Degree of reliance on imported energy:
EIA estimates that South Africa's total oil consumption was 616,000 bbl/d in 2013. The petroleum consumed in South Africa comes mostly from its domestic refineries that import crude oil and its CTL and GTL plants. The country also imports petroleum products. In 2012, according to the South African Revenue Service as published by Global Trade Atlas (GTA), South Africa imported 110,000 bbl/d of petroleum products.
Main sources of Energy:
The South African economy is extremely energy intensive compared to international standards, with only a handful of countries having higher intensities. In addition, South African industrial energy efficiency is on average significantly lower than in other countries. This is an important factor, given that at the moment industry and mining consume over 60% of the electricity produced in the country, and the inclusion of commerce takes this figure to almost 75%.
Therefore, residential energy use makes up a far smaller portion of final energy demand than in other countries, and demand from poor households is even smaller. Only 16-18% of South Africa’s electricity is used by residential consumers, an outcome of the energy intensive nature of the economy, and the extreme income differential in the country
South Africa's nominal (nameplate) installed electricity capacity is about 45,700 MW, although total net maximum capacity (nominal capacity minus the amount the power station uses to operate) is lower. According to South Africa's Department of Energy (DOE), Eskom supplies roughly 95% of South Africa's electricity and the remainder comes from independent power producers (IPPs) and imports. Eskom buys and sells electricity with countries in the region.
South Africa plans to diversify its electricity generation mix. Currently, about 90% of South Africa's generation capacity is from coal-fired power stations, about 5% from one nuclear power plant, and 5% from hydroelectric plants, with a small amount from a wind station, according to South Africa's DOE. South Africa's renewable energy industry is small, but the country plans to expand renewable electricity capacity to 18,200 MW by 2030. South Africa has one nuclear power plant, Koeberg, with installed capacity of 1,940 MW. The country plans to expand nuclear power generation by 9,600 MW by 2030.
In 2012, 72% of South Africa's total primary energy consumption came from coal, followed by oil (22%), natural gas (3%), nuclear (3%), and renewables (less than 1%, primarily from hydropower), according to BP Statistical Review of Energy 2013. South Africa's dependence on coal has led the country to become the leading carbon dioxide emitter in Africa and the 14th largest in the world, according to the latest (2011) EIA estimates.
Extent of the network:
73% of its population has access to electricity.
South Africa's electricity system is constrained as the margin between peak demand and available electricity supply has been precariously narrow since 2008. In 2008, some coal mines had to halt operations because of power blackouts. In November 2013, Eskom requested that its largest industrial customers cut their consumption by 10% during peak demand times to avoid unexpected blackouts or load-shedding (scheduled power cuts). According to SAPP's 2013 Annual Report, South Africa's peak demand was forecast to reach 44,005 MW in 2013, exceptionally close to installed net maximum capacity. The SAPP forecast has peak demand growing to almost 53,900 MW (or by 20%) by 2025. According to Bloomberg, Eskom plans to spend $49 billion to replace aging equipment and add new power stations to meet growing demand.
With increasing interest in renewable energy deployment in the country, existing grid infrastructure problems have come to the forefront. In 2010, the DOE and National Treasury, in consultation with Eskom, mapped investor plans against existing Eskom infrastructure and grid planning, and indicated that there was sufficient connection capacity for REFIT IPPs until 2016. However, in 2011, Eskom did admit that it does not have the capacity to build the infrastructure needed to connect all IPPs to the grid. IPPs have, therefore, undertaken connection requirements themselves and at their own costs. Despite these commitments, existing maintenance backlogs in the country’s electricity grid are putting severe constraints on the development and deployment of renewable energy. In efforts to alleviate the challenge, Eskom has initiated a smart grid pilot project network to enable demand side management through load limiting technology.
Potential for Renewable Energy:
South Africa has a good solar resources; direct normal irradiance averages over 7.0 kWh/m2/day in many areas of the country, particularly in areas with close access to the electricity grid, such as in the Northern Cape.
