Tag Archive | renewable energy

MPRDA Bill to be amended urgently

Some form of compromise….

coal miningIn referring back to Parliament the Mineral and Petroleum Resources Development Amendment Bill (MPRDA) and acknowledging in his State of Nation Address (SONA) that in its present form it could be damaging to South Africa’s investment climate, President Zuma and his cabinet have introduced more certainty to both the mining and oil and gas industries.

At least a year and a half delay was a guess if the suggestion that two replacement Bills were to be drafted separating mineral resources from oil and gas in the light of the fact that both have separate BEE charters.

Certainty needed

However, mineral resources minister Ngoako Ramatlhodi has agreed with mining companies and also the point put forward by Chamber of Mines that the best and fastest way forward to bring certainty to theRoughnecks wrestle pipe on a True Company oil drilling rig outside Watford industry would be to pass the Bill subject to amendments based on a new approach to the mining beneficiation issue and the matter of state “free carry” in any successful gas exploration.

Originally, on an issue raised both in submissions and by opposition parties and, even a couple of ANC MPs, the presidency has also agreed to doubts expressed whether, once signed, the MPRD Act after amendment would pass constitutional muster on the basis of the amending Bill’s passage through Parliament and the process adopted.

Section 79(1) of the Constitution empowers the President to return a Bill to Parliament for reconsideration if reservations about the constitutionality of the Bill prevail.

Mining land

Subsequently pointed out as a further reason for the Bill not beingtrad leaders signed, raised in a presidency statment issued by spokeperson Mac Maharaj, was a concern of cabinet that the Bill had to be processed through the Council of Traditional Leaders.

Parliament passed the Bill all in a rush at the end of March 2014 after much lobbying by ANC whips and despite warnings and constitutional challenges from many parties.  Nearly a year has passed since sending the proposals off for presidential assent.

The subject of the regulatory environment has not even been touched upon or has come up in the debate at this stage.

During the parliamentary recess both the Chamber of Mines and others have complained of sustained uncertainty in their industries and in the investment world.

Two issues emerged almost immediately when the President announced he was delaying his signature. The first issue was a hefty warning from mineral resources minister Ngoako Ramatlhodi who said “the implications for companies that did not meet BEE targets set out in the mining charter would be severe”, inferring that this might eventually affect the granting of mining licences. He raised, once again, the issue of employee shareholding.

“Developmental” metals pricing

Consequently, it still remains somewhat foggy what government policy was in instituting such clauses other than an overall ambition for the state to have more ownership of strategic resources in both industries and the drive by minister of trade and industry, Dr Rob Davies, to assist smaller manufacturing metals industries becoming more viable at the cost of larger industries, therefore creating more jobs, he said.

On the subject of BEE and the two different charters affected, all that has been said officially was a remark by minister Ramatlhodi “We have to satisfy ourselves that the Act meets our broader socio-economic development activities.”

The second issue to emerge after the announcement of the return of the MPRDA to Parliament was further mention by the department of energy of“Operation Phakisa”, the speed-up process as part of a co-ordination exercise with the oil and gas industry to reduce reliance on oil imports.

Fracking and renewables

On a separate issue, further statements by ministers with regard to fracking and speeding of delays in the IPP world with renewables has also emerged, overshadowed by the urgent need of an energy plan from the newly formed energy “war room”.

Whatever happens, both industries should be prepared for another round of public comment, hopefully in the first parliamentary period after the Budget…… minister of finance Nene notably mentioning nothing of nuclear interest in his budget speech.
Other articles in this category or as background
Energy War Room formed to meet crisis – Parly ReportSA
Mineral and Petroleum Resources Bill halted perhaps – ParlyReportSA
Medupi is the key to short term energy crisis – ParlyReportSA

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President Obama and Power Africa

Power Africa and a $7bn involvement

In an excellent speech to a young audience at the University of Cape Town but seen the world around, the words “Power Africa” were heard by many for the first time from none other than the President of the US and although by no means did the financial implications have any comparison to the US Marshall Aid plan to Europe in 1945, this is without doubt a much played down mini-version in energy terms.

