is a view that the assumptions around the completion of Medupi and Kusile should be changed. The proposal is for the remainder of Medupi and Kusile units not be considered but to be reviewed against additional capacity from “cheaper” clean energy sources. The cost of energy from these stations, the financial challenges of Eskom and The IPCC report are some of the reasons advanced for the proposal.

Our approach is based on the reality that Medupi/Kusile are already committed. The proposal to stop the completion of Medupi and Kusile has to be looked at in the context of commitments to date and implications of that on Eskom and the national revenue fund, should breakage costs be incurred.

23

The decommissioning of coal plants that would reach their 50 - year life attracted different views.

Accelerated decommissioning has the potential to compromise the security of supply because the capacity has not been discounted prior to scheduled lifespan in the previous energy plan.

Job losses will also have to be considered beyond the energy context.

24

Concerns are raised regarding assumptions used for the Eskom generation Energy Availability Factor (EAF) EAF in the draft IRP.

Assumptions are said to be optimistic as current actual EAF is lower than what is projected. The EAF is therefore not improving as per the projections obtained from Eskom with the likelihood that additional capacity maybe required sooner than what the draft IRP indicates.

Eskom EAF (at the aggregate level) is just a useful indicator but individual plant performance projections have been obtained from Eskom and are used to inform the technical studies. Sensitivity analysis will also be conducted to ensure the final proposed plan is robust.

25

Consideration of the job losses in the coal sector and a reskilling of employees in this sector and a detailed socio-economic impact analysis of communities affected by the decommissioning must be fast-tracked to achieve effective sign-off with all stakeholders and in doing so prevent the creation of ghost towns, unemployment and social upheaval.

The solution for potential job losses and economic impact as a result of closing down of power plants must look at options beyond replacing like with like. Job losses will have to be considered beyond the energy context, hence the proposal in the draft IRP for detailed analysis and consultations outside of the IRP process. The reality is that a lot of coal plants will soon reach end of life.

26

A proposal is made to address job losses in the coal industry by introducing spatial component into the implementation of the IRP for a just transition. The proposal is that new generation capacity must be closer to where existing power generators will be phased out.

See 25 above.

F. GAS

27

The inclusion of gas was critised to be neither least cost option nor clean energy. The extraction of gas was further argued to be harmful to the environment. Moreover it was viewed as an additional greenhouse gas on top of the coal that is reflected in the recommended plan.

Gas is considered a transition fuel globally and it provides the flexibility necessary to run a system like we have in a cost effective manner. It is cleaner than other fossil fuels. The extent of the gas contained in the draft IRP is within the imposed emissions reduction trajectory.

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28

A concern was raised on the source of

gas. A request is also made for this

information to be reflected in the IRP.

Two options are available in the short-medium term, being imported Liquefied Natural Gas, or piped gas from the sub-region (or even domestic)

29

Caution was raised about the likely availability of gas infrastructure within the envisaged IRP timelines. Once more, there is a request to reflect implementation details in the IRP.

See 28. The IRP will not cover the implementation details because this is not its intended scope. The Gas Infrastructure Plan will address this concern

30

The likely volatility of imported gas prices was raised as a point of concern. It was proposed that to mitigate against this, the following should be considered during implementation:

The proposal is noted.

31

The exchange rate exposure as a result of importing gas and the likely impact on the electricity tariff were raised as a concern for the inclusion of gas.

The proposal is noted and will be considered when the gas supply options are weighed.

32

There is a request to consider and to include in the IRP additional information regarding the anticipated capacity factors and number of start/stops that would be expected of the gas capacity.

This is noted and will be effected.

33

The IRP should consider latest information regarding some of the gas technologies compared to that in the EPRI report. Generation equipment supplier submitted “Latest information” for consideration by the technical modelling team.

This is noted. Also see 21 above.

34

Consultation with gas industry experts was proposed and the idea to conduct more studies on the gas industry was welcomed and a willingness to share information on studies already done was communicated

This is being done as part of the Gas Infrastructure Plan development.

35

Government policy is based on an energy mix that includes nuclear etc. A such rational basis must be advanced as to the exclusion of one technology option or the other, and the same applies to nuclear. Where there is sound basis for the inclusion of nuclear in the energy mix, it will be included.