Wind energy potential is estimated to have between ‘modest’ to ‘abundant’ prospects. Average wind speeds at 10 metres range from 4-5 m/s for the majority of the coastal areas of the country, increasing to approximately 8 m/s in some mountainous regions.
In the longer term, around 9 to 16% of the total energy demand could be met by biomass. Potential energy sources include agricultural residues such as bagasse and cuttings from forestry operations, as well as dedicated energy crops (Jatropha, switch grass, triticale etc.). Household biogas digesters also have a large potential market share, and two landfill gas projects have recently been commissioned near Durban.
Geological conditions in South Africa generally preclude any large-scale geothermal resource discoveries, but with the recent energy crisis, new resources are becoming economically feasible.
South Africa has low average rainfall. Seasonal flow of the country’s rivers and frequent droughts or floods, limits opportunities for hydropower. The majority of the country’s hydropower resource is concentrated in 6,000 – 8,000 sites in the Eastern regions.
Waste to energy
A growing number of projects are being proposed for South Africa under the label of ‘Waste to Energy’ where waste (such as anatomical hospital wastes, bio-hazardous wastes, electronic scrap, municipal/ domestic and industrial waste, worn out tyres, solvents, plastics and sludge) is burned instead of coal.
Wave energy has the potential to contribute 33 TWh per year by 2050, in conjunction with other, less-used renewable energy resources.
Potential for Energy Efficiency:
Total primary energy supply per capita was 2.92 ktoe in 2009, whilst electricity consumption per capita was 4,532 kWh.
- Energy Efficient Motors Program: direct subsidies to the purchase of new motors (2007).
- Certification of energy auditors and accreditation of inspectors for EE standards.
- Energy management systems and audits.
- Promotion of ESCOs.
- DSM initiative to audit industrial, commercial and residential energy use (2006).
- Standard Offer Program (SOP) providing a rebate for energy savings.
- Extra levies on inefficient vehicles used to cross-subsidize more efficient vehicles.
- Distribution of CFLs at subsidized prices, mainly in areas with capacity bottlenecks.
- Mandatory standards and labels for appliances, vehicles and buildings.
- Mandatory energy audits for commercial buildings.
- Encouragement of the use of LPG as a cooking fuel, rather than electricity or other fuels.
- Educational campaigns, particularly in engineering and architecture.
- EE funding for government buildings.
- EE Monitoring and Implementation Programme (2010-14).
- Establishment of a South African Regional Energy Efficiency Centre (SAREEC).
Although ESKOM (http://www.eskom.co.za/) does not have exclusive generation rights in South Africa, it does have the practical monopoly on the bulk of electricity in the country, and it maintains the national grid.
Structure / extent of competition:
The electricity sector in South Africa is essentially totally vertically integrated, due to the continued existence of ESKOM’s monopoly of approximately 95% of the market. ESKOM is involved in practically every area of the electricity sector, from generation to transmission, and retail. In July 2002, ESKOM was converted into a public, limited liability company, wholly owned by government.
In addition, it supplies electricity directly to commercial farmers and, through the Integrated National Electrification Programme (INEP), to a large number of residential consumers. It sells in bulk to municipalities, which distribute to consumers within their boundaries. Access to electricity in 1994 was at 34%. Since 1994 INEP make it possible to electrify more than 5.8 million households which resemble 86% access to electrification nationwide.
Existence of an energy framework and programmes to promote sustainable energy:
White Paper on the Energy Policy of the Republic of South Africa 1998
Describes the government’s general policy for the supply and consumption of energy until, approximately, the year 2010. This policy sets out the path for development of renewable energy and improvement of energy efficiency with the ultimate goal of reaching a more sustainable energy mix, in order to achieve South Africa’s macro-economic goals. A successor to this policy was released in September 2009, and aims to overhaul the fiscal, legislative and regulatory regimes in the energy sector, to further promote renewable energy development, and reduce carbon emissions.
White Paper on Renewable Energy 2003
That lays the foundation for the widespread implementation of renewable energy and sets a target (currently not mandatory, only a policy objective) of 10,000 GWh of renewable energy contribution to final energy demand by 2013.
