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Regulatory Regime within the Electricity Supply Industry 17 September 2013

Regulatory Regime within the Electricity Supply Industry 17 September 2013. Table of Contents. Introduction: Electricity Supply Industry –Value Chain. Current Regulatory Regime. Overview of the ESI. Electricity Generation Mix Policy Position (20 year plan).

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Regulatory Regime within the Electricity Supply Industry 17 September 2013

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  1. Regulatory Regime within the Electricity Supply Industry 17 September 2013

  2. Table of Contents Introduction: Electricity Supply Industry –Value Chain. Current Regulatory Regime. Overview of the ESI. Electricity Generation Mix Policy Position (20 year plan). Current Production, Transmission and Distribution. Legislative and electricity generation policy overview. National Energy Regulator of South Africa. Legislative Mandate: Procurement of New Gen Capacity. Feed-In Tariff vs. Bid-based Tariff 2

  3. POWER STATIONS Industrial TRANSMISSION TRANSMISSION Transmission Transmission (765/220 kV) (765/220 kV) Lines Lines Distribution Lines DISTRIBUTION (132/33 kV) Transmission Substations Domestic Distribution Substations Commercial RETICULATION HV (11 & 22kV) Reticulation LV (380 / 220V) Electrification Agriculture Electricity Supply Industry –Value Chain Generation

  4. Introduction • Almost 97% of South Africa’s electrical power requirements is supplied by Eskom. • 10 out of 11 of base-load power stations are located in Mpumalanga. Amounts to 80 % of total power generated by Eskom. • Rationale - power stations closer to primary fuel (input fuel) • Power is transported to load points throughout the country via a total of 353 000 km (TX and DX network). • This topology is widely referred to as Centralized Power Generation. • Due to distant load centres, the reliability of supply is dependent on the TX and DX networks as well. • Increasing demand for power imposes constraints on these networks, resulting in controlled (or non-controlled) load shedding. (2008 Western Cape scenario)

  5. Overview of the South African electricity industry(Production/Transmission & Consumption) Electricity consumption Overview • Electricity generation dominated by state-owned power company Eskom(2), which currently produces over 96.7% of the power used in the country • Eskom has a current nominal installed capacity of 44,175MW • Government addressing electricity supply issues with Eskom and Independent Power Producers (“IPPs”) • South Africa needs over 45,600 MW new generation capacity by 2030 • Eskom is part of Southern African Power Pool, a group of utilities in the region aiming to create a common market for electricity in the region Electricity production(1) Transmission and Distribution Overview • Currently, the transmission of electricity in South Africa is undertaken by Eskom • The company has over 28,000km of transmission lines spanning the entire country • Electricity distribution is the final stage in the delivery of electricity to end users, currently undertaken by Eskom, together with 187 municipalities • Municipalities account for c.40% of the total electricity sales and c.60% of the customer base ____________________ Source: Eskom Website, Research Channel Electricity Review February 2011, Datamonitor South Africa Electricity Overview, August 2010 (1) Production figures are based on Eskom’s production (2) Falls under the Department of Public Enterprises

  6. South Africa’s Plant mix

  7. Overview of the South African electricity industry(Current Sources of power) Coal power • c.93% of power in South Africa is generated from coal fired power stations • South Africa is the 5th largest coal producing country in the world with coal reserves of 30,408mt (3.68% of world total) • Coal accounts for 86% of Eskom’s nominal current capacity (37,755MW) Nuclear power • Only one nuclear power station (Koeberg), a base-load station with a nominal installed capacity of 1,930MW (c.5%) • Construction for the plant began in 1976 and full operation in 1985 • Produced 12,806 GWh electricity in year ended 31 March 2010 • Uses c.30tpa of enriched uranium • Government authorized contracts in place to supply Koeberg for the next 8 years • It is intended that nuclear will comprise 17% of South Africa’s base load energy mix by 2030 Hydro-electric, Gas fuel and Renewable Projects • Hydro-electric power stations account for less than 2% of nominal installed capacity, while the gas/liquid fuel turbine accounts for c.6%(2) • Renewable Energy Programme – Current project in construction 2600 MW. (IPP’s) • Potential to import hydro power (Grand Inga) ____________________ Source: Eskom Website, Research Channel Electricity Review February 2011, Datamonitor South Africa Electricity Overview, August 2010, 2010 BP Statistical Energy Survey (1) Map indicates South African power network and interconnections with neighboring countries (2) Figures represent Eskom’s capacity

