The National Energy Bill

1
The National Energy Bill

• The DME briefing
• National Council of Provinces
• Select Committee on Economic and Foreign Affairs
• 2 September 2008

2
The team from Department

• Nhlanhla Gumede
• DDG Hydrocarbons Energy Planning
• Zombango Nondabula
• Energy Officer Petroleum Regulation
• Elias Modiba
• Energy Officer - Energy Planning
• Tembile Vilo
• Director Generals office
• Kwazi Mhlongo
• Director Generals office

3
Long title

• To ensure that diverse energy resources are
  available, in sustainable quantities and at
  affordable prices, to the South African economy
  in support of economic growth and poverty
  alleviation, taking into account environmental
  management requirements, and interactions amongst
  economic sectors to provide for energy modelling
  and planning, increased generation and
  consumption of renewable energies, contingency
  energy supply, holding of strategic energy
  feedstocks and carriers, adequate investment in,
  appropriate upkeep of and access to energy
  infrastructure to provide measures for the
  furnishing of certain data and information
  regarding energy demand, supply and generation
  to establish an institution to be responsible for
  promotion of efficient generation and consumption
  of energy and energy research and to provide for
  matters connected therewith.

4
Objects of the Act (cont)

• 2. The objects of this Act are to
• (a) ensure uninterrupted supply of energy to the
  Republic
• (b) promote diversity of supply of energy and its
  sources
• (c) facilitate effective management of energy
  demand and its conservation
• (d) promote energy research
• (e) promote appropriate standards and
  specifications for the equipment, systems and
  processes used for producing, supplying and
  consuming energy
• (f) ensure collection of data and information
  relating to energy supply, transportation and
  demand
• (g) provide for optimal supply, transformation,
  transportation, storage and demand of energy that
  are planned, organised and implemented in
  accordance with a balanced consideration of
  security of supply, economics, consumer
  protection and a sustainable development

5
Objects of the Act (cont)

• 2. The objects of this Act are to
• (h) provide for certain safety, health and
  environment matters that pertain to energy
• (i) facilitate energy access for improvement of
  the quality of life of the people of Republic
• (j) commercialise energy related technologies
• (k) ensure effective planning for energy supply,
  transportation and consumption and
• (l) contribute to sustainable development of
  South Africas economy.

6
Energy policy formulationHow do we evaluate the
impact of our policies
7
Energy policy formulationPolicy impacts depend
on where you sit
Source Sadelec Report, 2003
8
BackgroundSome facts
Source National Treasury, 2007
9
Some of us would argue that we do not have an
electricity but an energy challenge
Addressing these peaks through electricity is a
very expensive option
Source Eskom Holdings Limited Annual Report 2007
10
BackgroundSome facts
Source Grain SA, 2008
11
BackgroundSome facts
Source Energy Information Administration
Conference, 2008
12
BackgroundSome facts
Source Energy Information Administration
Conference, 2008
13
An alternate end of oil view
Source Energy Information Administration
Conference, 2008
14
Peak oil view with lower recovery factors
Source Energy Information Administration
Conference, 2008
15
Peak oil view with lower initial-in-place
estimates
Source Energy Information Administration
Conference, 2008
16
The Bill background

• Was first developed in 2003 to cover all EWP not
  covered that far
• Cabinet approved public consultation in 2004
• Widely consulted in 2004
• Withdrawn in 2006 to effect certain changes
• Key focus now is energy security
• Constructive engagements at Nedlac
• All stakeholder comments considered

17
White Paper on Energy Policy, 1998 (EWP)

• Bill based on the EWP of 1998
• Some assumptions underpinning the EWP - no longer
  valid
• Assumed that energy security can be achieved
  through greater diversification and flexibility
  of supply
• Asserted that the energy sector relied on
  market-based pricing
• Placed greater emphasis on commercialisation and
  competition
• However acknowledged that competitive energy
  markets need sophisticated regulatory regimes
• Assumed that government will promote investment
  into energy sector rather than use energy to
  drive investment in other sectors of the economy
• Also assumed that there will be a healthy balance
  between the interest of capital and national
  objectives
• Experiences in other competitive markets have
  shown that markets work well in a situation of
  over capacity
• In 1998, RSA had over capacity in all areas of
  energy
• In drafting the Bill, validity of the assumptions
  underpinning the policy was a concern

