NERT Update. October2009

Transcription

1 NERT Update October2009

2 Contents Key Performance Indicators Addressing System Adequacy Addressing System Security Review of Supply / Demand Forecast Key Interventions Non Eskom Generation Demand Side Initiatives Security of Supply Crisis Response Summary of Critical Issues Scenario Models Conclusions

3 Strategic Performance Areas The ability of the system to deliver the requisite supply of electrical energy is known as system reliability. System reliability concerns two crucial components: System Adequacy - refers to the capacity of the system to meet the requisite demand System Security - refers to the ability of the system to absorb disturbances to the system.

4 Strategic Performance Areas Achieve minimum of 15% Reserve Margin Increase System Adequacy Increase System Security Increase System Capacity Manage Demand on System Improve System Reliability Monitor Primary Energy adequacy and quality New Build & RTS System Non-Eskom Generation Demand Management/E E Power Conservation Generation Transmission Distribution

5 Condition State of Readiness Operational Ready &Working Under Pressure Under Development Route Vehicle Stressed Lever Lack of Policy Gx Reliability Tx Reliability Increase supply Dx Reliability New build & RTS Cogen/IPP/MTPPP The Goal Increase this Margin Primary energy Energy Efficiency Allocations Pricing Manage Demand PCP DMP Trading Merits/DeMerits INTENSITY New Growth Regulatory Market Driven Emergency Load Shedding

6 RSA Crisis Dashboard as at Oct 2009 The X13 Strategic Performance Area's Existing Gx Reliability Existing Tx Reliability Existing Dx Reliability Reliability & Quality of Coal Supply Energy conservation participation Managing the crisis RSA Electricity Demand Growth New Connection IPP and CoGen Participation Eskom Financial & Governance Health New Build Delivery Skills availability & quality Regulatory and Political Environment -50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Downside Upside

7 Supply & Demand Forecasts High degree of uncertainty to the quantum and nature of the crisis Conflicting messages and statements on the crisis PMU developed a Supply / Demand Forecast based on actuarial analysis of supply and demand forecast data.

8 Supply Demand Forecast Model Looked at variables affecting supply and demand GDP Weather Other variables Developed a high correlation model between demand and GDP

9 MW Peak Demand Per Year Peak Demand per Year

10 GWh NESO Per Year 6000 NESO per Year

11 1/1/94 9/1/94 5/1/95 1/1/96 9/1/96 5/1/97 1/1/98 9/1/98 5/1/99 1/1/00 9/1/00 5/1/01 1/1/02 9/1/02 5/1/03 1/1/04 9/1/04 5/1/05 1/1/06 9/1/06 5/1/07 1/1/08 9/1/08 5/1/09 1/1/10 9/1/10 5/1/11 1/1/12 9/1/12 5/1/13 1/1/14 GWh NESO Forecast Autoregressive Time Series Five-Year Forecast of NESO Quarterly Data NESO Actual NESO Forecast Lower 95% Limit Upper 95% Limit

12 GWh NESO Forecast Autoregressive Time Series Five-Year Forecast of NESO (Excluding Q Onwards) Quarterly Data NESO Actual NESO Forecast Lower 95% Limit Upper 95% Limit

13 MW Regression Based Forecast ARIMA Time Series Five-Year Forecast of Peak Demand (Excluding Q Onwards) Weekly Data /1/07 1/1/08 1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 Peak Demand Actual Peak Demand Forecast Lower 95% Limit Upper 95% Limit

14 MW Forecast Demand with GDP Growth Maximum Demand Growth High Growth Mid Growth Low Growth Gov 6% GDP Target % 2.86% Years

15 Reserve Margin The Reserve Margin has been trending downwards the whole year and in Week 29 reached its lowest level this year of 11.8%. The reduction in the Reserve Margin is primarily an indication of increased Peak Demand, which reached a high of 35,850 MW in week 31. Peak Demand was primarily the result of meteorological factors (i.e. low temperatures). Despite the global economic slow-down, this Peak Demand is comparable with the Peak Demand witnessed in 2007 (36, 513 MW week 27) and in 2008 (35,959 MW week 29).