G. NUCLEAR

36

Other comments made a case for Nuclear rating high on a security of supply scale as compared to renewable, coal and gas.

Noted.

33

37

It is said that the exclusion of nuclear from the proposed new additional capacity is in contradiction to the NDP and Nuclear policy of 2008.

This is not the case. IRP2010-2030 contradicts this assertion. Capacity additions to the system are based on demand and system requirements. The absence of new additional capacity from nuclear is therefore not in contradiction to policy. It is more of a timing issue. It is for this reason that the draft IRP called for detailed analysis to be undertaken to ensure the energy mix is maintained post 2030 when most power plants are being decommissioned.

38

It is recommended that the future cost of decommissioning nuclear power plants should be built into the current price paid for nuclear.

The technical model takes into account Life cycle costs for all technologies under consideration.

39

It is recommended that the DoE look into the studies that have been conducted over the years by various stakeholders and industry players with regards to nuclear.

The technical team has considered all studies made available to the team about nuclear, during the development of the draft report.

No additional studies have been submitted as part of the consultation on the draft IRP.

40

It is proposed that Policy adjustment must be extended to include nuclear energy given it’s a clean source of energy with huge socio-economic advantages including investment with long-term returns to South Africa.

Policy adjustment of the IRP is the prerogative of Cabinet, and they will have the opportunity to do so.

41

It is proposed that the IRP should include nuclear as the least cost in the long term. Koeberg is referenced as a case in example. It is also indicated that nuclear will create more jobs than the current plan which consist of renewables and gas.

Nuclear is included as one of the technologies the technical model should consider. Due to the relative marginal cost of generation, in comparison to other options, no new capacity from nuclear comes through before 2030 but there is a scenario that builds new nuclear capacity post 2030.

This will be looked at in details as part of the post 2030 energy mix.

42

There is a proposal for the Department to nuclear power RFI/RFP like in the case of renewables which is said to be the only way to ascertain the cost of power from nuclear.

In 2007 Eskom issued an RFP for nuclear plants and the outcome is well established. There is also plenty of information about the cost of nuclear plants to estimate the marginal cost of generation. This should not be confused with the fully depreciated operational cost of a nuclear plant, like Koeberg.

43

A call is made for the inclusion of CSP even though it does not fit least cost criteria. The argument advanced is that CSP is clean and unlike other renewables, it has the ability to provide ancillary services.

The proposal is noted. This will be considered under implementation in line with the proposal to procure solutions and not technology.

H. CSP

44

There is a proposal to amend procurement and go beyond procuring a technology but a solution. The proposal is to allow the procurement of CSP in the base load programme, mid merit or peaking demand profiles, with PPAs structured for such operations.

See 43

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45

It is said that the CSP costs used in the draft IRP are high and the Department should consider the learning curves for CSP to date based on SA and international markets.

Latest information for CSP is used for the IRP. Some of the information proposed for use could not be verified or supported.

I. BATTERY STORAGE

46

It was pointed out that the cost of energy from renewable sources with battery storage technology is becoming cost competitive and comparable to that of renewables with gas. Additional benefits of battery storage for system operations are highlighted as reasons for inclusion of battery storage in the IRP. It is proposed that energy storage be included in the final IRP as the prices are falling at a fast rate.

The comment is noted.

This will be considered under implementation in line with the proposal to procure solutions and not technology.

41

47

It is recommended that the department look at latest cost of batteries together with the learning curve.

See 46

48

There is a proposal for distributed energy storage allocation to match the allocation for embedded generation

See 46

J. EMBEDDED GENERATION / RENEWABLE ENERGY

49

The inclusion of embedded generation was welcomed with the proposal that it be referred to distributed generation which is a common name used.

Proposal is noted.

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50

Clarity is being sought on how the embedded generation cap of 200MW was arrived. The proposal is to increase the annual allocation. There is also a proposal to use applications already received by the Department as a starting number.

The allocation will be reviewed as proposed.

51

There was a concern that a cap on embedded generation would encourage a noncompliance. Another view proposed that if the cap remains, there should be at least a compounded growth per year.

See 50

52

It was proposed that the off grid connections not be part of the embedded generation cap.

These are exempt from licensing and therefore not part of IRP.

53

It was pointed out that microgrids and backfeeding onto the grid for less than 10MW was not addressed.