18
Interface with other legislation

• Energy Bill interfaces with a number of pieces of
  legislations

19
National Energy Bill in perspective

• Whilst most of existing legislation are about the
  past and present, the National Energy Bill is
  about future

Key Energy Legislations
Other Energy legislation
Energy Bill

• Governance redress
• Competition and industry structure issues
• Economic issues (mainly prices and tariffs)
• Standards specifications
• Quality of supply
• Health Safety
• Social and national objectives
• Industry structuring restructuring

• Securing our energy future
• Data information
• Modelling planning
• Future fuels
• Sustainable access
• Maintaining affordability
• Energy research
• Climate change
• Security of supply

20
Energy Security Framework

• Energy Bill aims to address all energy security
  issues

Foreign policy
Local production
Reserve margins
Climate change (mitigation adaptation)
Energy infrastructure planning
Energy security
Standards specifications
Role of state in productive sectors
Demand management
Energy Research
Diversity of supply
Macro-economic framework
Import Export policies
21
The essence of the Bill

• The National Energy Bill essentially about
• Provision of energy data and information
• Energy modelling and integrated energy planning
• Energy development
• Alternative and future energy
• Efficient production use
• Coordinated research on carriers technologies
• Security of supply (both carriers feedstock)
• State participation in key energy infrastructure
  planning and development

22
General guiding principles

• The Energy Bill does not seek to replace existing
  institutions but to strengthen them
• Energy is the lifeblood of energy economy
• Economic decisions made w/o consideration of
  energy availability and price are problematic
• Focuses on issues intended to strengthen energy
  security
• Seeks to complement data collection and
  facilitate sharing

23
Source Energy Geopolitics, Professor Michael J.
Economides,
24
Energy Bill energy data modelling 1998 White
Paper on Energy policy

• P19
• For various reasons South Africa has very limited
  energy data and, furthermore, very limited
  capacity to perform this sort of policy analysis
• P81
• Informed decision making, at all levels, is only
  possible when suitable and credible statistics
  and information are available

25
Energy Bill energy data modelling 1998 White
Paper on Energy policy

• P84
• Government will ensure that the necessary
  resources are made available to establish
  structures and systems, and put in place
  legislation to facilitate the specification,
  collection, acquisition, storage, maintenance and
  supply of energy data, and energy-related data,
  according to the requirements of integrated
  energy planning and international standards.
  Government will facilitate the establishment of
  information databases.
• Government will provide information to the public
  at a reasonable price. The provision of this
  information will not compromise the commercial
  position of parties supplying data to government.

26
Energy Bill Energy planning 1998 White Paper
on Energy policy

• EWP84
• The data should be collected, stored and reported
  in accordance with international specifications
  and standards to facilitate easy comparison,
  integration and exchange
• Data should be collected regularly and the
  database kept up to date
• EWP90
• The Department of Minerals and Energy will
  include explicit environmental considerations
  into studies regarding energy suppliers and
  users, and will integrate these results through
  Integrated Energy Planning

27
Data collection, integrated energy modelling
planning

• Provision of high-quality, energy information, in
  manner that promotes sound policymaking,
  efficient markets and public understanding, to
• Cabinet Ministers
• National, provincial local governments
• Markets (for efficient market operation)
• Public (communication)

Planning An integrated planning approach to
ensure that all the constituting elements are
addressed in a coordinated manner
Modelling An integrated energy modeling
capability which would be instrumental in the
development of energy plans and evaluation of
options that are proposed by policy-makers
28
Modelling vs. Planning
Modelling
Planning

• Should be descriptive and avoids policy advocacy
• Modeling should, as a basis for the development
  of energy plans, be undertaken in such a way as
  to use
• prevailing policy,
• legislative arrangements,
• proven or almost proven technology or industry
  structural conditions

• Is essentially prescriptive, and advocates for
  certain policy approaches.
• Involves deliberate policy choices, which may go
  beyond empirical evidence
• Should be about handling of sometimes conflicting
  objectives