It comes with an initiative already started; US business plans in energy to Africa already in motion to an estimated tune of $9bn….. and thats just a start, said President Obama.    Energy, he said, is the key to Africa and electricity to all homes is the hope for all Africans. Without electricity there is no possibility that education can take root and therefore no way out of the poverty cycle, he said.

Electricity for all

If anything of value therefore from a business viewpoint came out President Obama’s trip other than some very warm-hearted gestures of friendship, it was certainly the extraordinary news that he personally, and that presumably means in fact the US Administration, has plans for a state $7bn initiative to enhance access to every household with electricity across Africa by tapping the continent’s vast energy resources and plenty of money by attracting international US investment.

By reading up on Forbes Magazine, which presumably has one of the best lines on what the US Administration is up to financially, their story on Power Africa appears to be already a well established initiative in the US.    For the most part, it is most detailed.   The story ends, however where perhaps it should have started.

In the last paragraph, after a giving a picture of the structure of the Power Africa programme and the names of the many partners US partners contributing to the initiative with finance and skills, the Forbes article ends with the observation……

“The recent discoveries of oil and gas in sub-Saharan Africa will play a critical role in defining the region’s prospects for economic growth and stability, as well as contributing to broader near-term global energy security.  Yet existing infrastructure in the region is inadequate to ensure that both on- and off-shore resources provide on-shore benefits and can be accessed to meet the region’s electricity generation needs.”

And there, possibly, we have it.   A sort of Mozambique Channel gold rush.   Yet we are assured by no less than President Obama himself that the USA has enough shale gas not to be importers but shortly exporters.

The Chinese robotic approach

However, to assume the US is looking for new oil fields for its own use or not would be to miss the point.   Trading in Africa with Africans was the point in Obama’s speech and hopefully, as the US President says, the USA can add value to what is made in South Africa before it is exported and not just exploit the resources in Africa, as does he says China and others of their ilk. The general feeling remains that China will put in power plants just to get out the resources. Either way, we get power – but the US way seems more sustainable and of use to economic and social needs of Africa in the long run.

Power Africa, Obama says, will, in, addition also “leverage private sector investments” beginning with an additional $9 billion in initial commitments from private sector partners in sub-Saharan Africa.   Most of the talk is about land-based electricity grid support, off grid projects, renewable energy projects and supplies to marginalised communities and there was a clear inference in the article that nobody in the US was going out of their way to invest in more coal mines.

The article says most importantly, “Although many countries have legal and regulatory structures in place governing the use of natural resources, these are often inadequate.  They fail to comply with international standards of good governance, or do not provide for the transparent and responsible financial management of these resources.”

“Power Africa”, Forbes continues, “will work in collaboration with partner countries to ensure the path forward on oil and gas development maximizes the benefits to the people of Africa, while also ensuring that development proceeds in a timely, financially sound, inclusive, transparent and environmentally sustainable manner”

In other words there has to be certainty.

ParlyReport this week focuses on the introduction to the South African  public of the Mineral and Petroleum Resources Development Amendment Bill on that very subject. One would hope that the intentions of government to have a stake in oil and gas exploration success stories do not frighten investors off and that the amendments to the Act stay fixed when agreed, give certainty and are properly regulated and the MPRDA changes are not the precursors of the mess that such regulations are to our North.

Posted in Cabinet,Presidential, Electricity, Energy, Enviro,Water, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry, Transport0 Comments

IPP 3 delayed until mid-August says DOE

More time needed before next IPP window……..

Announced by the department of energy (DOE) during December, potential IPP power producers now have until 19 August 2013 to submit their bids, thus meaning that the submission date for the third bidding window for independent power producers (IPP) has been postponed again.

