Tag Archive | ompi aphane

Medupi is key to short term energy crisis

Eskom bogged down with Medupi …

medupiActing director general of the department of energy (DoE), Tseliso Maqubela, told Parliament before it went into short recess that once Eskom’s new Medupi power station starts supplying the grid the country would have “turned the corner”.

“It is well known we are challenged on electricity”, he said, adding that the fresh view is being taken on the independent system marketer’s operators (ISMO) system which would contribute to recovery in the medium term through the addition of independent power producers (IPPs).

DG of energy policy, planning and clean energy, Ompi Aphane, in his presentation told parliamentarians that, as per the State of Nation Address (SONA), “vigorous attention is now being given to the establishment of the operator’s office to implement independent power supplies.

Financial  certainty, they say

On the subject of infrastructure build generally in the electricity sector, financial certainty was now being restored in the energy industry, Maqubela said, with the result that R120m in energy investment is now planned, “some of which has already come in and projects started.”

The overall plan was to divide power supply between Eskom and IPPs on a 70-30 basis through the national grid by 2020, decisions on refining and gas replacing diesel also being necessary in the short term in terms of a revised energy mix to meet future demand.

Other immediate focus areas for DoE were to increase access to electricity; increase “the momentum” of the installation of solar units; finalise the integrated energy plan; address maintenance and refurbishment programmes; “strengthen” the liquid fuels industry and facilitate decision taken on the nuclear programme.

Interface problems

A major issue being tackled was the in the area of household connections, according to the DoE presentation. Dr Wolsey Barnard, in charge of energy projects and programmes, explained that whilst Eskom was often bringing power to an area, the municipal backbone installations were either not ready or municipal skills were lacking.  DoE had recognised the problem and was busy trying to bridge this gap, he said, with skills training or by working on temporary permissions from municipalities with Eskom assistance.

However, Dr Barnard said it was encouraging that whereas the position ten years ago could have been described as hopeless, the situation was now specific and targeted to small areas, in most cases the most difficult remaining.

At the moment, 1,5m additional households will be connected by 2019 but as this is still insufficient to meet the target of universal electrification by 2025, additional funds are now being allocated by the state and plans made.

Barnard calls for co-operation

In order to achieve this, it was essential, Dr Barnard said, that the modalities regarding national, provincial and local government powers be revised on the ability for Eskom to assist in view of the lack of skills and the handling of appropriation funding.

He called for urgent attention to the fact that power installation funding by DoE to municipalities should be “ring fenced” and accounted for. This area had to be focused upon urgently, he noted.

He said that too many times Eskom had supplied power to an area only to be told by a municipality that there were no funds for distribution boxes or no skilled persons available to connect lines.  Dr Barnard said he was aware that the economic planning department were “in the picture” and legislation was planned despite the constitutional barriers but again he wanted to emphasise that this issue had to be resolved urgently.

EFF members asked if there were plans to specifically assist the unemployed with electricity connections and wanted a list of all power cuts to the different areas and the reasons for these.

Priorities from both sides

ANC member Ms Makwbele-Mashele asked the DG that with all the emphasis on “greening”, the high cost of gearing industry to meet new emissions and pollutants standards and the recently introduced air quality regulations, whether in his opinion these issues were hindering the country’ energy and industrial development.  The ANC also asked, as the fuel price seemed to be “out of our hands”, whether Sasol could increase production locally.

The DA wanted more detail on the exact steps at present underway to increase co-generation of energy to solve the immediate energy crisis.   This was in the light of the fact that the ISMO process had initially failed simply because DoE could not foresee the end state of independent power production, they said.    They also felt that a paper was needed to get clarity on how the integrated energy plan and the integrated resources plan locked into the NDP.

The DoE promised to respond to MPs questions in writing through the chair as the minister of energy had taken up most of the debating time available.