29
Demand driven energy planning
30
Energy Bill Energy planning 1998 White Paper
on Energy policy

• EWP6
• To cope with multiple causal linkages, energy
  policy analysis usually commences with the demand
  side by means of the process entitled-
  integrated energy planning. This recognises
  that energy is not an end-good but is rather
  consumed as a means to an end. Policy must
  facilitate optimal energy consumption and
  production to meet social needs. This requires
  consumer choice and the operation of market
  forces.
• Integrated energy planning suffers from the same
  drawbacks as other ideal models. It requires a
  great deal of data and analysis to implement, of
  which South Africa has a scarcity. Nonetheless,
  this white paper identifies integrated energy
  planning as the most suitable base for planning
  purposes and also addresses the issue of data
  scarcity

31
Energy Bill Energy planning 1998 White Paper
on Energy policy

• EWP82 clearly articulates the IEP Integrated
  energy planning (IEP) is a process which entails
  the following technical functions
• interpreting the requirements of national
  economic, social and environmental policies for
  the energy sector
• analysing energy needs in terms of how their
  fulfilment will contribute towards attaining
  national economic and social goals
• analysing the potential of energy supply systems
  and demand side management to meet current and
  potential future energy needs. This would include
  analyses of individual supply sub-sectors and the
  linkages between sub-sectors
• analysing energy sector linkages to the
  macro-economy
• analysing the potential effects on the energy
  sector of global and technological developments
• evaluating the effects of legislative,
  institutional and industry structure arrangements
  on energy supply and demand
• specifying, sourcing and presenting data on
  energy supply and demand, energy sector
  institutions, and linkages with economic and
  social factors in order to provide a statistical
  description of the energy sectors historic
  evolution and current impact on economic and
  social development

32
Energy Bill Energy planning 1998 White Paper
on Energy policy

• EWP82
• Government will facilitate the provision of the
  necessary resources to establish IEP structures
  and systems to develop energy policy
• The Department of Minerals and Energy will ensure
  that an integrated resource planning approach is
  adopted for large investment decisions by energy
  suppliers and service providers, in terms of
  which comprehensive evaluations of the economic,
  social and environmental implications of all
  feasible supply and demand side investments will
  have to be undertaken.
• In the electricity sectors case, the National
  Electricity Regulator will only license new
  facilities upon the satisfactory completion of an
  integrated resource plan

33
Energy Bill Energy planning 1998 White Paper
on Energy policy

• EWP84
• Not only is good data required for the energy
  policy process but it is fundamental to the
  implementation of integrated energy planning. To
  facilitate integrated energy planning a database
  needs to be maintained covering at least the
  following areas
• energy resources
• energy production from indigenous resources
  (mining, renewables, oil and gas)
• international energy trade (imports and exports)
• energy transformation (production of liquid fuels
  and electricity from other sources)
• storage, transport and distribution of energy
• national energy trade (wholesale and retail)
• investment in plant and infrastructure associated
  with the above areas
• disaggregated energy usage, expressed in energy
  and cost terms
• energy efficiency
• energy related environmental emissions
• average sectoral energy prices and taxes
• institutions linked to all the above areas
• similar data from regional and international
  sources

34
Energy Modelling System (NIEMS)
35
Proposed energy modelling

• Represents energy supply, conversion, and demand
  in a unified, but modular system
• Detailed structural and process models in most
  energy sectors
• Typically a bottom up approach of model
  formulation
• Models real consumer, supplier and equipment
  behaviour

36
Residential and Commercial Demand Modules

• Track changes to building stock and equipment
  appliance stock by type and region
• Rely on data from residential and commercial
  energy surveys
• Choose new or replacement equipment for each
  energy service based on cost and performance
  characteristics and modelled economic behaviour
• Technology characteristics to reflect future cost
  reductions and performance improvements, and
  mandated efficiency standards and building
  regulations

37
Buildings (Residential/Commercial) Sector
Projections

• Sector energy consumption
• By fuel type (electricity, coal, gas, etc)
• End-use (heat, lighting, cooking, etc),
• Building/housing type
• Region
• Households and floor space
• New construction, surviving, building type
• Energy consumption intensity (use per square
  foot)
• Delivered (site), electricity losses, total
  (primary)
• Sector carbon emissions by fuel type
• Average residential equipment stock efficiency
• By end-use
• By fuel type (commercial),
• By equipment (residential)
• Stock (residential)