16 Percentage ESKOM Plant Performance 95.0 EAF Includes Nuclear APR'09 MAY'09 JUN'09 JUL'09 AUG'09 SEP'09 OCT'09 NOV'09 DEC'09 JAN'10 FEB'10 MAR'10 MTD ACTUAL YTD ACTUAL MMI Y-END TARGET

17 New Build Programme MW F2009/2010 F2010/2011 F2011/2012 F2012/2013 F2013/2014 F2014/2015 F2015/F2016 F2016/F2017 TOTAL Grootvlei (Coal Fired) Komati (Coal Fired) Arnot (Coal Fired) Medupi (Coal Fired) Kusile (Coal Fired) Ingula (Pumped St.) Annual total MW

18 NERT Interventions Work Groups are: Non Eskom Generation (Co-generation and IPP); Energy Efficiency & Demand Side Management; Power Conservation Programme; Regulatory and Tariffs; Communications; Funding; Economic Impact; and Electricity Distribution Industry.

19 System Adequacy: Non Eskom Gx Type of Projects Potential Capacity (MW) Investor cost (Rbn) Requirements to unlock MW Wind, Concentrating Solar Power, Coal fired power station, Furnace off gas and other types of cogeneration projects 3122 MW R60bn Balanced Risk Power Purchase Agreement (PPA); Obligation to procure Access to the Transmission Grid; Independent System Operator 3122 MW potentially available with an expected Private Sector investment of R60bn.

20 NUG Supply Timing MW Commissioned per Financial Year Type of Projects Potential Capacity (MW) 2010 (MW) 2011 (MW) 2012 (MW) 2013 (MW) 2014 (MW) Wind, Concentrating Solar Power, Coal fired power station, Furnace off gas and other types of cogeneration projects 3122 MW

21 Programme / Initiative Issues to be Resolved Description Responsible Entity PNCP, MTPPP, Base-load IPP, DoE Peaking plant Renewable Energy IPP Finalise Cost Recovery Mechanism Rules Determine Grid Access Conditions Develop Feed in Tariffs for Cogeneration (COFIT) Eskom s funding model Cost Recovery Mechanism Rules Eskom s financial requirement of cashflow neutrality Integrated Resource Plan energy mix Identity of the Buyer in the PPA Method by which renewable energy generators will be selected Risk allocation in the REFIT PPA Grid access Eskom s funding model Cost Recovery Mechanism Rules Delay in publication of rules Clear, realistic and committed grid connection timelines, processes, codes and terms Clarification whether cogeneration will be included in REFIT programme or a separate programme will be created. REFIT guidelines excludes cogeneration Policy and Regulatory mechanisms to enable IPP entry into the market NERSA, DoE, National Treasury, DPE NERSA & DoE NERSA NERSA NERSA

22 Addressing the Non Eskom Generation Issues Several critical initiatives have been undertaken to ensure access to additional private participation in generation to address the supply crisis; Development of New Generation Regulations which creates a platform the the acquisition of independent electricity; Development of Feed in Tariffs for renewable energies; Development of the Cost Recovery Regulations to ensure that costs associated with the procurement of independent power can be reclaimed by the tariffs; Proposal on the development of an Independent System Operator to ensure non-conflicted procurement of alternate generation; Funding proposal to Treasury for guarantees to enable IPP by providing cash flow neutrality to Eskom; and NERSA development of a standard PPA by external consultants in conjunction with Industry.

23 Demand Side Initiatives The South African Government has made clear its intention to promote energy efficiency, both in the context of the current shortage of electricity as well as in support of national climate change objectives. This intention is demonstrated in various recent legislative / regulatory / policy instruments. However, the majority of these (e.g. the National EEDSM Policy published in 2004) are published as guidelines for voluntary participation of the SA industry and municipalities in EE programmes, rather than enforcement of energy efficiency practices. In February a draft regulation on Integrated Resource Planning and EE DSM was published for public comments. However Schedule 1 of this draft regulation, namely the IRP, was incorporated into the New Generation Capacity Regulation, promulgated on 5 Aug 2009, and Schedule 2, EE DSM, is still under development.