Other articles in this category or as background

  • http://parlyreportsa.co.za//bee/electricity-connections-target-far-short/
  • http://parlyreportsa.co.za//energy/electricity-tariffs-billiton-tells-its-side/
  • http://parlyreportsa.co.za//uncategorized/major-metros-open-up-on-electricity-tariffs/
  • http://parlyreportsa.co.za//energy/eskom-issues-alerts/

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ISMO Bill: Eskom to keep the transmission grid

When asked by MPs what assets in the proposed Independent System Market Operator (ISMO) Bill were to be transferred to the operator’s name during the restructuring of South Africa’s energy system, Ompi Aphane, deputy director general of the department of energy (DOE), confirmed that the Bill was not referring to a transfer of South Africa’s transmission grid system but to minor office assets.   He said any such thoughts of splitting Eskom as the major electricity generator from its national supply grid were not being countenanced at this stage and any such moves “were a long way off”.

Aphane, in presenting DOE’s responses to the various submissions made in parliamentary public hearings on the Bill,  said that there had been a change of mind at DOE as a result of the submissions when it came to staff transfers.   These were now to be carried out strictly in terms of the Labour Relations Act.

The DDG summarized by saying that inputs on the Bill “had been very useful” and they would no doubt improve the quality of the Bill itself but he drew attention to the fact that a good deal of the hearings had been devoted erroneously to discussion on a finally re-organised energy supply system, “which was clearly not defined by the Bill nor its intention.”

However, Aphane said that in general terms the responsibilities of “keeping the lights on” was being taken away from Eskom given to ISMO with considerable numbers of staff transfers and transfer of expertise taking place as part of this process.

He said, “We have a very tight energy supply position in South Africa and in taking any direction with energy supply it is essential that we do not compromise this country’s supply/demand relationship which badly needs a balanced electricity supply system based upon carefully handled and integrated established base load plants and peak generation plants.”

In a survey of world situations, Aphane said that DOE had established that in some countries some very bad mistakes had been made in similar situations, including the United Kingdom, which had, as a result of poor handling, suffered greatly from little in the way of new infrastructure energy investment. It was critical, he said, that South Africa does not emulate such mistakes.

DOE said it had looked at ISMO structures established Norway, USA and in developing countries such as China, Turkey, Thailand and Brazil and it was interesting to note, he said, that Norway was generally regarded as having one of the best electricity market models – although very different from South Africa.

Nevertheless, Aphane said, there were certain parallels which South Africa could copy but he warned that any planning coming after the abortive REDs situation had been in a period when there was a high reserve margin. Now, with completely different and very tight restraints, it was to be realized that DOE would proceed into the area of free market operations with great caution. There was a different financial call upon Eskom and on government.

Aphane said it remained essential now to have control over pricing to the consumer especially in the light of Inter-Ministerial Committee report following the blackouts and massively increased electricity tariff structures; the call for energy efficiencies and new factors on climate change. The world was a different place to that when the REDs plan was mooted.

He commented that it had to be recognised that South Africa currently remained dominated by coal fired stations and such were difficult to introduce into a free market situation. Also, he said that the issues of cross-subsidies would probably always remain in some form or another.   He concluded that the “big ticket items” in DOE’s view that had emerged from the public hearings on the ISMO Bill were the perceived need  for independent transmission lines; that the concept of willing buyer-willing seller need to be addressed in the concept of the ISMO, as it was elsewhere in South African legislation, and the call for stakeholder representation on the ISMO board.

On the last point, DOE believed that the state must retain the prerogative of appointing board members in the light of the fact that it was the state that was exposed financially.

MP Lance Greyling, shadow minister of energy, called for a lot more planning and strategy on energy to rest with the ISMO board urgently. He disagreed that such a considerable number of the regulatory matters should remain to be sorted out under the ERA and would be preferably defined under the ISMO Bill at the soonest. Too much was being left to amendments to the ERA to come, way down the line, leaving a current vacuum, he said.

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Energy department plans more electricity for the poor

Ompi Aphane, deputy director general of department of energy (DOE), told parliamentarians that his department was acutely aware of the fact that South Africa needed energy security for development of the country and to reduce economic deprivation amongst the poor. However he said his departmental budget had been cut, resulting in a number of departmental objectives being abandoned.

