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23 - 26 October 2012

Draft National Water Resource Strategy 2 (NWRS 2): Eskom submission to the Portfolio Committee on Water and Environmental Affairs. 23 - 26 October 2012. Section 1 Importance of water to Eskom. Section 2 Initial comments on the NWRS 2.

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23 - 26 October 2012

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  1. Draft National Water Resource Strategy 2 (NWRS 2):Eskom submission to the Portfolio Committee on Water and Environmental Affairs 23 - 26 October 2012

  2. Section 1 Importance of water to Eskom Section 2 Initial comments on the NWRS 2

  3. Importance of water to EskomEskom’s Strategic Imperatives Leading and partnering to keep the lights on 1 Becoming a high performance organisation 2 Reducing our environmental footprint and pursuing low-carbon growth opportunities 3 8 Strategic Imperatives Setting ourselves up for success 4 Pursuing private sector participation 5 Securing our future resource requirements mandate and the required enabling environment 6 Implementing coal haulage and the road to rail migration plan 7 Ensuring our financial sustainability 8

  4. Importance of water to EskomWater use and water risks • Future locality for new power stations: • Coal-fired: Waterberg Soutpansberg, Free State, Mpumalanga • CSP/Solar – N.Cape • Nuclear, Wind, OCGT / CCGT – Coast Strategic importance of electricity: Economic & social development requires reliable and affordable electricity Build program R340Bn employ 50% locals • Eskom water use: • Water volume requirements peak in 2021 at 380Mm3 /a • By 2030, water requirements reduce to 275Mm3/a • Strategic importance of water: • Current heavy reliance on relatively water intensive, wet cooled power stations • Produce 78% of MWh • Consume 98% water Water use Water risks

  5. Importance of water to EskomEskom’s involvement in the formulation of the National Water Resources Strategy 2 (NWRS 2) • The Department of Water Affairs (DWA) drafted a new National Water Resources Strategy (NWRS 2). Eskom provided submissions for forming the basis of the Energy Chapter within the NWRS 2. • Eskom’s first submission to DWA was made in November 2011 in a report which covered: • The importance of electricity to the socio-economic growth of South Africa and therefore the importance of power generation retaining its “Strategic Water User” status . • The future water requirements for South African power generation based on the current capacity and the future capacity plans (IRP 2010). • Eskom’s water resource management activities. • Recommendations for consideration in NWRS 2. • DWA published the Draft NWRS 2 in September 2012 for public comment and participation. • Eskom’s second submission to DWA is scheduled for December 2012 and will be based upon a gap analysis and detailed review of the Draft NWRS 2 and be taken into account during the DWA Public Consultation phase. • This presentation highlights certain Eskom concerns in the Draft NWRS 2, and does not address Eskom’s detail recommendations to DWA for aligning the NWRS 2 with energy and other policies, strategies or plans.

  6. Importance of water to EskomFirst submission to DWA - 16 recommendations Eskom’s recommendations on NWRS 2 (November 2011) a Improve alignment between water and energy planning processes 1. b Encourage “trade-off discussions across relevant Government departments c Engage with stakeholders beyond Eskom Planning Broaden the forum for SADC and wider water / energy discussions d Understand impact of climate change on the security of water supply to Eskom and power producers e a Develop a formal policy for desalination attached to coastal power stations b Refine the current pricing strategy and tariff principles 2. c Implement a national dry-cooling policy Policy Develop a standardised cross industry framework for measuring and reporting water footprint d Encourage DWA stakeholders to expand energy demand management and WC/WDM practices e f Define the responsibilities of a Strategic Water User a Rapidly implement the Waste Discharge Charge System Encourage water users to subscribe to the principles of the UN Global Compact CEO Water Mandate 3. b c Address gaps in the current water sector governance framework Operational d Encourage improved and faster service provision e Where possible, limit dependence of power stations on one water source