Energy Efficiency Strategy of the Republic of South Africa 2005
Sets out a national target (currently not mandatory, only a policy objective) for energy efficiency improvement of 12% by 2015 and provides for a number of “enabling instruments”.
Biofuels Industrial Strategy of the Republic of South Africa 2007
Proposes the adoption of a 5 year pilot program to achieve a 2% penetration level of biofuels in the national liquid fuel supply. Also the utilization of certain crops for the production of biofuels, and excludes others on the grounds of food security. It recommends the use of a fuel levy exemption for biodiesel and bioethanol.
South Africa's Renewable Energy Policy Roadmaps
Renewable energy Roadmaps have been projected for electricity generation from wind, CSP and PV and for high and low SWH rollout programmes that reduce the demand for electricity. Six roadmaps were developed.
National Cleaner Production Strategy 2004
Seeks to “enable SA society and industry to develop its long term full potential by... adopting the principles of Cleaner Production... and promoting the practices of sustainable consumption.”
In keeping with the new legislative and policy direction, South Africa has moved quickly to implement a comprehensive renewable energy procurement programme with a view to procuring the first 3,725 MW tranche of renewable energy contribution to the national energy mix as contained in the IRP, from Independent Power Producers. The SA government is also in the process of implementing its own 200 MW Sere Wind Farm and is investigating the implementation of a 5 GW solar park.
Unlocking South Africa's Green Growth Potential by the South African Renewables Initiative (SARi)
Determine whether and how South Africa’s renewables ambitions could be substantially increased as part of its broader industrial and economic strategy. Introduces scenarios for renewable energy development.
The 2008 Energy Act
Focused on ensuring that diverse energy resources are available, in sustainable quantities and at affordable prices in support of economic growth and poverty alleviation. It further provides for energy planning, increased generation and consumption of renewable energies, contingency energy supply, and a variety of other measures to promote energy development.
Energy Policies for Sustainable Development in South Africa
Publication presents profile of energy in South Africa, assess trends and analyse some options for the future. Presents a profile of energy and sustainable development in South Africa and uses modelling tools and indicators to assess future policy options for the country.
National Response to South Africa's Electricity Shortage
Policy document published in 2008 by Department of Minerals and Energy. The plan includes work on the country's electricity distribution structure, and the fast-tracking of electricity projects by independent power producers. It also involves electricity co-generation projects between ESKOM and private industry, where the heat generated as a by-product of industrial processes, in sectors such as chemical processing, is captured to produce power. This can be used by the industries themselves or bought by ESKOM for the national grid.
Integrated Energy Plan (IEP), 2003
The IEP provides a framework in which specific energy policies, development decisions and energy supply trade-offs can be made on a project-by-project basis. Although the IEP recognises that SA is likely to be reliant on coal for at least the next 2 years as the predominant source of energy, it also recognises the potential and need to diversify energy supply.
Integrated Resource Plan (IRP)
In 2011, the South African Government put forward an Integrated Resource Plan (IRP) to help minimize greenhouse gas emissions related to fossil fuels and help boost job creation. The Department of Energy released the IRP 2010-2030, a 20-year capacity addition plan for the electricity sector, which set a target of 11.4 GW of renewables. After a round of public participation was conducted near the end of 2010, several changes were proposed and a second Policy Adjusted IRP was recommended and adopted by Cabinet in March 2011. This newly approved and updated IRP 2010, which forms a subset of the overall South African Energy Plan, calls for a total installed capacity of 17.8 GW of renewable energy and 42% of all new generation capacity developed up to 2030. More specifically, the IRP 2010 calls for 8,400 MW of wind and solar photovoltaic each, and 1,000 MW of concentrated solar thermal. Excluding existing hydro this brings the renewable energy share of power supply to 9%. This is limited compared to the coal generation capacity, which will continue to make up about 60% of the generation fleet.
