MINISTER OF PUBLIC ENTERPRISES, Power-Gen Africa Conference 19 July 2016

MS. LYNNE BROWN, MP MINISTER OF PUBLIC ENTERPRISES

.

MS. LYNNE BROWN, MP 

MINISTER OF PUBLIC ENTERPRISES,

KEYNOTE ADDRESS

POWER-GEN and DISTRIBUTECH AFRICA 2016

 

Power-Gen Africa Conference

19 July 2016

 

Chairperson and Governing Authorities of Energy and Electricity Utilities

Chief Executives  & Officials from African and international utilities

Academics from universities

Public officials from the countries representing their different Governments

Ladies and Gentlemen

 

Welcome to South Africa and our winter season, and yes to a very cold Johannesburg – at least for us.

At this moment I would like to wish the Turkish people and representatives of their companies in this conference all best in resolving the recent troubles facing Turkey.   

A common experience in most countries, is when things go wrong in a country the government, invariably, gets blamed. And in the instances of electricity production, supply and distribution in our country, the Minister responsible for ESKOM in South Africa gets blamed. That's me, the Minister of Public Enterprises. So, the cold winter leads to razor-sharp monitoring of ESKOM.

However, when all goes well and there is indeed a stable energy supply and distribution to households and industries, like it has been for the last 11months, everybody takes the credit. Even the doomsayers against transformation and restructuring of ownership & supply in the energy and electricity industry in South Africa want recognition for Government’s efforts through ESKOM, given the benefits of comprehensively dealing with recent electricity power load-shedding. Does that not sound familiar to you – whether you in public or private utilities – when it comes to your own countries? Our message as Government is that we will not shy away to account to our citizens - they take priority over any existing and continuing rugged private interests that perpetuates inequality and poverty.    

The SA Government resolve through ESKOM has taken us out of the dark hole of loadshedding, thereby making up for no investment by the apartheid government and sluggish investment during our earlier years of constitutional governance. 

We know from our own country-specific experience, how no investment in energy and electricity infrastructure, contributed to low growth levels in the domestic economy. We also know how no investment in energy and electricity continue to push the black majority of our country's citizens into deepening levels of inequality, poverty and unemployment and how these ravages brought pain and a range of social ills. Taking electricity power to greater number of citizens, across South Africa and our African continent is indeed critical for economic development, human capital development and in providing the poor a head-start. The report, Looking Ahead: The 50 Trends that Matter[1][2], reminds us that  

People without electricity often burn wood or dung for cooking, which are indoor sources of air pollution that kill more people every year than malaria and tuberculosis combined.

As the South African Government we decided that industrialisation and infrastructure investments must be our priority to bring energy and electricity supply and distribution to our citizens and industries. To achieve this, we had to a) improve maintenance and operational practices at plants; b) encourage co-generation supply of energy; c) gas power generation; d) encourage Independent Power Producers (IPPs); and e) increasing the focus on the demand side management of electricity.

 Ladies and gentlemen, the democratic dividend for us is our developmental responsibility of providing electricity power access and redistribution to citizens. These efforts included real opportunities for poor and in particular black communities in ownership through power generation capacity investments in sectors such as coal, gas, nuclear, hydro and other renewables in the energy and electricity industry. 

I am reminded that during 2002 that the International Energy Agency[3] predicted that the world will continue to experience security of energy supplies; increasing demands for investment in energy infrastructure; threats of environmental damage caused by energy use; and uneven access of the world's population to energy. 

These challenges were globally compounded by changes in the power generation sector. We are experiencing major shifts in - 

·           Demand patterns are changing with consumers increasingly becoming more efficient and generating their own energy through distributed generation. 

·           Utilities’ generation mix is also changing, becoming lower carbon and more flexible in terms of load following and size of plant.  This has been driven primarily by environmental concerns and has resulted in the cost of lower carbon technologies such as renewables reducing.

·           Regulatory environments and markets are changing to encourage greater diversity and competition in the national and regional space, thereby pushing utilities in the energy and electricity industry to adapt their business models to the new dynamics. 

