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15 April 2008

Programme director
Your Excellencies, Ministers of Energy and Minerals Resources and their representatives
Members of the Regulatory Boards in our midst
Chairpersons of Boards and Chief Executive Officers amongst us
Members of the Finance sector
Captains of the Energy Industry
Distinguished ladies and gentlemen

I am indeed honoured to be invited to be part of this high-level diverse group of political leaders and technical experts who have taken interest in discussing and sharing information on challenges and opportunities facing the power sector in recent times.

The challenge before us in Africa and indeed in the rest of the developing world is great and will need stakeholders, comprising governments and the private sector, neighbours within and across regions, to take one another’s hands as we move our respective economies to higher levels of growth and thereby providing a better life for our people by meeting the social needs of our people in a sustainable way.

I am encouraged by the numbers that I see represented here. It is a manifestation of the inherent human energy and zeal within us to want to make a difference and be counted. The challenge that most of us face stems partly from colonial times and partly from the institutionalisation of practices that hinder efficient operations of our energy systems. Some of the challenges are of our own making by being slow to ride the waves of technological and institutional changes currently sweeping across the globe. You must be aware of the sweeping changes in development and the strengthening of trade blocks.

There is also the enhancement of inter-block trade which has seen the pooling of scarce resources such as electricity, water and Information and Communication Technology (ICT) to name but a few. We have recently seen the liberalisation of the skies between Europe and North America. These are examples of the benefits of co-operation, standardisation and collaboration on matters of common interest.

Electricity issues have been on our tables for a long time now. Truth is we can also name a few of our achievements. The success of some of our institutions like South African Development Community (SADC), Southern African Power Pool (SAPP), African Forum for Utility Regulators (Afur), Regional Electricity Regulator Association of Southern Africa (RERA), New Partnership for Africa's Development (NEPAD), Development Bank of Southern Africa (DBSA) and the African Development Bank (ADB) are examples exemplifying our resolve to deal with challenges we face as a continent. There will of course be opportunities for international bodies to participate and partner with us.

In the late 90s to early 2000s, the biggest challenge was the reform of the energy sector. This was seen within the context of excessive state involvement on the power sector and the inability of state utilities in general to deliver on their mandates, lack of maintenance of infrastructure, lack of billing and metering systems, lack of collection and hence the unsustainable nature of the electricity businesses. All this led to the national and international finance houses being reluctant to fund the refurbishment of existing and development of new power stations. There are of course other political (civil wars and political instability) and macro economic impediments (international spot prices of commodities, currency volatility and inflation) which have made debt funding particularly difficult.

For most of us as governments, the need to deal with our social responsibilities together with provision of basic services became a rude awakening of the realities of our past. Communities need to be developed simultaneously with the growth of the economy. The mid 2000’s saw a drive towards the consolidation of the distribution sector and the unbundling of the electricity sector. As a continent we are at different stages of reform. We are aware that Namibia is steps ahead in the restructuring of the distribution sector. As South Africa we are still grappling with constitutional issues to be able to move ahead on electricity distribution industry reform.

With exception of a few areas, stability in Africa has brought about impressive growth rates. These have resulted in high demand for energy in general and electricity in particular. The challenges that were predicted in the late 90’s have now become a reality. In this regard, we have seen the scramble for power as governments in their sovereignty are looking for local rather than regional solutions. Most of these projects have not yet materialised because amongst others, the necessary Power Purchase Agreements (PPA) could not be secured across national borders, reserves of primary energy could not be proven, unit costs of new power was too high, interconnections could not be done successfully, or identified technologies have become too expensive or too risky to contemplate as initially envisaged.

As you are aware, over the past few months South Africa has seen unprecedented levels of electricity supply disruptions. The questions on the minds of most people is what is the problem with our electricity supply industry which we have known to be world class, how long is this problem likely to persist and whether authorities are doing enough to resolve it. We have heard calls in many quarters that relate mainly to the need to identify the culprits and to punish them. I must take the opportunity to convey our sympathies with all those who are affected. I must concede from the onset that as government, we recognise the inconvenience caused and the hardship that all of us are subjected to. It is not an easy situation to be in. The situation was unforeseen and unprecedented.

As you may be aware, unlike the situation in many countries, South Africa has both a capacity (in terms of megawatts) and energy (in terms of megawatt hours) shortages. We are all aware that we have a national emergency which calls upon all of us to contribute towards the management of this situation. We need to address both the energy and capacity shortage. It is a pity that when we are affected, so are many of our neighbours who are interconnected with us.
We are doing everything in our powers to manage the situation such that all of us, businesses and civil society can have reasonable levels of electricity supply in the short term, while we address the medium and long term issues. The co-operation of all of us will be necessary if we are to succeed as a nation and the region.

As the Ministry and Department of Minerals and Energy, responsible for the security of supply of energy, we anticipated this current situation. When we experienced electricity demand, growths ranging of 3.34% and 7.1% in 2002 and 2003 respectively, projections were revised and it was confirmed that new power generation would be required in 2007. Little did we know that our generators were already stretched to their limits. The rest is history.