A total of 3.4 million households did not have electricity, he said, and 1.2 million of these were in informal settlements around the country. This meant about 12.5 million people did not to have access to energy as is commonly understood. Ompi Aphane was addressing the NCOP’s select committee on economics and consequently his overview stressed provincial and rural targets.

The percentages of households without electricity were: Eastern Cape 20%, the Free State 6%, Gauteng 21%, KwaZulu-Natal 24%, Limpopo 10.5%, Mpumalanga 6.5%, North West 5.5%, Northern Cape 1.5% and the Western Cape 5%.

Aphane said that Development Bank of South Africa have joined the DOE on a rand to rand basis with electricity development in municipal areas where help is needed to overcome some of the issues, he told MPs. These arrangements were at MOU stage but, nevertheless, negotiations with certain municipalities was underway and planning going ahead.

Dr Wolsey Barnard of DOE (Inep-BPU) said that that it needed centralised buying power to bring down the costs of equipment supplied to make equipment such as transformers available at lower prices to smaller municipalities and IPPs. A more innovation approach to centralised procurement was needed, he said.

Returning to the overall picture, Ompi Aphane said South Africa had to remain competitive in terms of electricity pricing in order to attract investment and DOE remained conscious of the fact that the country had to be totally able to finance its R3trillion energy/electricity programme which included all power stations and national grid wiring and transmission systems.

The  main objectives for DOE were the planning and establishment of new electricity generation capacity in South Africa; the running of the multi year price determination process (MYPD) through to 2030 to establish electricity prices; to monitor all Eskom construction; the establishment of the independent market operator system (ISMO) bringing in independent electricity generation producers and to focus on the electricity distribution network as it applied to the rehabilitation of municipality systems and distribution.

On nuclear energy, Aphane told the select committee on economic development  that the IAEA review of South Africa’s nuclear needs was about to be finalised and hopefully ratified and  approved; all processes being for peaceful purposes, including the important applications in the food chain and health curative areas. Radiation monitoring at main ports of entry was a current project of DOE, he said.

Nuclear issues were subject to “scaremongering”, he said and DOE was fully aware of the need for full national debate on the issue and community awareness programmes. Amendments also were needed under the Nuclear Regulator Act which had to be approved by cabinet and provisions’ made for the withdrawal of the safeguards function from the nuclear operating body, the Nuclear Energy Corporation and pass this to independent governance of the regulator, NERSA.

Other legislative changes ahead were proposals to amendments to the National Energy Regulator Bill; the Electricity Regulation Amendment Bill and the ISMO Bill. Draft legislation on nuclear waste issues was with cabinet, Aphane said.   The DOE energy policy and planning programme also had the objective of monitoring the effectiveness of the Increasing Block Tariff (IBT) designed to cushion the poor from rising costs in terms of the true cost of production. The programme planned to extend the IBT to cover prepaid meters in more municipal areas.

Bio-ethanol blending values had to be established and a debate commenced on exactly what were break-even bio fuel price structures if development was to be seen in this area. On energy renewables, Aphane said that a “template” had to be found for a renewables annual report so that progress and development could be measured.   A wind energy awareness campaign was being planned and the solar water heating implementation was well underway with over half a million solar water heating units so far installed.

Nevertheless, returning to his opening remarks, DOE reported that still 12.5 million individuals remained without electricity.   Inroads were being made and next year a further 70,000 municipal connections were expected and 111,500 Eskom connections were planned but price increases in the materials used, or “hardware” were escalating.

On non-grid solar home systems, the total installed to date since the start of the programme was 48,230. The provincial breakdown had been 10,385 in the Eastern Cape, 29,705 in KwaZulu-Natal and 8,140 in Limpopo.

In future, non-grid electrification programmes were not only to be implemented in what was known as “concessionary areas” but on a limited basis in Southern Cape, Northern Cape and Eastern Cape areas where sunlight was more reliable. The target of 10 000 home systems for the current year had been achieved.

The DOE concluded that South Africa’s electrification policies were still valid but different strategies of implementation, particularly as far as climate change was concerned, were needed in the area of renewables.