As part of the renewable energy IPP procurement programme, which was introduced in August 2011, the submission date had originally been set for 7 May 2013 but DOE says that more time is needed to incorporate lessons learnt from the previous IPP windows.

In addition, DOE says it needs to update requests for proposals according to new matters coming to light

More power from renewables

By giving more time to bidders to consider updated request for proposals, this affords the IPP team, says DOE, more time to consider the preferred bidder process, DOE stating that the country’s overall energy needs programme will require an additional 3200 MW of renewable energy from the three phases or windows of IPP bidding.

IPP targets in technical terms for onshore wind, both types of solar energy, biomass, bio-gas, small hydro and generalise small energy projects are all included in the DOE statement.

Amendments to regulations regarding petroleum products wholesale licences and petroleum products manufacturing licences were also published by DOE in December late.

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Final push for renewable energy promised

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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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RE producers will take financial pressure off Eskom

The department of energy (DOE) has introduced to Parliament the concept of establishing a licensing entity for independent power producers (IPPs). This would be set aside from Eskom operations but would act as a much needed resource to shore up Eskom’s inability to provide, in terms of its credit rating, sufficient power for all of South Africa.

The ability of licensed IPPs to raise funds separately, particularly for renewable energy resources, will take the pressure away from  Eskom in terms of fund raising, says DOE.

A new Bill, numbered B9 of 2012, allowing independent system and market operators (ISMOs) and setting up an entity, which appears somewhat separated from Eskom to regulate such operators and purchase power, has been tabled in Parliament. Known as the Independent Systems Market Operators (ISMO) Bill, other necessary amendments to anchor legislation such as the current Electricity Regulation Act (ERA) will follow in due course.

Introduced by director general of DOE, Ompi Aphane, the new Bill will assist in providing, through an ISMO board, independent dispatch of power from all ISMO generating facilities to the sole purchaser, Eskom, “in an efficient manner in order to minimize costs’.  Muzi Mkhize, director general, hydrocarbons, described the new Bill “as establishing an autonomous state owned company, mandated to buy power from generation.”

He said that co generation projects will not require government guarantees and thus electricity from such projects “may come at a lower tariff when compared to costs generated by the Eskom build programme”.

The ISMO board, Mkhize told parliamentarians, will assist DOE in planning for “a new generation capacity”. On the basis that the ISMO board does not become involved in power generation itself, the licensing of electricity to distribution and large customers will be enabled independently of Eskom, such licencees being given equal access to the wholesale price.

According to the presentation made, only Eskom will sell electricity to the public. The presentation was made in the form of “electricity wiring diagrams” when describing the electricity generation regime in South Africa, rather than diagrams giving structured industrial relationships. MPs were at a loss to understand this.

In response, Mkhize said, “some of the functions to be performed by IPPs were not licensable activities at present” and therefore the Act would have to be amended at the earliest. However, he told parliamentarians that ISMO, as a body and licensing entity, would have to enter into a contractual arrangement with Eskom for the “execution of functions and contracts to be finalised within three months of the ISMO incorporation date”, i.e. a total staff transfer from Eskom Holdings in order for it to be in operation at the soonest.

The minister of energy, it is proposed, must ensure that ISMO board appointees are representative of the industry and all Eskom Holdings staff employed currently “in the fulfillment of functions contemplated by the establishment of ISMO, including support staff will be transferred to ISMO in terms of the new Bill”.

Mkhize said he believed that such generation licences to be granted and the allocation of MW in terms of government’s renewable energy plans would be addressed under the Electricity Regulation Act amendments. Future electricity tariffs created by the new structuring would require approval from the existing regulator.

The need for independent transmission lines as well was noted, Mkhize said, and this was to be addressed in due course.

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Global Finance Needed for Renewable Energy

If carbon emission targets are to be met, department of energy (DOE) told Parliament, then countries needed effective international finance instruments put in place to assist in creating renewable energy source industry infrastructure. The department was reporting back on the recent international global warming conference held in Durban.