38
Residential End Use Services

• Heating
• Cooling
• Water Heating
• Refrigeration
• Freezers
• Cooking
• Clothes Drying
• Clothes Washing
• Coffee Makers
• Handheld Rechargeables

• Lighting
• Dishwashers
• Televisions
• PCs
• Furnace Fans
• Spas
• Security Systems
• Home Audio
• Microwaves
• Ceiling Fans

39
Commercial End Use Services

• Heating
• Cooling
• Water Heating
• Ventilation
• Refrigeration
• Cooking
• Lighting

• Office Equipment (PCs)
• Office Equipment (non-PCs)
• Other

40
Industrial Demand Module

• Industry sector decomposed into manufacturing
  industries, agriculture, construction and mining
• Energy use estimated by major process steps or
  end uses based on major technology bundles
• Energy intensity for each bundle declines based
  on time, rate of capacity additions, and energy
  prices
• Motor stock model included for manufacturing
  industries
• Combined heat and power (CHP) technology adoption
  simulated
• Fuel switching, recycling, and byproducts included

41
Transportation Demand Module

• Distinct approaches for light-duty vehicles,
  trucks, rail, shipping and air travel.
• Energy use in light-duty vehicles
• Vehicle-miles traveled estimated based on cost of
  driving, income, and demographics
• Tracks light-duty vehicle stocks by type and age
• Fuel-saving technologies selected for cost
  effectiveness and compliance with fuel economy
  standards
• Alternative-fuel and advanced technology vehicle
  sales are a function of technology attributes,
  costs, and fuel prices
• Freight truck and air are also vintaged stock
  models
• Commercial, medium, and heavy trucks
• Regional, narrow, and wide body aircraft

42
NIEMS Macroeconomic Activity Module

• Could use Global Insight Macro Model
• Links all energy variables within the GI model to
  NIEMS energy variables
• Global Insight model has 26 energy variables
• Uses Input/Output model with dynamic
  specification for industrial output
• Global Insight model has 60 industrial sectors
• We would require an employment model
• We could calibrate existing similar models to
  suit South Africa

43
NIEMS Macroeconomic Activity Module

• Regional Model
• Forecasts regional product, wages and salaries,
  disposable income, consumer prices, population
  and housing activity
• Uses Census projections for population and
  national concepts to estimate regional results
• Regional commercial floor space model estimates
  floor space stock and additions for floor space
  types
• Major explanatory variables include income,
  interest rates, population by region

44
Cap on CO2 Emissions

• Emissions accounting included in NIEMS design
• Each solution generates and accounts for GHGs and
  other emissions
• Embedded cap and trade system
• Marginal abatement cost for other GHGs to
  simulate reductions under economy-wide policies
• All other environmental issues are determined in
  each module

45
Energy efficiency EWP 98

• EWP deals energy efficiency in detail
• P10
• It is estimated that greater energy efficiency
  could save between 10 and 20 of current
  consumption. Government needs to facilitate
  increased energy efficiency. Obstacles include
• inappropriate economic signals
• lack of awareness, information and skills
• lack of efficient technologies
• high economic return criteria and
• high capital costs.
• Government commits itself to facilitate greater
  energy efficiency

46
Energy efficiency EWP 98

• P14
• Government will create an energy efficiency
  consciousness and will encourage energy
  efficiency in commerce and industry. Government
  will establish energy efficiency norms and
  standards for commercial buildings and industrial
  equipment, and voluntary guidelines for the
  thermal performance of housing. A domestic
  appliance-labelling programme may also be
  introduced. Publicity campaigns will be
  undertaken to ensure that appliance purchasers
  are aware of the purpose of appliance labels

47
Energy efficiency EWP 98

• P15
• Government's capacity to implement energy
  efficiency programmes is currently limited
• Government will investigate the establishment of
  appropriate institutional infrastructure and
  capacity for the implementation of energy
  efficiency strategies (p29)
• The functions of such an institution are outlined
• Targets for industrial and commercial energy
  efficiency improvements will be set and monitored
• P27
• energy-efficiency targets will be established and
  programmes will be mounted to conserve energy