  7. Importance of water to EskomRecommendations to enhance the strategy Focus Areas Recommendations • Unclear strategic framework • The link between “Strategic Goals”, “Water Management Strategies” and “Enabling Strategies” is unclear • The content in each of the strategies is overlapping and sometimes inconsistent • Develop a more structured framework which clearly links strategic goals to activities and enabling actions • Few strategies are automatically implementable • Only some strategies are defined clearly enough to enable them to be implemented by relevant parties • In many cases, the objective has been provided but no approach or solution is defined • Additional work to go into defining policies / procedures prior to final document approval • Unclear and un-prioritised implementation approach • Structured framework / timeline not present which links all the different strategies (although timelines per strategy have been defined) • Interdependencies between strategies have not been identified • Strategies have not been prioritised • Improved mapping of timeline • Highlighting interdependencies and implications of not meeting certain goals • Prioritisation of all strategies / actions • No detailed quantitative and qualitative water assessment • The strategy doesn’t provide a detailed quantitative assessment of water usage and water quality for South Africa and SA’s different catchments - nor the plans by sector in the future (e.g. The future water demands by sector across South Africa) • Bottom up analysis of all water use and water quality by catchment / river system • Projected water use based on sector input and water resource quality Eskom priority issues • Water stewardship • National water infrastructure management • Water pricing strategy and investment framework • Climate change • Alignment between water and energy planning • Water sector service provision • Water quality • Assurance of supply to “strategic water users”

  8. Section 1 Importance of water to Eskom Section 2 Initial comments on the NWRS 2

  9. Draft NWRS 2 strategic frameworkEskom supports the core strategies and makes recommendations in following areas #3 Improve national water resources infrastructure management #2 Misalignment between water and energy planning processes #1 Encouraging water stewardship throughout value chain #8 Assurance of supply to “strategic water users” #4 Improve water sector service provision #6 Declining water quality adversely affects Eskom operations #5 Review current water pricing strategy and investment framework #7 Climate Change

  10. #1 Encouraging water stewardship throughout value chain Requirements of a standard cross-industry framework for water footprinting • Need to “implement an accounting framework for WC/WDM”, but NWRS 2 is not specific • Does not address alignment with energy demand management, nor focus on specific sectors • Highlights potential funding requirements, but not the source • Opportunities for a funding model for WC/WDM initiatives should be assessed • Need to improve public awareness (e.g. UN Global Compact – CEO Water Mandate), but NWRS 2 does not specifically target businesses which play a significant role in South Africa’s water usage • Recommendations: • Define, implement, monitor and enforce a water accounting policy for both strategic and non-strategic users • Implement processes and systems to be more effective in – • Compliance monitoring and enforcement • Eradicating illegal water use and water losses • Eskom provided a water footprint for power generation based on IRP 2010; NWRS 2 needs to show how water sector will support the development • Encourage DWA to enforce principles of the UN Global Compact – CEO Water Mandate • Encourage other large water users to lead and mobilise managing water risk effectively at catchment, supply chain and company level • Ensure that other role players in energy and power generation sectors are consulted • CEO Water Mandate • Key areas include – • Direct operations • Supply Chain • Watershed management • Collective action • Public policy • Community engagement • Transparency

  11. #2 Misalignment between water and energy planning processes Require alignment to address Water-Energy-Food nexus • Draft NWRS 2 takes a broader view and puts water at the centre of national planning decisions; however – • Nothing specific mentioned regarding – • Infrastructure and water resources plan to support the IRP 2010 and related developments • Striving for consolidated Water Resource Studies and EIA’s, SEA’s, IWUL’s, EMPR’s • Increasing speed at which locations are selected for power generation build • No ‘trade-off’ discussions across relevant Government departments (DWA, DOE, DEA, DMR, etc.) • Certain strategic goals might have to be compromised to help meet other related goals (e.g. reduces emissions but increases water usage) • Recommendations: • Develop infrastructure and water resources plan to support the IRP 2010 and related developments • Development of cohesive and balanced environmental / water / climate change policy for power generation • Require single environmental approval process • Development of new SADC and African forums where energy and water (and potentially food) stakeholders discuss planning and policy issues

  12. #3 Improve national water resources infrastructure management Address gaps in national water resources infrastructure management • Recognised the importance of separating roles and also build skills • Indicated that economic regulation is being explored and decision around institutional design will be taken by end of 2014 • Emphasised the need to improve asset management, reduce backlog in infrastructure maintenance • Recognised capacity gaps both at national level and at regional institution level (e.g. CMA, RWIs, WMAs) • Key Strategic Objectives of Draft NWRS 2 include: • Establishing an effective regulatory function • Strengthening role of DWA as regulator and other regulatory institutions – includes enhancing DWA capacity, establishing Regulatory Branch and fast tracking establishment of CMAs • Promoting Regulator’s accountability to improve public confidence • Recommendations: • Management of national water resources infrastructure remains a primary concern: • Ownership, financing, development, management and operations of national water resources infrastructure will be strengthened by ring fencing Water Trading Entity into Government Component separate from Policy and Regulation • Not clear if governance structure will separate roles and responsibilities of DWA as regulator, policy maker and implementer of national water infrastructure • DWA to initiate immediate steps to improve performance of national water resources infrastructure management function and related financial management aspects

