ELECTRICITY SUPPLY CONSTRAINTS IMPLEMENTATION PLAN FOR COMPREHENSIVE PACKAGE OF MEASURES

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1 ELECTRICITY SUPPLY CONSTRAINTS IMPLEMENTATION PLAN FOR COMPREHENSIVE PACKAGE OF MEASURES 19 February 2015 OVERALL APPROACH It has been agreed between the Presidency and Business that the overall approach to the current electricity supply constraints should be one based on collaboration and the need to work in the interests of RSA Inc. Two broad areas of work have been identified, namely research and implementation of a comprehensive package of measures. STRUCTURE The War Room is a structure that reports directly to the Deputy President and is headed by Sean Philips, the Director General of the Department of Performance Monitoring and Evaluation who has been seconded full time to lead the War Room. The existing engagements between Business and the War Room will continue on a regular basis. Representatives of the War Room will attend meetings as appropriate. In addition, regular meetings between Business and the War Room will be held. Focus groups have been established as follows by Business: Load shedding; Co-generation Renewable energy; Gas and diesel supply; Demand response measures. The Government has requested that the focus groups be action orientated. Separate engagements with Trade and Industrial Policy Strategies (TIPS) will be undertaken as required. Business has also been requested to review the factors delaying implementation of Eskom s maintenance plan.

2 RESEARCH The services of TIPs have been retained by the War Room to undertake the following tasks: Appoint project manager to manage implementation of the actions required to alleviate the situation; Appoint an electrical engineer to provide technical support to the War Room; Develop a comprehensive set of supply- and demand-side measures that should be introduced to alleviate the situation; Review the challenges in execution of the Eskom maintenance plan; and Assess the cost of load shedding on the economy. PROGRESS Load shedding The excellent response from members on the impact of load shedding on firms is acknowledged. These inputs are being used to argue the need to have a better approach to load shedding. Estimates of the costs of load shedding to the economy range between R75/kWh and R15/kWh. Although the management of load shedding is much better than it was in 2008/9, the management of the schedules is not business friendly. In response to a questionnaire on the issue, members responded at a tempo previously not experienced in any similar call. The most common complaint is that the notice given is insufficient to prevent unplanned shot downs. Targeting of residential users, which is supported generally by business, is not technically feasible on most municipal systems. The practice of Eskom announcing almost on a daily basis that they may have to load shed and then not doing so is causing increasing concern to business as the warning is still insufficient if a power outage occurs once a production run has already started. At the time of writing, discussions on better ways to manage load shedding are about to commence. There is a school of thought that says that load shedding schedules should be developed based on greater synchronisation with the maintenance plan. Further discussions will take place on this view. The Government has requested that Business considers the possibility of changing shift times in those firms where shifts do not cover 24 hours. A process of engagement on this matter has commenced. However, this is not a simple thing to do. Given the fact that 45% of industrial users operate 24/7, the actual value of attempting this option needs to be determined before pursuing it. So far it would appear that division of the country into more than one time zone would be a more realistic option, but this also needs further consideration in order to make sure that it will really work. The necessary research will be undertaken in collaboration with TIPS.

3 Co-generation The Government has been persuaded to roll over existing co-generation supply contracts that are due to expire on 31 March 2015 and all suppliers have indicated their willingness to roll these contracts over. The Government has also agreed to buy back some power from energy-intensive users. These supplies should go some way towards alleviating the load-shedding situation, but there is still no chance of avoiding load shedding in the near future. It is anticipated that a request for proposals for additional co-generation to be commissioned in the next months will be called for before the end of February. Renewable energy Independent Power Producers are beginning to connect renewable energy to the grid and such supply goes some way towards smoothing out peaks. It also helps with the overall shortage of base load energy. The Government is also considering the possibility of embedded, small-scale renewable generation like photovoltaic cells which are connected to the grid and a discussion paper in this regard has been released. Business is encouraging government to fast track the regulatory requirements to introduce this option by the end of this year. The City of Johannesburg is also keen to pursue this approach, which is being supported by Business. Gas and diesel supply The five-point plan includes proposals to convert the Ankerlig Open-Cycle Gas Turbine Plant to gas and to extend the use of gas for household use as an alternative to electricity. Demand response measures In December 2014 the Government released a request for information on demandresponse measures and all members were encouraged to submit ideas that they had for demand-response measures. A number of such measures are also understood to have been incorporated into the action plan developed by the Government in consultation with Business. Further demand-side response measures are being discussed and a process to review the incentives to ensure that they support energy efficiency measures is being initiated. A list of measures that can be supported by Business leaders and the Deputy President are being prepared with a view to a joint public announcement. A preliminary list is attached hereto. Eskom maintenance plan A presentation was made on the Eskom maintenance plan and the state of the system. It was clear from the presentation on the status of the system that the seriousness of the situation should not be underestimated. From Eskom s explanation, it was clear that the deferment of maintenance is a result of poor execution of the plan, and not because the plan itself was bad.

4 It was agreed that the slide presentation would be shared with us once it had been declassified and the more detailed slides on the skills shortages had been added to the pack. The Government would like Business to review the reasons for the ongoing deferment of planned maintenance to see if and how we could assist them. One of the reasons for the deferment is the lack of capacity space to allow units to be taken off line. This is discussed in more detail below under demand curtailment. A small team of engineers has been assembled to engage with Eskom on the factors affecting delays in implementation. A meeting with the Eskom technical team is being arranged by the war room.

5 APPENDIX 1 ACTIONS WHICH CAN BE TAKEN BY BUSINESS AND GOVERNMENT TO USE ELECRICITY MORE EFFICIENTLY Business has established an Energy Efficiency Leadership Network, which encourages better energy management in firms. In 2014, significant energy savings achieved by members of the Network were reported. Interventions which led to the savings included the following: Setting energy efficiency targets for the company Installation of energy efficient lighting Increased efficiency of air conditioning and ventilation systems Recovery of heat Installation of variable speed drive motors Improved process efficiency Installation of solar water heaters. Energy efficiency including use of alternative sources of energy not only makes good business sense but can make a meaningful contribution to alleviating the current electricity supply constraint.