25 January 2008
Cabinet received detailed reports on the current electricity situation and the steps that we need to take to redress the situation. It is the view of Cabinet that the unprecedented unplanned power outages must now be treated as a national electricity emergency that has to be addressed with the urgent, vigorous and coordinated actions commensurate with such an emergency situation. It is imperative that we all become a national movement to conserve electricity in all our areas whilst ensuring that key functions, safety and security are not compromised.
Government is very confident that we can do this and the response we have had from organized business and large users makes it clear that all stakeholders are committed to cooperating in this emergency campaign. The previous experience we had in the Western Cape further increases our confidence that we can quickly begin to manage the most disruptive aspects of the shortage of electricity supply.
The proposals that we outline today are designed to rapidly try and minimize the disruptive unplanned outages. The proposals fast track many programmes to deal with increased energy efficiency, which is a necessity for our economy. All these proposals are designed to manage a short term challenge in a manner that will minimize the adverse impact on growth. There is no question of stopping contracted projects or freezing any new projects. What will happen is more systematic scheduling and evaluation of projects. It is also a reality that there will be further significant increases in electricity prices. However, such increases will be implemented so as to significantly lessen their impact on the poor. Despite such increases, South Africa will, however, remain the most competitive large energy system in the world. The background document available to you today provides more detail on these aspects.
However, stabilizing the situation and achieving these objectives will require the maximum co-operation between all of us in both voluntary and mandatory programmes that will now be implemented. We must stress that the successful implementation of these programmes will give us much more comfort within a two year period. It is also critical to stress that the growth of South Africa’s economy at the current healthy levels can continue if we change our behaviour and become more energy efficient. This emergency must entrench energy efficiency and we will use the massive infrastructure build and the opportunities presented by the emergency to create new economic capacity and industries in the South African economy.
To understand the thrust of the proposed programme, particularly urgent short term actions, we need to look at the immediate causes of the current emergency.
The underlying problem is the very significant rise in demand, particularly over the past few years, resulting from an economy working at full capacity and the rising standards of living, with close on 3.5 million homes having access to electricity from 1994. In a sense we are the victims of our own success. You will see in the document to be distributed that until two years ago the reserve margin was above 16%. The decision to charge Eskom with the responsibility to embark on a large and urgent build programme in 2004 was in hindsight late. The President has accepted that this government got its timing wrong. We were working within a framework where the need for new capacity could be combined with the reform of the Electricity Supply and Distribution system as the Reserve Margin was then in excess of 20%. However, such a reform, both in South Africa and in other countries, has proved complex and slower than envisaged.
In 2004 the decision was taken to charge Eskom with the task of providing 70% of new capacity. However, rising demand meant that our reserve margin was under threat. To deal with this we had to put all our effort into pushing the build programme and then intensify new Energy Efficiency programmes. The detail of this is contained in the accompanying document and it is evident that significant new capacity does indeed come on stream in each year and we are looking at ways to increase that amount in the short term.
At the end of 2007, we took further decisions that would allow us to fast track Independent Power Producer (IPP) projects and Co-generation arrangements. Both of these are now receiving urgent attention and announcements will be made as we are able to provide certainty.
Our relative success over the winter may have lulled us into a false sense of comfort that we could manage our way through the challenge without more dramatic negative effects, such as the recent country wide load-shedding that has taken place over the last two weeks. Against the background of the tight supply and demand conditions, there are salient developments that have led to unacceptable disruption. It is clear that we are running our power system at utilization levels that are overstretching maintenance and if we do not stabilize this we could drive our systems into higher levels of stress – this we cannot do!
In addition we are now experiencing serious problems with coal quality and stocks. We are engaging the industry to change this situation and we need to make it clear that should there be no rapid improvement we will not hesitate to use emergency measures. Poor quality coal and events like the current heavy rain create too great a risk for the system.
This combination of factors has caused unprecedented levels of unplanned outages. This is too disruptive to ordinary households and the business community with those least able to adjust bearing the greatest brunt.