24 Demand Side Initiatives Energy Efficiency Strategy for SA The recent revision of the 2005 Energy Efficiency Strategy for SA is an opportunity to clarify the government s intention on EE and to present a clear road map towards stated goals Regulation on Norms and Standard for building reticulation The regulation on Norms and Standard for building reticulation, which was promulgated in July 2008, has several practical implications. Firstly it is highly unlikely that the target date of 2012 for the installation of all smart meters will be met. Secondly, it is unreasonable to expect the municipalities that have had to incur the capital expenditure of installing these meters, not to recover their cost by managing their maximum demand through utilising these meters. Regulation on Deviation from Approved Tariff This regulation was promulgated in January 2009 in order to enable the legal positioning of PCP under the Electricity Regulations Act, The regulation defines the national savings target, for a period of 5 years from the date of promulgation, as 10% of the annual national baseline electricity consumption. This is subject to the annual review by the Minister. Further, it defines specific circumstances, the prevalence of which, empower the Regulator to approve a deviation from the set of approved tariffs.

25 EE Interventions New regulatory instruments and decisions required Update and revision of the 2004 EEDSM Policy by to include the Standard Offer Model as well as other changes that are required; Clarification of the role, functions and mandate of NEEA within SANEDI as well as clarification of the funding mechanism; The Measurement and Verification standard to be developed; There are also certain problems that need to be addressed before the municipalities can adequately implement EE interventions. For example it seems that the MFMA requirements prevent municipalities from participating in CDM projects.

26 Critical Interventions Deliverable Highlights Standard Offer A consolidated Standard Offer Overview developed with input from stakeholders including Nersa, Eskom, DoE, NEEA and the ESCO Association Solar Water Heater (SWH) Workshop held on 14 September 2009 with the objective to determine the way forward for a National SWH approach Public geysers disconnection Possible quick-win with immediate implementation First draft communication compiled and to be forwarded to all NERT Stakeholders Munic EE Of the 19 Municipalities that have received DORA funding, 6 have been helped with their business plan development for implementation Measurement &Verification Understanding and streamlining the EE Institutional Environment A proposed National M&V approach was presented to the EE Workgroup at its Forum meeting on 22 September An outline of the EE institutional environment was presented on 30 September 2009 to the DoE. This will enable discussions on the best way to implement the Standard Offer Model, SWH and other EE initiatives by the DoE

27 Other EE Interventions Development of Incentive Schemes for EE Standard Offer Tax Incentives Development of a national plan to unblock the challenges to the mass roll-out of SWH. Development of Solar Energy proposal for households. Enhanced communications to ensure better informed and participative public.

28 Communications Update Transfer of the web site from GCIS to NEEA (Saneri) for day to day management; Core CWG meeting held on 8 Oct 09 reconstitution of the WG, induction of new members; Briefing by DPE of SA leading economists on the Eskom s tariff increase (8 Oct 09); Developed a draft Tariff Increase Communications Strategy including key messages. The Key Messages have been submitted to Cabinet for consideration as part of current affairs issues; The current state of the EE Communications Campaign was presented to Infrastructure Development Cluster; The Presidency is to be appointed as a core member to CWG.

29 Power Conservation Programme Energy Conservation Scheme The ECS is a national scheme aimed at reducing national electrical energy demand via a formalised demand management programme. Such a reduction will enable, in the absence of sufficient supply-side interventions, required power network stability, and will mitigate the risk of interruptions to national power supply. The Scheme will be mandatory for targeted participants, but regulation is still required. It is believed that the Scheme is central to the implementation of PCP as it forms the basis for both EGM and RTC trading. Electricity Growth Management (EGM) The Electricity Growth Management framework aims to find an appropriate methodology to allocate the limited and scarce supply of electricity to new applications. This scheme will allow for controlled growth in electrical energy demand, with new connections synchronised to the supply-demand balance. It is envisaged that implementation of the EGM scheme will be largely based on the success of ECS savings.