Our African continent (54 individual countries – diverse and not one country as some believe outside the continent) accounts for more than 40% of all people in the world who are without access to electricity.  The International Energy Agency provides a frightening yet sobering picture that shows that, in the 21st century, more than 10 countries in Africa have 75% of their population living without access to electricity, followed by an additional 10 countries that have half of their population living without electricity.   

Ladies and gentlemen, the lack of electricity in Africa remains one of the biggest barriers to the region’s development and prosperity, and continues to trap millions of our people in extreme and abject poverty. The current energy deficit in Africa is alarming.

 

Ageing power infrastructure remains unable to meet the surge in power demand. Large infrastructure investments are therefore a rationale response to myriad of well-documented challenges in power supply. 

Like the rest of Sub-Saharan Africa, South Africa has faced its own power generation challenges. In the decade that followed 1994, heavy investments in the country’s heavy mineral plants (particularly aluminum and steel), rapid economic growth and the need to achieve universal access to electricity and other socio-economic infrastructure led to a rapid rise in electricity demand.  

Large infrastructure projects require specific skills in engineering, productivity improvements, life cycle asset management and complex procurement management. We need to actively grow our technical and vocations skills in this area in partnerships with others in order to fast track uptake and ensure reliable energy. I believe that the technological innovations and future expansions will definitely address the challenge of universal electrification in our countries. It is a huge opportunity, the challenge lies in ensuring that we leverage our technological expertise and innovation to provide energy in a cost effective manner and at the same time grow our different countries domestic economies to ensure long term sustainability.  

There are a range of opportunities to strengthen electricity networks to facilitate an increase in regional electricity markets, especially through investments in generation and transmission.  Large hydro generation is being developed that contributes to lower carbon drives. Ethiopia’s  determination and resilience, for example, by building the colossal 6GW Grand Ethiopian Renaissance for power generation has enabled it to sell energy in the export market to Djibouti and Sudan, thereby earning revenue of 123million US dollars during its 2015/16 fiscal year[4].  

The coordinated development of regional infrastructure will enable projects such as these to be delivered on time thereby unlocking other regional economic opportunities and growth centres.    

In South Africa we are heavily coal based but evolving towards lower carbon technologies. According to the BP Statistical Review Published in 2014, in 2013, 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). The Eskom Fact Sheet published in May 2014 indicates that more than 85% of South Africa's installed electricity capacity is coal-fired power stations, 10% hydroelectric plants, 4% a nuclear power plant, and 1% non-hydro renewable energy. The Africa Report, June 2016 confirms that the price of electricity in South Africa in US cents per kilowatt hour is the cheapest in Africa and the 15th cheapest in global rankings, according to a 2015 World Atlas[5].

South Africa operates in a challenging environment as it tries to ensure that its energy supply keeps pace with demand while mitigating against vulnerability of a power deficit that could constrain growth. To increase electricity generation capacity, several mothballed plants were returned to service and 2 new, large coal-fired plants – Medupi and Kusile, approved for construction (with Medupi Unit 6 already contributing 800 MW to the national grid). By the end of their construction, both of these new plants have a total installed capacity of 9.6 gigawatts.  

In the Southern Africa region we have the opportunity to exploit gas reserves for the benefit of the region and gas is not only lower carbon, but also more flexible and can be used to manage demand and is an ideal partner for renewable energy. The development of gas infrastructure in the region will pave the way for any future developments in shale gas. Eskom is currently evaluating the opportunity to convert existing open cycle gas turbine plant to gas as a second source of fuel. Expanding these gas activities raise new challenges, opportunities and potential risks regarding South Africa’s regional interdependence or independence on energy supply.

Despite these expected improvements, it is worth mentioning to this conference that studies conducted to inform our country’s Integrated Resource Plan for Electricity [IRP] 2010 – 2030) indicates by 2030, South Africa could face a power supply gap of 6 – 10 gigagwatts due to a combination of shutting down of aging coal plans and reliability challenges in older generating plants. With peak demand expected to increase by 11 to 18 gigawatts, and an estimated 14.4 gigawatts of aging coal capacity scheduled for de-commissioning over the same period, as Government we have a long-term energy strategy produce sufficient electricity through reliable and diversified sources that include a mix of nuclear, coal, natural gas, hydropower and renewables.  