It is for the above reasons that the situation constitutes an emergency and we are taking emergency steps to move the system out of its current state of criticality. We are viewing the next two years as being critical. In this manner we plan to provide more room to manoeuvre both in this short term period and in the important year of 2010. I need to stress that the Cabinet was fully briefed on the electricity situation as it specifically relates to the World Cup and on general progress with the preparations for infrastructure for 2010. There is no threat to the successful holding of the event as plans to ensure electricity security in that period are well advanced.
Within Government an emergency task team is in place led by the Department of Minerals and Energy. Minister Sonjica will coordinate her colleagues and the Departments in regard to the overall demand management and efficiency campaign. The Minister of Public Enterprises will work with Eskom to address the current emergency and the supply conditions and interact with key users to implement a systematic voluntary demand reduction programme. All Departments of Government, at all levels, will be charged with making a major contribution to energy saving and coordination of communication will be strengthened between government and energy stakeholders.
Themba Maseko (Government spokesperson) Cell: 083 645 0810
Issued by: Government Communications (GCIS)
Background Notes on the National Electricity Emergency Programme, 25 January 2008
As you’ve heard from Minister Erwin, we are facing an emergency situation. However, we are mindful that this electricity emergency cannot be solved by government alone, but will have to be a collective effort by both ourselves and South Africans in general. Let’s all put our shoulders to the wheel to deal with the situation we find our selves in. We have received various suggestions from members of the public in terms of how we can save energy, which have been very useful and we are going to publish through various mediums.
During our deliberations in Cabinet, it became obvious that the interventions that will provide us with immediate relief will be on the demand side management and energy efficiency. It goes without saying that we therefore, all need to ensure that energy conservation is a way of life.
The immediate need for the country is to ensure that our electrical system is brought back into balance. We will need to restore a workable reserve margin in order to alleviate strain on the generation assets and the primary energy supply chain. We also need to create breathing space for maintenance to be done.
Our intervention timeframes are classified as:
- immediate (within 6 months);
- medium term (within 18 months); and
- long term (longer than 18 months).
Other short term interventions that have been explored are the following:
- Immediate implementation of the Power Conservation Programme
- Immediate implementation of specific demand-side behavioural change programmes
- Renewed focus and emphasis on medium and long term initiatives.
Power Conservation Programme
Most of the Demand-Side Management (DSM) consumer behavioural change programmes need immediate implementation, however the impact will only be observed in the medium term. A Power Conservation Programme will have an immediate “quick hit” solution that will reduce and, depending on its success, negate the need for load shedding.
This is an urgent intervention to help alleviate the problems being experienced with power outages. Countries like Cuba and Brazil have already proven that an energy crisis could be turned around to make a country grow even more economically and save substantial amounts of money if a nationwide energy efficiency drive is politically driven.
I am sure most of you have heard about the proposed power rationing programme. We have gone a step further to look at how this power rationing can be done. Amongst other things we discussed, was the issue on how quotas will be allocated, who will be exempt from the programme, what incentives and penalties will be in place, when it will start and what legislative enablers we need to have in place for the programme to work.
Other intervention measures that seek to influence consumer behaviour in the medium to long term are the following:
- Efficient lighting roll – out programme
Roll out of compact fluorescent light (CFL’s) fittings. It has been established that of the 10 million plus electrified households in South Africa, on an estimate of 8 incandescent lights per household, it is projected that 800MW could be saved by replacing with CFL's. The final target is to reduce the demand by 750 MW by 2010. The programme also accommodates a free CFL exchange for low income households until 2015. In order to ensure that this roll – out is sustained, we intend to issue a restriction on the manufacturing of incandescent light bulbs. There will be certain exclusions granted for lamps for ovens, microwaves and for sensitive buildings and special cases.
- Solar Water Heating Programme
The programme is in progress with a target to install 1 million solar water heaters over the next three (3) years. The current cost of the solar heater is prohibitive (it is estimated to cost between R7 000 and R20 000). It is also reported that the South African manufacturing capacity is only 10 000 units per annum. To eliminate these barriers, there is a subsidy of 20 – 30% depending on the cost of the unit. The potential savings of this programme is 650 MW. The programme is targeting both the households, group houses (e.g. army bases, mine residences) commercial and industrial applications.