The country has implemented a number of initiatives and instruments to help facilitate the achievement of these targets while simultaneously helping develop its green economy. These initiatives include the South African Renewables Initiative (SARI) and the South African Renewable Energy Council (SAREC), the creation of the Green Economy Accord - through the launch of the Country’s Green Economy Accord in November 2011, the Government has committed to procuring 3,725 MW of RE for the national grid by 2016 and to create at least 50,000 green jobs by 2020-, South Africa’s Green Economy Accord., the incorporation of green growth goals in the Industrial Action Plan (IPAP2), the introduction and revision of the Integrated Resources Plan in 2009 and 2010, and finally the Renewable Energy Independent Power Producer Procurement Programme (REIPPP)
South Africa’s Department of Energy award preferred bidder status to 17 projects under Round 3 of its Renewable Energy Independent Power Producer Procurement Programme (REIPPP). The successful projects, totalling 1,456 MW, comprised seven wind projects (787 MW); six solar PV projects (450 MW); two solar thermal (200 MW); and for the first time, one landfill gas and one biomass project (18 MW and 16.5 MW, respectively). The successful projects will enter into PPAs with state-owned utility Eskom and receive guaranteed payments for 20 years.
Current energy debates or legislation:
After a series of delays, the end of 2014 finally saw South Africa’s Department of Energy award preferred bidder status to 17 projects under Round 3 of its Renewable Energy Independent Power Procurement Programme (REIPPP). The auction was characterized by high levels of competition — generating the lowest bid prices to date — and received significant interest from international developers, representing over 75% of the bids for wind and solar according to BNEF. The large number of competitive bids, for wind and solar projects in particular, has prompted the Government to consider awarding additional capacity. Meanwhile, the disclosure of successful projects for the capacity that has been awarded was quickly followed by a raft of announcements by the developers behind the bidding entities, highlighting the significant level of participation by foreign companies.
Major energy studies:
South Africa is a member of the Southern African Power Pool (SAPP), which began in 1996 as the first formal international power pool in Africa with a mission to provide reliable and economical electricity supply to consumers in SAPP member countries.
Role of government:
Department of Energy (DoE)
The Department of Energy is the primary government institutions responsible for energy regulation. No other government department takes an active role in the energy sector. The Department of Minerals and Energy was split in 2009 into The Department of Energy and The Department of Mineral Resources. The Electricity and Nuclear branch of the Department of Energy is responsible for electricity and nuclear-energy affairs, while the Hydrocarbons and Energy Planning branch is responsible for coal, gas, liquid fuels, energy efficiency, renewable energy and energy planning, including the energy database.
Department of Environmental Affairs (DEA)
Responsible for Environmental Policy and controlling authority in terms of NEMA and EIA Regulations promulgated in terms of NEMA. As Eskom is a statutory body DEA is the competent authority for this project and charged with the responsibility of considering whether or not to grant environmental authorisation and under what conditions.
Government agencies in sustainable energy:
The Central Energy Fund Group (CEF (Pty) Ltd.)
It is involved in the search for appropriate energy solutions to meet the future energy needs
National Energy Efficiency Agency (NEEA)
Created in 2006 as a wholly-incorporated division within the CEF Group, it is responsible for the implementation of demand side management and energy efficiency projects in the country; the management of strategies for improving efficiency; awareness-raising campaigns and training programs in energy efficiency and co-operation with all agencies involved in the sector to ensure best practice.
The Energy Development Corporation (EDC)
Established in January 2004 as a division of CEF, and supports the development of renewable energy and alternative fuels through investment. The corporation targets market sectors where there is insufficient private sector activity as well as where the government, for strategic reasons, believes state investment is required. The EDC is also involved in sectors where renewable energy and energy efficiency require catalyzing and developing.
South African National Energy Development Institute (SANEDI)
In 2011, the two public research agencies South African National Energy Research Institute (SANERI) and National Energy Efficiency Agency (NEEA) were merged into the new South African National Energy Development Institute (SANEDI). SANEDI is an implementing agency of the South African government, in particular of the DoE, created to assist the country to reach its energy goals (SANEDI 2012). It focuses on awareness-raising and increased uptake of "green" energy. Its portfolio includes data and knowledge management on energy, energy efficiency, fuel technology, low-carbon energy and transport, CCS, as well as energy end use and infrastructure.