The role of renewable energy in South Africa’s long-term plans as per the Integrated Resource Plan for Electricity envisages that 9.2GW will be generated from wind, 8.4GW from photovoltaic sources (solar panels) and 1.2GW from concentrated solar power. These in addition to possibility of viable, large-scale production and use of natural gas would not only represent a major step towards a cleaner and more secure energy future in South Africa, but also provide additional impetus towards enhancing economic opportunities within the Green Economy and boosting economic growth.  

However, economic growth will be severely harmed in the medium term without the additional electricity generation capacity. We are indeed concern that if electricity prices are determined by market forces, lack of additional capacity would result in significant increases in electricity prices. The push for increasing market influence into electricity network, especially through the mechanisms of privatisation and public-private partnerships call for an increased introspection into the demand and supply networks, our utility and an on-going assessment of the structure of ESKOM.  

The renewable energy independent power producer programme has been hailed for its success but at the same time have highlight constraints on the alignment of the grid to renewable energy sources.

Ladies and gentlemen, we are learning that the grid in the areas that are optimal for Wind and Solar energy production are becoming increasingly constrained. Major investment is required in the Transmission Grid in order to sustain the connection of renewable energy plants in these areas. The same applies for conventional fossil fuel power plants such as large gas and coal fired plant. In the case of the Waterburg, a major HVDC grid connection has been identified as a likely prerequisite for unlocking further large scale power generation in that area. The cost of such an HVDC scheme is estimated at 13billion South African rands.

Ladies and gentlemen, for future power generation to be sustainable, all power generation technology options are kept open including renewables, nuclear, gas, different grades of coal and biomass for centralized or distributed energy systems. There is a need to deliver affordable, reliable, safe and clean power to our communities.

However, South Africa has only two real options for base-load and mid-merit operations to manage electricity system requirements. These are coal and nuclear. The decision on which technology to deploy then requires an assessment of lifecycle cost, current and future predicted costs, and COP 21 commitments. There has been significant debate on the current and future costs of both these technologies. There is growing consensus that future cost comparisons will swing in favour of nuclear given increasing coal-fired plant costs associated with more stringent emission limits and the introduction of carbon taxes. Nuclear offers one of the cheapest sources of electricity that comes with zero greenhouse gas emissions. Clearly, this requires more research work to quantify and firm up our position that nuclear is favourable than any fossil power generation.

In this regard I would like to announce today that as part of EPPEI Phase 2 programme, Eskom will establish a Specialisation Centre focusing on Nuclear Engineering and Technology. The specialization centre will have a dedicated director and partnership with reputable international universities will be pursued.

Embedded Solar PV 

Embedded rooftop PV fulfills all three key requirements of any new-build option to address the current electricity crisis: It is cheap (0.8-0.9 R/kWh), it can be implemented quickly (few weeks to few months for individual projects) and it can be implemented in large scale (500 - 1 000 MW/yr achievable). In addition, it is fully aligned with the long-term capacity expansion plan (IRP) and therefore a no-regret move. The opportunities from embedded PV are: a very high local content can be achieved; local manufacturing of components is easier to stimulate due to the granularity and steady off-take market; job creation and a localised ownership base of the rooftop PV assets. However, introduction of solar pv must be managed very carefully to manage and optimise demand and supply. 

Renewables-based synthetic fuels

The European Parliament recently paved the way for these fuels by allowing synthetic fuels based on renewable electricity (so called Power-to-Liquids) to count towards the mandatory blending requirements for biofuels in the European Union. Even more, they will count twice as compared to biodiesel and bioethanol. (South) Africa can leverage its synthetic fuel expertise and its superior solar and wind resources to produce the cheapest carbon-neutral diesel, petrol and kerosine globally. Because of the superior solar and wind resources in the country, renewable electricity will always be 30-40% cheaper than in most other countries, which makes synthetic fuels produced in South Africa 20-30% cheaper than elsewhere.