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First round of IPP producers named for grid supplies

In the first round of allocation of bidders in terms of the department of energy (DOE) renewable energy allocation procurement programme, 39% of the allocated 3625MW for independent power producers has been decided upon.

Parliamentarians were told that the number of “passing bids” was 66.5% of those submitted, resulting in a total capacity of 1415 MW of the 3725MW to be procured being taken up at this stage.

By far the greatest number of projects was solar energy projects, either solar voltaic or solar CSP, with slightly over 30% being wind projects. Twenty eight projects in all were found to be acceptable.

No biomass, biogas, landfill or small hydro projects were submitted in this round, or “window” as it is referred to by DOE.     All projects decided as acceptable were from Eastern, Western and Northern Cape. In all some 68 applications were received.

Ompi Aphane, acting deputy director, DOE, told the portfolio committee of energy that small 100MW projects would be handled separately, the original procurement documents for the bidders for larger scale projects having been released during August 2011 and the compulsory bidders conference held in September for these and for the second window now to be considered.

All documents have been treated as confidential by all parties and are still treated as such in view of the fact that the process is ongoing.

Evaluation of projects on the issue of land rights where, Aphane said, South African law “was antiquated and not clear”, have and might give difficulties. The same applied to municipal issues insofar as relationships and responsibility might be concerned, he said.

On the whole such issues would be the concern of the supplier to sort out but it had to be remembered, Aphane said, that at the same time all such problems were “everybody’s problems and it would serve South Africa best to sort them out at every level.”

On land matters as well, there might be problems in agricultural areas concerning projects that involved good arable farming land but very little in the way of problems were land was fallow had arisen so far or had been pointed out by the evaluators. Registration of leases or proof of land use application had to be shown in submissions.

Commercial legal issues, economic development priorities, financial oversight and technical issues had all been studied and a large evaluation team made up of international legal experts, well known local legal evaluation teams and technical consultants had been assembled. Financial evaluation had been undertaken by Ernst and Young and PricewaterhouseCoopers.

Under questioning by parliamentarians it became evident that all competitors had to be at least 40% South African owned. When asked if there were any landfill, biogas, and biomass projects that had become evident in early bidding under the second window period, Aphane said that such had not arisen at all, nor were they expected to be, mainly because they would be of a minor nature insofar as they would fall under projects providing 100MW or less.

Hydro projects had not arisen. He also commented that projects emanating from “fossilisation processes” were disallowed.

On whether the same extended and expensive evaluation process would be applied to the second and third round of bidding, Aphane said that “DOE had learnt much from the processes applied in the first round” and that the ground rules established by both experts, consultants and official bodies could be applied henceforth.

Questions on final pricing per unit of electricity arose and deputy director general Aphane said that this could not be discussed at this stage for reasons of security but in his mind as the bidding progressed he would expect to see the final price dropping.

DOE was working itself on a figure of something in the region of “R2.75 to R2.80 a unit” before bidding opened. This may go down, he said, but the final price had to apply to all involved in all bids.

Aphane confirmed in answer to questions that the “position with regard to legal difficulties on the licensing of independent operators with NERSA, the national energy regulator, had been resolved”.

Further questioning from parliamentarians resulted in Aphane confirming that the current IPP energy exercise was not in any way connected to the South African government overseas investment exercise with foreign companies on energy renewables, known as SARi.

On finance, once all bidding was completed, the three windows were closed and the final results were known and contracts granted, Aphane said, DOE was particularly aware of the problem of a sudden importation into South Africa of a large quantity of equipment from overseas and the effect this might have upon the rand.   Steps were in hand to counter this, probably by phasing in start dates.

Final questioning came from parliamentarians on the issue of land once again, particularly when the issue of litigation by present land owners arose either on matters of expropriation or proximity.

Aphane said that DOE could not be involved in such matters, which were the supplier’s problem.  However, broadly speaking, if any such problem arose in terms of it becoming a national problem, it would then naturally become a “South African problem as a whole” and this would have to be dealt with. DOE would monitor the situation.

The exercise regarding the “whole question of smaller 100MW or less, self-sustaining and possible minor contributions to the national grid” would be studied at a later date, he said.

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