Energy planning procedures:
South Africa has two acts that direct the planning and development of the country's electricity sector:
i. The National Energy Act of 2008 (No. 34 of 2008)
ii. The Electricity Regulation Act (ERA) of 2006 (No. 4 of 2006).
In May 2011, the Department of Energy (DoE) gazetted the Electricity Regulations on New Generation Capacity under the ERA. The New Generation Regulations establish rules and guidelines that are applicable to the undertaking of an IPP Bid Programme and the procurement of an IPP for new generation capacity. They also facilitate the fair treatment and non-discrimination between IPPs and the buyer of the energy.
Certain projects were developed prior to the gazetting of the New Generation Regulations. In the absence of regulations, these vested projects were undertaken in order to ensure security of supply. The projects and programmes that fit into this category are Eskom’s current new build programme, the medium term power purchase programme (~400 MW) and the DoE's open cycle gas turbine (OCGT) IPP project (~1020 MW).
Per the New Generation Regulations, the "buyer" can only procure energy in accordance with the IRP. While a policy vacuum currently exists in respect of unsolicited offers (i.e. those proposals which are outside the scope and timeframe of particular programmes under the IRP, but present a unique opportunity which could leverage strategic and economic benefit for the country), work is being undertaken to establish a framework and process whereby such proposals could be considered. This will be discussed within Eskom and with the DoE and NERSA. Certain regional projects fall into this category but are dealt with in the Southern Africa Energy (SAE) business unit.
Energy regulator Date of creation:
The National Electricity Regulator (NER) was the regulatory authority that presided over the electricity supply industry (ESI) in South Africa. In November 2005, the National Energy Regulator of South Africa (NERSA) replaced the NER.
Degree of independence:
NERSA consists of four full-time and five part-time members appointed by the Minister of Minerals and Energy (including the Chairperson).
The Regulator is funded by monies set aside by Parliament, levies imposed by or under separate legislation, funds collected under separate legislation, charges for dispute resolution and other services rendered in terms of the National Energy Regulator Act, as well as a licence fee.
Regulatory framework for sustainable energy:
- Electricity Regulation Act of 2006 & regulations
- National Energy Act of 2008 & regulations
- Income Tax Act of 1962
- National EnvironmentalManagement Act of 1998
- National Building Regulations
Until mid-August 2011, the main policy mechanism in place to promote renewable energy was a Renewable Energy Feed-in Tariff (REFIT), announced in March 2009 by NERSA. Although Tariff rates were setting 2009, developers could not enter into contracts with Eskom (the single power buyer in the country) because standardized power purchase agreements had not yet been issued.
More delays came in March 2011, when NERSA announced that the REFIT rates needed to be lowered. NERSA invited stakeholders from a series of sectors related to renewable energy (project developers, associations, environmental organizations and end users) to comment on the tariff level. After a consultation period, tariffs were announced to be lowered considerably—tariffs for photovoltaics, for example, were lowered by over 40%.
NERSA received over 200 written submissions concerning the revised REFIT rates and agreed to take all comments into consideration. This, along with questions raised by the National Treasury regarding the legality of the REFIT, led NERSA to delay official feed-in tariff announcements. Delays put increasing stress on project developers, which had already started project development processes, such as wind measurements, under the generous 2009 REFIT rate assumptions, and increasing uncertainty and lack of investor confidence amongst investors looking to develop in the country. After a nearly 2 year stalemate process of attempting to put in place the REFIT, the program was replaced by the competitive bidding process (REBID) in August of 2011, known as the Renewable Energy Independent Power Producer Procurement Programme (REIPPP). This occurred when the new generation regulations came out in May 2011. The regulations had no mention of the REFIT, and the new REIPPP process was introduced. NERSA had no option but to comply with this new policy change.