A number of policies and strategies have been developed and approved to ensure that we approach the value chain of electricity supply in an integrated and sustainable manner. To that end, the Nuclear New Build Programme Strategy (NNBPS), Renewable Energy Strategy and Liquid fuels strategies were developed and approved. These are all clearly articulated in our energy policy. In the absence of capacity and energy, we are faced with two options, namely load shedding and power rationing. The former is the most inefficient and painful way of addressing the crisis as it leaves no control on the consumers to manage their situation. The latter is the more rational approach, which we are proposing as a strategy for pulling through this dark cloud. We are strongly advocating the power rationing option.

Programme director, we have instituted a Power Conservation Programme (PCP) which is an integrated national programme intended to manage the power rationing we are proposing. The programme has both capital and user intervention components. Once again we are calling upon all stakeholders to co-operate with us in avoiding load shedding at all cost going forward.

The following are components of the PCP:

Legislative and regulatory measures

The current legislative framework provided for the minister to make certain regulations pertaining to security of supply, energy efficiency and sustainability of the electricity industry. There are other concomitant actions that need to be undertaken by other spheres of government. Thus, most of this work will be possible only if different spheres of government and stakeholders work together under the PCP.

For my Department

In order to speed up the attainment of the PCP, we are also embarking on the development of necessary regulations under existing legislation to enable us to implement our legislative mandates.

In this regard, we are undertaking the following:
* quality of supply regulations
* prohibition regulations
* energy efficiency and demand side management policy
* electricity pricing policy

We are also facilitating the development of rule by the National Energy Regulator (NER) to better implement the provision of the regulations and the strategies.

Immediate projects

In order to kick-start the PCP, we have procured compact fluorescent light fittings (CFLs) and solar water heaters. We will be assisting with the smart meters to enable municipalities and Eskom to control the load of their customers during periods of constricted capacity. We are also working in close collaboration with all of you in this regard.

Specific programmes under the PCP

In our energy saving campaign we are advocating the following programmes:

Banning the manufacturing and use of incandescent lights
It has been established that with 10 million electrified houses in South Africa, on an estimate of eight incandescent lights per household, it is projected that 800 MW could be saved by replacing the incandescent lights with compact fluorescent lights.

Solar water heaters
These we are promoting through a 20% subsidy for the installation of these solar heaters as they are on the expensive side.

Smart metering
We are looking at implementing smart metering which requires the use of wireless technologies so that Eskom or the municipalities are able to manage the customer load.

Fuel switching
We are promoting fuel switching to other sources like Liquefied Petroleum (LP) Gas to ameliorate the strain experienced by the electricity networks during peak times. This could result in saving 500 MW. We are looking at a subsidised package of hardware and the gas itself. We have published regulations that to address the pricing issues and also to create the market for the LP gas.

Traffic lights
Traffic lights will be converted to solar power with the battery back up.

Efficient lighting
The domestic sector has been provided with CFLs in a sustainable manner to avoid relapse into non-efficient energy lighting options. The hospitality industry is called upon to retrofit and be energy efficient

Public buildings
All public buildings including those of parastatals will be targeted. From these we will expect even bigger savings as we need to lead by example.

Education, public awareness and communication
Most of the energy saving is associated with lifestyle issues. This programme comprises day-to-day practices that each one of us can do to save energy.

Medium to Long term programmes (18 months to seven years)
While all the above activities will be unfolding, we will be embarking, on a parallel process such as:

* Co-generation.
* New and renewable energy production.
* The New Build Programme of both nuclear and hydrocarbon nature will be constructed.
* We will also strengthen our import capacity as the regional capacity expands and becomes available and reliable. Negotiations are already underway to get more power from Mozambique.
* During the process the existing plant will be refurbished and useful life extended.

Tariff increase
Programme director, there is a cost associated with all the above energy interventions. Unfortunately, the bulk of these costs will be borne by the consumers through tariff increases.

Conclusion

We are well aware that the road ahead will be rough for all of Africa. As a region and as a continent, together we stand and alone we will fall. We will continue to call upon all of our fellow governments and private sectors to collaborate in managing the prosperity of the African continent. The challenge for all of us is not whether we have energy crises or not, but rather how we manage it including how we emerge on the other side.

I am hopeful that through a collective effort that will be here for the next two days, solutions will be deliberated upon to ensure that, through energy, we create a better life for all. I believe that a lot will emerge from your deliberations that will benefit both the private and the public sector.

Programme director, I look forward to a feedback that will assist us in taking the challenges of the energy sector to new levels.
I wish you well in your deliberations.

Thank you

For more information, contact:
Sputnik Ratau
Tel.:012 317 8291
Fax: 012 322 8699
Cell: 082 521 9614
E-mail: sputnik.ratau@dme.gov.za

Issued by: Department of Minerals and Energy
15 April 2008