- National Housing Specifications
The behaviour can be entrenched by ensuring that the building standards are legislated and implemented. Local government has indicated that the municipal bylaws will entrench energy efficient behaviour.
- Smart metering for residential customers (Load management)
Although the smart metering can be initiated in the short term, the benefits will be reaped in the medium to long term.
Smart metering requires the use of wireless technologies which have to be retrofitted to existing conventional and pre-paid meters. In this manner the utility (Eskom or the municipality electricity distributor) will be able to remotely manage customer load. In this case a quick cost benefit analysis indicates that an improved communication between the utility and the customer meter will result in big energy savings during the peak demand. This is illustrated by the figures below.
The potential reduction is estimated to be 3 265 MW, made up of:
- Geyser = 2 161 MW
- Laundry (2% contribution to peak) = 246 MW
- Pool pumps (1% contribution to peak) = 122 MW
- Other appliances (6% contribution to peak) = 736 MW
The programme will need extensive human resources. The programme provides an opportunity for training and job creation.
- Fuel switching
This refers to the substitution of electricity as a domestic energy source with Liquefied Petroleum Gas (LP Gas) in this case, in order to lower the burden of electricity generation. This strategy assists in ensuring that the appropriate energy carrier is used for the application – it is more energy efficient to cook with gas than with electricity. In addition, fuel switching to LP Gas ameliorates the strain experienced by the electricity network during peak times when domestic users are cooking at the same time.
Two challenges have to be overcome in respect of fuel switching to LP Gas. Lessons learned from the Cape Town electricity crisis indicate that supply chain issues and the pricing of LPG will need to be resolved as a matter of urgency. In order to overcome these challenges, the Department of Minerals and Energy has initiated a programme where concessions are issued and suppliers bid for these concessions. This is in line with Petroleum Products Amendment Act. The regulated pricing regime for LPG will be completed in the next two months. The opportunity to import the gas during supply shortages needs to be explored more, because the gas is actually a by-product in the oil refining process and is readily available in the global market. It is expected that this programme will save 500 MW.
- Traffic lights and Public Lighting
All traffic lights and public lights will be converted to solar power with a battery backup. This is another extensive project that will cost approximately about R400 million. This will also be another opportunity for employment creation and skills development.
- Hospitality industry
The Department of Trade and Industry will proclaim that the hospitality industry convert all water heating to solar power. The water heating method can be in the form of solar pre – heaters, thereby ensuring that electricity is not used whenever there is enough solar radiation available to heat water.
- Other medium term interventions
Medium term interventions that are likely to influence the behaviour in the long term are the following:
- Implementing the Electricity Regulation Act as amended, especially on the issues pertaining energy efficiency
- Adjusting the tariff regime to reflect the actual cost of providing electricity
- Regulation of the maintenance regime of the electricity infrastructure
- Availability of primary energy (especially coal) for power-generation
- Medium to Long Term Intervention
Statement on Renewable Energy (RE) Development
The Department of Minerals and Energy has embarked on a number of renewable energy projects which are geared at increasing power generation in the country. Most of these projects have been supported by the DME either through policy pronouncements or through financial support. The Renewable Energy Subsidy office (REFSO) has started disbursing subsidies for RE projects and this year we have provided R4million for the development of these projects.
We have supported a number of RE projects and these cover hydropower, biogas to electricity, wind power project (Darling wind farm) and a green power pilot project which has included biomass electricity co-generation. The capacity of these projects is approximately 30MW.
The DME jointly with CEF, has embarked on the Solar Water Heating project, which promotes the use of solar geysers. Through this project we expect to reduce energy consumption in geysers, which are major consumers of electricity.
Themba Maseko (Government spokesperson)
Cell: 083 645 0810
Issued by: Government Communications (GCIS)