30 PCP.. Trading of the Right to Consume (RTC) RTC aims to ensure that the national reduction target is met by facilitating the reallocation of consumption rights through bilateral trading and auctions of allocations. The RTC scheme will enable customers who are able to save more than the required ECS savings to sell their right to consume to those who are unable to save or require electrical energy greater than their allocation under ECS. This scheme is envisaged to allow customers a means of selling their rights, title and interest in and to a portion of their electrical energy allocation to another customer at an agreed to price, through the trading of RTC units.

31 Issues The PMU assisted the DoE in creating a process for managing the DORA allocated EE funds with 6 business plans of the 19, but the release and spending of the funds remains an issue. MTEF Budget for EE was put forward but cash crunch in NT will likely result in decreased fiscal support for EE Initiatives.

32 System Security Efforts to address the Generation and Transmission reliability by ESKOM are continuing. The demand requirements on the Generators requires the plants to be run at high utilisation factors which has an impact on reliability. Primary energy remains an issue, both cost and availability. Maintenance of infrastructure in Distribution remains problematic and threatens system security.

33 Contingency Planning Developing Probability models for load shedding including: Amount of load required to be shed Time Period load shedding is required Assessment of largest electricity users and their economic contribution; Development of scenario analysis for targeted load shedding options including the extension of the ESKOM DMP Programme; Economic Assessment of the costs of targeted load shedding vs rolling load shedding vs electricity rationing; Development of a step tariff proposal; Contingency Plan to be discussed at the Jan 2010 Cabinet Lekgotla

34 Summary of Key Issues The current system buffers are to low to absorb shocks to the system. There is a clear need for the appropriate chain of command to ensure an integrated and holistic government response. The need remains for an integrated response plan with the requisite funding. The business and the public are a crucial stakeholder and are keen to participate and contribute to addressing the supply crisis.

35 Summary of Key Issues There are serious systemic problems within the utility, which include: Lack of skills; Player and referee in supporting Non Eskom Generation; Inappropriate generation capability and generation mix; and Lack of coherent funding strategy to address any electricity supply shortage in future. Low tariffs contribute to the lack of energy efficiency in the country as well as a lack of interest in Independent Power Production.

36 Summary of the Key Issues Reliability of the Generation, Transmission and Distribution infrastructures are fundamental to ensuring security of supply. Maintenance and strengthening of those infrastructures will provide the buffer against systemic shocks, which caused the rolling blackouts in January The implementation of the resolutions reached at the Distribution Maintenance Summit remains a priority.

37 Recommendations Accelerate the following crucial aspects: Non Eskom Generation postive impact the economy and negates the needs for economically negative programmes like rationing and laod shedding; Addressing the challenges to the mass adoption of Energy Efficiency incentives and disincentives); Adjusting the tariff regime to reflect the actual cost of providing electricity; Development of a sustainable funding model for Eskom to ensure the expansion programme supports long-term energy needs without burdening the fiscus and the economy; Addressing primary energy issues and ensuring long-term stability of costs and supply; Regulation of the maintenance regime of the electricity infrastructure; and Ensuring that contingency planning becomes a crucial facet of long-term plans.

38 Scenario Model

39 Conclusion The projection for the status of the system is that the Reserve Margin for 2009/2010 (11%) will be approximately the same as that for 2008/2009. While the projected Reserve Margin is well above the 2007/2008 s Reserve Margin (the period during which the extensive load shedding occurred), it is still below the targeted Reserve Margin of 15 19%. The threat to the stability of the system in 2009/2010 will therefore remain. The projected Reserve Margin is expected to decrease in 2010/2011 (9%) and 2011/2012 (8%) and the threat to the stability of the system will therefore intensify during this two year period.

40 Conclusion The decrease in the Reserve Margin can be attributed to the fact that the expected increase in the demand for electricity in this period with be greater than the rate at which additional capacity is added to the system. It is the rate at which additional capacity is expected to be added to the system in this period (approximately 700 MW s for both years) that constitutes the gravest concern. The system will be extremely vulnerable during this period and any substantial increase in demand and/or decrease in supply will compromise the stability of the system. The former eventuality is likely to occur in June/July 2010, as South Africa will be hosting the FIFA World Cup during what is historically the system s most vulnerable period

41 Questions