The REIPPP has been designed to deliver the target of 3,625 MW of renewable energy to start and stimulate the renewable energy industry in South Africa, where bidders are required to bid on tariff and the identified socio-economic development objectives of the Department of Energy. The Department has received an overwhelming amount of bids, representing more than double the capacity allocation of the first 2 bidding windows. 132 bids in the first phase and second phases of the bidding processes were received, and 47 have been chosen, representing 2,460 MW of renewable energy capacity. The bids are determined overwhelmingly on price, each below the ceiling price set by REFIT. While it is know that the bidding prices have been lower in the first and second rounds of the REIPP than they would have been in the case of REFIT, the end results including what projects will actually be built and the final costs are still unknown
NERSA, established in terms of the National Energy Regulator Act of 2004, is mandated to regulate South Africa's electricity, piped gas and petroleum industries and to collect levies from people holding title to gas and petroleum.
The idea behind a single regulator for the three industries was to improve efficiency and cut costs. It is also expected to boost private sector participation in the energy sector. NERSA's functions include issuing licences, setting and approving tariffs and charges, mediating disputes, gathering information pertaining to gas and petroleum pipelines, and promoting the optimal use of gas resources.
Role of government department in energy regulation:
The Department of Energy is the primary government institution responsible for energy regulation. No other government department takes an active role in the energy sector.
A lack of capacity at the institutional level can delay renewable energy deployment. In South Africa, there is a lack of Institutional capacity that has resulted in delays with bringing REBID power purchase agreements to financial closure. For example, to award contracts and complete the bidding procurement processes, the DoE was unable to meet deadlines for the first and second windows, and the third window was delayed over 8 months in order to give officials time to catch up as well as to assist bidders struggling to finalise outstanding bid commitments.
Greenpeace (2012). The Eskom Factor: Power Politics and the Electricity Sector in South Africa. Available at: http://www.greenpeace.org/africa/Global/africa/publications/coal/TheEskomFactor.pdf Accessed 19th February 2014
EIA (2014): South Africa Overview Available at: http://www.eia.gov/countries/cab.cfm?fips=sf Accessed 19th February 2014
Norton Rose Fulbright (2012): Scaling-up renewable energy in Africa: South Africa Available at: http://www.nortonrosefulbright.com/knowledge/publications/58912/scaling-up-renewable-energy-in-africa-south-africa Accessed 19th February 2014
FUAS (2012): SOUTH AFRICA & RENEWABLE ENERGY Country at-a-glance. Available at: http://www.laurea.fi/en/connect/results/Documents/South%20Africa%20Fact%20Sheet.pdf Accessed 18th February 2014
WWF & World Energy Institute (2013): Meeting Renewable Energy Targets: Global Lessons from the Road to Implementation Available at: http://awsassets.panda.org/downloads/meeting_renewable_energy_targets__low_res_.pdf Accessed 16th February 2014
FUAS (2012): South Africa Country Report Available at: http://www.laurea.fi/en/connect/results/Documents/South%20Africa%20Country%20Report.pdf Accessed 17th February 2014
Ey.com (2014) RECAI Available at http://www.ey.com/Publication/vwLUAssets/RECAI_40_-_February_2014/$FILE/EY_RECAI%2040_Feb%202014.pdf Accessed 16th February
G7 Renewable Energy: Regulatory Framework Available at http://www.erm.com/PageFiles/3591/Ch2.pdf Accessed 17th February
Fekete Hanna et al. (2013): Climate change mitigation in emerging economies: From potentials to actions Available at https://www.umweltbundesamt.de/sites/default/files/medien/378/publikationen/cc_19_2013_vorabexemplar_fkz_3711_41_120_ueberarbeitet_12_12_13_.pdf Accessed 16th February
Eskom website: Guide to Independent Power Producer (IPP) Processes. Available at http://www.eskom.co.za/Whatweredoing/InfoSiteForIPPs/Pages/Guide_To_Independent_Power_Producer_IPP_Processes.aspx Accessed 17th February