The policy stance is that municipalities have the prerogative whether to allow this or not, in line with the Constitution. The IRP does not prescribe this

54

There are concerns regarding the embedded generation installations that are greater than 10MW whether they are included in the IRP allocation or not.

These installations will still need a Ministerial deviation in line with the Electricity Regulation Act.

55

It is recommended that the annual embedded generation be increased and that provision must also be made for industrial co-generation and self-generation

See 50

56

It was proposed that work to capture accurate and current information is urgently undertaken reduce uncertainty in the next IRP review in two years.

NERSA in the process of finalising the registration process which is in line with this proposal.

K. HYDRO

POWER

57

A call was made for supporting smal

hydropower

Noted.

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58

There was a caution against Inga project due to Congo’s political instability.

Noted. The same applies to any cross-border project, including Cahorra Bassa in Mozambique.

L. CLARITY COMMENTS

59

Whether an environmental impact was conducted in line with the legislative framework that governs this requirement.

Need clarity regarding which environmental impact this question is referring. In any event the scope of the IRP does not extend to EIAs, this is an implementation issue

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60

Community development/benefit—

Whether job creation was factored into the development of the IRP, particular in relation to community development, long-term impact on communities and impact on communities upon decommissioning.

Job numbers analysis of the final proposed plan for the period up to year 2030 together with potential jobs impact due to decommissioning of old Eskom power plants will be undertaken as part of the proposed work to be undertaken.

61

Economic outflows of opportunities:

Black emerging miners, Mining Charter.

Question reads incomplete.

Expansion will assist to ensure response is adequate and relevant.

62

IPP contracts and current tariff structure — would want to have sight of this information: proposed a presentation of applications for tariff applications.

A presentation in this regard can be arranged for interested members of the Task Team at a suitable time.

63

Eskom’s financial instability should feature in discussions, particularly its high debt levels, R400billion.

Unsustainable business model - it was agreed that while Govt should respond to the points raised, the secretariat would in addition provide feedback from the work of the Sovereign Ratings Downgrade task team, already engaging on this matter.

Eskom issues are being attended to as announced by the President. The proposal for the secretariat to provide feedback from other engagements is supported.

64

Future of the electricity industry —

any consideration been given?

See response to Question 5. IRP at this stage looks at mainly balancing supply and demand irrespective of the market structure.

65

Eskom as a producer of renewables:

Labour was of the view that Eskom should continue to enjoy its monopoly in the energy sector;

Eskom should therefore be part of the process of moving towards renewables; and

Also separate issue for noting in the Nedlac report: Eskom’s role in producing renewables (not purpose of the IRP to determine who produces what; rather to renounce on the energy generation mix required for security of supply).

See response to Question 63.

66

The proposed retrenchment of

17 000 workers at Eskom were

concerning.

There is a process dealing with Eskom and as announced in SONA, various stakeholders will be engaged as announced.

67

Decreasing demand on the national grid: How did Government arrive at a conclusion that the demand was decreasing or had decreased, given that many communities are still without electricity?

Actual historical data obtained and as measured by Eskom confirms that demand projected in 2010 has not been realised. Data also indicates that the electricity intensity is coming down. This is seen from energy used per unit of GDP.

While historically demand has remained flat, the IRP projects that demand will continue to grow into the future and this makes provision for increasing access.

It should also be noted that the challenges of access are being addressed under the electrification programme, which is a distribution issue (not a generation or IRP issue)

68

Quality control/assurance in respect of models used and research undertaken.

The simulation models and data set input used were independently verified by CSIR, NREL as well as PLEXOS developers for quality assurance. Most utilities in the world follow the methodology we are using

69

Drafting process – should be shared

The request is not clear. An expansion of the request and relevance to the report contents as presented will assist.

The report was compiled by the Department of Energy with support from the technical modelling team.

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The IRP stated that there was a need for detailed studies on nuclear energy and other forms of energy such as clean coal. The NDP had already called for these in 2012. If the studies were done, they should be shared.

The report actually states that due to the significant change in the energy mix post 2030, a number of detailed studies must be undertaken as assumptions made today can significantly alter the energy mix outcome. There are various studies that have been carried out and continue to be carried out by a number of institutions. Future iterations of the IRP always take into account the latest technology developments