  8. Electricity Supply Industry Legislative Overview

  9. Committed Build New Build Options Imports, own build) Landfill, Hydro Gas CCGT Committed Build RTS Capacity DOE OCGT IPP Build Decommissioning Solar PV Nuclear Fleet Medupi Kusile Ingula Wind CSP Sere Peak-OCGT Import Hydro Wind CSP Cogeneration, Own Coal (PF, FBC, Total New and MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW 380 0 0 0 0 260 0 0 0 0 0 0 0 0 0 0 0 0 0 640 2010 679 0 0 0 0 130 200 0 0 0 0 0 0 0 0 0 0 0 0 1,009 2011 303 0 0 0 0 0 200 0 100 100 0 0 0 0 0 0 300 0 0 1,003 2012 101 722 0 333 1,020 0 300 0 25 0 0 0 0 0 0 0 300 0 0 2,801 2013 0 722 0 999 0 0 0 100 0 0 0 500 0 0 0 400 300 0 0 3,021 2014 0 1,444 0 0 0 0 0 100 0 0 (180) 500 0 0 0 400 300 0 0 2,564 2015 0 722 0 0 0 0 0 0 0 0 (90) 0 0 0 0 400 300 100 0 1,432 2016 0 722 1,446 0 0 0 0 0 0 0 0 0 0 0 0 400 300 100 0 2,968 2017 0 0 723 0 0 0 0 0 0 0 0 0 0 0 0 400 300 100 0 1,523 2018 0 0 1,446 0 0 0 0 0 0 0 0 250 237 0 0 400 300 100 0 2,733 2019 0 0 723 0 0 0 0 0 0 0 0 250 237 0 0 400 300 100 0 2,010 2020 0 0 0 0 0 0 0 0 0 0 (75) 250 237 0 0 400 300 100 0 1,212 2021 0 0 0 0 0 0 0 0 0 0 (1,870) 250 0 805 1,143 400 300 100 0 1,128 2022 0 0 0 0 0 0 0 0 0 0 (2,280) 250 0 805 1,183 400 300 100 1,600 2,358 2023 0 0 0 0 0 0 0 0 0 0 (909) 250 0 0 283 800 300 100 1,600 2,424 2024 0 0 0 0 0 0 0 0 0 0 (1,520) 250 0 805 0 1,600 1,000 100 1,600 3,835 2025 0 0 0 0 0 0 0 0 0 0 0 1,000 0 0 0 400 500 0 1,600 3,500 2026 0 0 0 0 0 0 0 0 0 0 0 250 0 0 0 1,600 500 0 0 2,350 2027 0 0 0 0 0 0 0 0 0 0 (2,850) 1,000 474 690 0 0 500 0 1,600 1,414 2028 0 0 0 0 0 0 0 0 0 0 (1,128) 250 237 805 0 0 1,000 0 1,600 2,764 2029 0 0 0 0 0 0 0 0 0 0 0 1,000 948 0 0 0 1,000 0 0 2,948 2030 45,637 1,463 4,332 4,338 1,332 1,020 390 700 200 125 100 (10,902) 6,250 2,370 3,910 2,609 8,400 8,400 1,000 9,600 Electricity Generation: Policy Position (IRP2010) Policy Adjusted IRP – Plans for South Africa’s generation mix Planned New Generation Mix 2030(1) Time Schedule New Power Generation Building ____________________ Source: Research Channel Electricity Review South Africa, February 2011 (1) Excludes power to be decommissioned Firm commitment necessary now Long lead times for power generators and related infrastructure require timely firm commitments Firm commitment in IRP 2012

  10. National Energy Regulator of South Africa

  11. National Energy Regulator of South Africa

  12. Legislative Regime: Procurement of New Generation Capacity • In terms of section 34 of the ERA, the Minister may determine the following: • Generation capacity required; • Buyer of electricity and seller of electricity; • Type of energy source to be used for electricity generation • Provide for private sector participation • Section 34’s determination is only legally binding once NERSA has concurred to it. • All new generation procurement (from August 2009) shall comply with section 34 of ERA. (current RE-IPP programme is undertaken in line with s 34). • S 34 is guided by Government policy position (IRP2010)

  13. Legislative Regime: Feed-In Tariff vs Bidding Tariff • Feed-In Tariff. • Tariff at which power is sold to the grid is prescribed before bid stage. • Determination of such tariff is based largely on theoretical assessment. • If tariff too low  market will not be responsive. • If tariff too high  consumer overpays. • NERSA does not have a legislative mandate to prescribe tariffs upfront. (can only make a ruling on a tariff proposal by the electricity supplier (being it Eskom or an IPP). • Bidding Tariff. • Tariff at which power is sold to the grid is determined through a competitive bidding process. • RSA  set tariff caps per technology. • Tariff caps based on “market-sounding, Request for Proposals” • NERSA issues individual generation license based on proposed funding model which determines tariff output. • If individual tariff too high  individual bid might not be selected. • Adopted RSA model.

  14. Electricity Pricing Regime

  15. NERSA- DoE Role in electricity price setting ____________________ Source: DoE website, NERSA website

  16. Thank You

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