  13. #4 Improve water sector service provision Address gaps in water service provision • Recommendations: • Prioritise handling and issuing of Strategic Water Users’ Water Use Licensing at central government level • Expedite institutional reform, e.g. setup CMAs, implement economic regulator and WRIA • Improved asset management and maintenance of existing water supply infrastructure • New infrastructure development to provide for new energy capacity

  14. #5 Review current water pricing strategy and investment framework Water pricing strategy to affect Eskom investments, operations and tariffs • Eskom supports the following Strategic Actions in the Draft NWRS 2: • Developing appropriate funding models for development of water infrastructure • Aligning prioritisation and delivery of projects across the water value chain • Aligning development of project proposals, identify and rectify gaps in planning and implementation schedules • Providing appropriate funding for new agencies and ensuring necessary state funding is available • Review and revise current pricing strategy to address price capping and exclusions • Investigate new ownership models for infrastructure - consider options for financing, designing, building, constructing and maintaining • Integrated infrastructure investment approaches followed in the past have not succeeded in addressing all challenges and improved financing methods are required to meet socio-economic goals • Recommendations: • Eskom, DPE and DoE need to participate in National Pricing Policy and investment framework review • Enable DWA to plan for, and develop long term water infrastructure more effectively • Ensure quicker approval and investment in water infrastructure • Enable WC/WDM across all sectors • Access climate change and green funds • DWA needs to ensure pricing policy protects local communities and disadvantaged • DWA should consider options for a “Blended Tariff” structure across South Africa

  15. #6 Declining water quality adversely affects Eskom operations Need to improve water quality and enforcement of regulations • Eskom is being impacted by deteriorating water quality • Draft NWRS 2 identifies reason for continued poor water quality as “can be attributed to weak governance, lack of regulation and poor compliance and enforcement” • Although the need to enforce compliance to regulation (e.g. Waste Discharge Charge System), measures and the tools to do that are not yet defined • Limited capacity exists in Regional Offices to enforce compliance • Recommendations: • Rapidly implement Waste Discharge Charge System • Enforce “polluter pays principle” • Implement Compliance Monitoring & Enforcement function required for those users causing a negative impact • Transformation of Water Management Institutions required to support such a goal

  16. #7 Climate Change Climate Change and water security • Climate change • Eskom requests DWA to quantify risks from Climate Change on current and future water supply through research and monitoring of hydrological flows and trends • Requires early warning and forecasting for disaster risk reduction • Water security • Limit dependence of power stations on one water source • Recommendations: • Climate change research should be one component of the broader research to be conducted by DWA and included in the National R&D Strategy • Both the Climate Change Adoption Strategy and the R&D Strategy will enable a better understanding of Climate Change on South Africa’s water resources • R&D Strategy should support funding of water related research • Potential impacts of Climate Change on security of water supply in key catchment areas need to be shared with Eskom to ensure water security • To mitigate water security risks, DWA should ensure each water supply system is backed up by multiple resources or power stations are located next to available water resources • Draft NWRS 2 does not make any reference to mitigating this risk

  17. #8 Assurance of supply to “strategic water users” Definition and responsibilities of a “strategic water user” • Limited fresh (surface) water available for strategic and other use, and it is proposed that all surplus fresh water be placed under direct control of the Minister • Not clear if / how Water Allocation Reform may impact Eskom , e.g. • Eskom future status as strategic water user not defined • Allocation priorities or assurance of supply to strategic water users not defined • Definition or responsibilities of a “strategic water user” not included in any NWRS 2 strategy • Priority 4 of Water Allocation Priorities specifically deals with the allocation of water for uses that are strategically important to the national economy, and then other uses • Specific development and security challenges include electricity, food security, and mining, as well as associated job creation • Recommendations: • Urgent need to define “strategic water user” within priority outcomes of Cabinet, the National Development Plan, the New Growth Path and spatial development plans • Need to define responsibilities of “strategic water user” • Power generation to remain “strategic water user” to support economic growth

  18. Discussion Thank you

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