 Gas to Power Request for Information

Based on our Government’s request for information for the gas to power programme during 2015 within the five categories of imported gas; domestic gas; power barges & power ships; piped gas; and cross-border projects, we have received encouraging responses from the market.  Approximately, 57% of the responses were for imported gas, primarily in the form of liquefied natural gas; 23% of the responses were for liquid-fuelled short term power projects. The total capacity of all projects was some 105GW of new power generation, with some 14GW of short-term power generation capacity.

Synthetic fuels 

A number of directives cover biofuels use in the European Union (EU), including the Renewable Energy Directive 2009/28/EC, the Fuel Quality Directive and the Biofuels Directive 2003. On 28 April 2015, the European Parliament voted to approve a new legislation, the "iLUC Directive", which limits the way EU member states can meet the target of 10% for renewables in transport fuels by 2020. There will be a cap of 7% on the contribution of biofuels produced from 'food' crops, and a greater emphasis on the production of advanced biofuels from waste feed-stocks. The residual 3% of blending requirement can be supplied by a variety of sources, one of which is synthetic fuels from renewable electricity (“Power-to-Liquids”: PtL).

Regional interconnection is important for energy security in Southern Africa. Trends in the energy power generation, transmission, and distribution industry revolve around cleaner energy solutions, universal access to electricity, and the transition towards smart grids.  But it is not just about renewable energy, for and in Africa, availability of electricity is critical. Therefore, the focus on developing reliable, base-load power is necessary to ensure sustainable power for Africa’s citizens.

We must intensify our research and development in all our countries to address current challenges. The research must be conducted through collaborative networks of research institutions that bring business and the public sector together. I believe that our interventions have to lead to:

·                decentralised electrification solutions to reach rural areas and energy affordability;

·                efficient transmission infrastructure to enable the evacuation of power to load centres across the continent and to encourage new investment;

·                storage technologies that facilitate the introduction of intermittent-supply technologies, such as wind and solar, but that also improve overall power supply certainty;

·                the reduction of the environmental impact of energy resource extraction, infrastructure development, and operations; and

·                smart grid technologies, so that we can leapfrog current energy infrastructure requirements and constraints.

A McKinsey report dated February 2015, Brighter Africa, which looks at the growth potential of the sub-Saharan electricity sector, states that, by 2040 and in terms of electricity demand, sub-Saharan Africa will consume nearly 1 600 terawatt-hours, that is, four times what was used in 2010.  This is due to increased urbanisation, a fivefold increase in GDP, and a doubling of the population.

The report goes on to state that, in terms of supply potential, it is estimated that there is a staggering 10 terawatts of potential capacity or more from gas, solar, hydro, wind, coal, and geothermal resource potential in Africa.  Of note, is that the percentage of electricity in Kenya that was generated by geothermal means in 2015, is up from 19 per cent the previous year[6].

Of this, 40% of new capacity could come from gas, and more than 25% of electricity could come from renewable resources.  The authors of the report believe that success will propel the economic growth of the continent and enhance the lives of millions of people, creating an additional estimated 2.5 million new jobs in Africa.  

The conference takes place at the right time to share information, technologies and best practices in all aspects of the energy and electricity supply system (ESI). I look forward to the outputs of the deliberations facilitated by papers presented by industry experts from around Africa and beyond that highlight the most effective and successful projects and programmes around Africa.

 

I have been convinced by ESKOM that this conference will play part in accelerating the development of power generation, supply and access across all of Sub-Saharan Africa in a sustainable and affordable way. 

In conclusion

On behalf of my fellow Africans, the South African Government and many citizens in the global village, I would to thank ESKOM and the Power-Gen Africa Conference organisers for continuing the march within the evolution to revolution discourse within the energy and electricity complex.

I wish all the best in your search for new and innovative inputs, throughputs, and outcomes in energy and electricity supply system (ESI).

In my province-national languages, I want to say to you All

 

Enkosi, Dankie, Thank you