In the absence of the minister of energy and most senior (DOE) officials due to the presentation by the president Jacob Zuma of the infrastructure plan announced in his SONA address earlier during the week, Mokgadi Modise, chief director, clean energy – DOE,  presented a departmental oversight on the Durban COP17 conference.   She noted that “bottom up” solutions were needed in all countries including South Africa to achieve advancements in the renewables clean energy with the appropriate solutions, if carbon emissions were to be reduced worldwide. There was too much “top down” application at present.

Modise said that that most countries had already indicated their un-willingness to answer key political, questions on the Kyoto Protocol, well before the Durban conference and that the hosting of COP 17 for South Africa, presented considerable problems for the country as hosts if a better outcome was to be achieved than the multitudinous disappointments experienced at the Copenhagen COP 15.

Focus at Durban was also on the “operationalisation” of the Cancun agreements at COP 16.

Modise outlined the “side event” on 26-27 November in which DOE participated and co-hosted with the United Nations Framework Convention on Climate Change (UNFCCC) secretariat to present the 12th Designated National Authority (DNA) in order to crystallize common views and communalize information before the main conference. Challenges at the DNA were that certain countries, such as Italy, were notable for the lack of data provided on their domestic energy statistics, rendering it difficult to obtain overall global factors and make proper conclusions.

Later in the meeting she said that the UNFCCC was working on sector-specific “data templates” and those countries would have to align themselves to data delivery protocols. These were to be delivered to all in the course of time. However, much was overcome at the DNA meetings, Modise said.

Other “side events” at COP17 in which DOE participated were many, including an SA energy oversight presentation and the launch of a pilot solar energy project at ILembe municipality by the president of SA, demonstrating South Africa’s keen interest in renewable energy as a practical issue on the ground.

A factor that emerged from COP17, Modise said, was that considerable advances had to be made urgently as far as international access to financial resources investment in renewable energy projects were concerned in order to “scale up” progress in this area.  Finance structures with international sourcing had to be put in place, she said.

Also, improved incentives to energy participants were needed in both the renewables and electricity energy fields in order to encourage different forms of energy creation.

For clean energy solutions to work globally there had to be an improvement in the support by governments generally.  However, she said, in terms of local business and industry in SA, DOE was convinced that both BUSA and commerce generally “had come to the party” on targets and their participation in DOE objectives within the framework of what South Africa had agreed to internationally” and that this was understood generally by the SA industrial and commercial community as a result of publicity.

Modise singled out wind and solar issues for discussion and told parliamentarians that DOE was working very closely with DTI on this subject but under questioning, was unable to provide any targets in terms of both energy figures or give timeframes.

On the subject of research and development in various energy sectors, she admitted that in South Africa there was little in the way of a sufficient base of technology on all forms of renewable energy but that much of this could, and would have to be, outsourced. Hence the plan to involve PPIs.   Whilst Modise drew no specific references to biofuels, she did note that the “way forward for DOE” was to apply “rigorous monitoring, reporting and verification on carbon mitigation effects”. She said domestic outcomes from the National Climate Change White Paper, approved by cabinet last October, were now going forward for conclusion by May 2012.

Seven projects on renewable energy had been approved and a further 21 were under investigation, she said.    These were to provide some 1 415.52MW of power representing the first IPP phase and other “windows of opportunity” for IPPs would occur in March and August this year.   She said she would supply the committee separately with lists of successful bidders and those being seriously looked as a separate exercise, in the light of time constraints in the particular meeting.

The White Paper on Energy Efficiency was still at the stage of “engagement with the department of the environment on how to unpack what energy sectors were responsible for what and what target applied to each and what the contributions expected were to be.” All stakeholders were involved, Modise said.      The final date for the country’s energy strategy as a finished document remained as May 2012, she noted.

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