48
Energy efficiency EWP87

• Government's capacity to undertake the energy
  efficiency programmes described herein is rather
  limited. Other countries in similar circumstances
  have found the establishment of an agency to be
  an effective means of providing the necessary
  capacity and flexibility to implement such
  programmes. The functions of such an agency could
  include
• building consumer awareness of energy utilisation
  and cost-saving measures
• demonstrating to consumers the benefits of energy
  efficiency measures through audits,
  demonstrations, sectoral analyses and other
  activities
• building the capacity to implement targeted
  energy efficiency programmes
• training people in energy efficiency methods
• identifying and facilitating the removal of
  barriers to energy efficiency
• Government will further investigate the
  establishment of appropriate institutional
  infrastructure and capacity for the
  implementation of energy efficiency strategies

49
Energy research EWP 98

• P15 Government expects energy suppliers and the
  private sector to carry out appropriate research
• P28
• Stimulate energy research and development
  partnerships between local role players and
  international agencies
• Facilitate the development of a research strategy
  to improve energy research and development
• P29 Develop and implement an appropriate system
  to co-ordinate energy research
• P64 promote research, technology development and
  technology transfer to stimulate the optimal
  development of the countrys oil and gas
  resources
• P94
• Energy research is currently supported by
  government, government agencies, parastatals and
  the private sector
• The Department of Minerals and Energy manages a
  limited non - nuclear research programme

50
EWP and Energy Research

• P96
• Government will consider the development of a
  system to prioritise national research funding
  into the three main research categories in order
  to address the medium to long-term research needs
  in the energy sector. This will consist of an
  integrated, multi-year, national, needs-driven,
  energy research strategy, developed from time to
  time by an experienced team of experts appointed
  by the Minister. This strategy will identify
  medium and long-term priority programmes and
  themes
• Extensive energy-related research is taking place
  in other countries, the results of which may be
  of value in South Africa. These developments are
  monitored by researchers, energy industries,
  energy consumers and others

51
Renewable energy EWP

• P7 The research and development of alternative
  and renewable energy sources is also being
  promoted
• P14
• Government believes that renewables can in many
  cases provide the least cost energy service,
  particularly when social and environmental costs
  are included
• Government will also promote appropriate
  standards, guidelines and codes of practice for
  renewable energy and will establish suitable
  renewable energy information systems
• P29 Investigate an environmental levy on energy
  sales to fund the development of renewable
  energy, energy efficiency and sustainable energy
  activities

52
Renewable energy EWP

• P79 Government policy on renewable energy is
  thus concerned with meeting the following
  challenges
• ensuring that economically feasible technologies
  and applications are implemented
• ensuring that an equitable level of national
  resources is invested in renewable technologies,
  given their potential and compared to investments
  in other energy supply options and
• addressing constraints on the development of the
  renewable industry
• P80
• Government will provide focused support for the
  development, demonstration and implementation of
  renewable energy sources for both small and
  large-scale applications
• Government will support renewable energy
  technologies for application in specific markets
  on the basis of researched priorities

53
Renewable energy EWP

• P81
• Government will establish suitable information
  systems of renewable energy statistics, where
  justifiable, and will assist with the
  dissemination thereof
• The capacity of the Department of Minerals and
  Energy is presently being improved in order to
  cater for the need to implement the proposed
  renewable energy policies and programmes

54
Security of supply and EWP

• P27
• Objective 5 - Securing supply through diversity
• P55
• Concerns are, however, being raised in some
  countries about the impact of competition on
  equity and environmental goals and the ability of
  a competitive market to ensure sustained
  investment and security of supply at low prices
  in the long term
• Security of supply not well captured in the EWP

55
Security of supply

• The Bill allows the Minister to, for the purposes
  of ensuring security of supply, direct any
  state-owned entity
• to acquire, maintain, monitor and manage national
  strategic energy feedstocks and carriers in
  accordance with the relevant published security
  of supply strategies or policies
• to
• undertake security of supply measures
• provide for adequate investment in energy
  infrastructure
• invest in critical energy infrastructure
• ensure upkeep of all critical energy
  infrastructure

56
Thank You