The Annual Report of the Department of Energy 2011-2012

The Annual Report of the Department of Energy 2011-2012

A review prepared by the Energy Institute,

Cape Peninsula University of Technology,

for the Parliamentary Portfolio Committee

Section 1: General

P 2. The vision for 2014 “A transformed and sustainable energy sector with universal access to modern energy carriers for all by2014,” seems overoptimistic and unachievable. It is desirable to have a clear vision, which implies a level of achievability.

The vision for 2025 “Improving our energy mix by having 30% clean energy by 2025,” is perhaps too focussed on the wider environment, and neglects the fact that millions of households that have access to electricity still use traditional fuels with severe health effects due to indoor air pollution and a host of other clearly identifiable problems. Affordable clean energy is even more important than clean energy itself.

P7. The winding down of EDI Holdings seems to be taking an inordinately long time. There does not appear to be a budget allocation for this work.

P8. “The DoE has also implemented the Regulatory Accounting System (RAS) margins into the fuel pricestructure on 07 December 2011, the goal of which is to develop a uniform and transparent set of regulatoryaccounts where costs are allocated according to predetermined methods in order to provide certainty toinvestors with regards to the returns on assets throughout the downstream petroleum industry valuechain.” While this is all well and good, there seems to be no progress on the policy of deregulation of the liquid fuels sector as set out in the White Paper of 1998. If deregulation were further advanced, then this form of fiddling with the regulation would be unnecessary.

P 10. “the establishment by Cabinet of the National Nuclear Energy ExecutiveCoordination Committee, or NNEECC. The NNEECC, headed by the Deputy President, is the authorityfor decision making, monitoring, and general oversight of the Nuclear Energy Expansion Programme asenvisaged in the IRP 2010.” This is progress, but it raises an important point about IRP2010, namely that it clearly identified decisions that needed to be taken immediately, namely 1000MW of coal-fired power generation, 3200MW of nuclear power, 2569MW of hydropower, 711MW of closed cycle gas turbines, and 2100MW of renewable energy. Elsewhere in the report there is much about the renewable portion, but absolutely nothing about the coal, hydro or gas turbines. Thus, not only is the nuclear decision late, the other sources of energy are still later. We therefore run real risks of power crises for the foreseeable future.

P 16. “The NMPP is able to transport petrol, diesel, jet fuel and gas from Durbanto Johannesburg.” That is true, but there is no explanation for why there are still no facilities for moving fuel from the Johannesburg terminal by road or rail.

P 18. “From both windows, 2 460 MW have been committed and are expected to be in the gridby 2016. This will alleviate the current constraints on electricity supply.” However, the average power delivered by this 2460MW installed will only be about 650MW. This is not even as much as the annual growth in demand (about 800MW). So far from alleviating the constraints, it will merely prevent the situation from getting much worse.

Section 2. Information of Predetermined Objectives

P 24. “Given the climatechange imperatives and the need to reduce greenhouse gas emissions, the DoE has been exploring theoptions available to us for greenhouse gas emission mitigation.” That is all very well, but the agreement reached at Copenhagen was that anything that we did would only be undertaken provided technical and financial help was forthcoming. This seems to have been forgotten, and we seem determined to go it alone. We cannot fix a global problem when we are only 1% of the problem. What are we doing to access the promised technical and financial help?

P 28. “The flagship programme of the IRP 2010, the Renewable Energy IPP Bidding Process, was launched this year.” Why is this a flagship? The immediate decisions required by IRP 2010 required not merely 2100MW of renewable energy but also nearly 5500MW of other forms of energy. Why has this been forgotten?

P 33. “The ISMO will therefore be responsible forgeneration resource planning;transmission service and implementation;buyer.” It was always our understanding that the ISMO would not be responsible for generation planning. If the ISMO both plans and buys power it will not be properly independent, but will be judge and prosecutor in one. Its sole role in generation must surely be providing information to the generators about the likely demand.

P 39. The Department has an objective “A long & healthy life for all South Africans,” so it is reminded of the issues raised in the comment on the vision for 2025. Why then is the only progress on LPG that to do with its maximum pricing, and nothing to do with its availability?

P62-67. The Hydrocarbon Division managed to achieve 6 targets, make limited progress of 16 and no progress on 4. One of the successes was running awareness campaigns. One of the failed targets was the development of an integrated energy plan. Overall this suggests the Department lacks capacity.

P 73. “Over R 46 billion of investment by the private sector” Rounds 1 and 2 of the bidding totalled R75 billion – surely the R43 billion is in error.

P 75. The reports at the top of this Table do not make sense. It appears that all targets were achieved, yet there is a variance report. And if the Department really “Monitors & reports onconstruction progress against schedule & budget & flags problem areas,” where does it report?

P 80. Biofuels. No progress was possible on even a pilot project to develop a regulatory mechanism for biofuels pricing, yet it is intended as per p 65 to introduce compulsory biofuels blending. Is this not the cart before the horse? Does one side of the Department know what the other is doing?

P 83. Performance Indicator No.16 Surely REFIT tariffs were replaced by REIPP? Why are they still being reported?