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The National Energy Bill

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Title: 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
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