Ms Nomawethu Qase Director: New and Renewable Energy 31 August 2012

1. Ms Nomawethu Qase Director: New and Renewable Energy 31 August 2012

2. PRESENTATION OUTLINE • Introduction • Energy Policy & Legislative Framework • The Integrated Resource Plan 2010-2030 • RE IPP Procurement Process • Eastern Cape Allocation and Benefits • Conclusion

3. UNDERLYING POLICY AND LEGISLATIVE FRAMEWORK • White Paper on Energy Policy of the Republic of South Africa December 1998 – “EWP” • ensuring the implementation of economic feasible technologies and applications • 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. • White Paper on Renewable Energy Policy of the Republic of South Africa of November 2003 – “REWP” • Provides for a target of 10 000 GWh of renewable energy contribution to final energy consumption by 2013, to be produced mainly from biomass, wind, solar and small-scale hydro.

4. UNDERLYING POLICY AND LEGISLATIVE FRAMEWORK Energy Act No 34 of 2008 • seeks 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 planning, increased generation and consumption of renewable energies • A Bill to establish an Independent System Market Operator (ISMO) is under consideration in Parliament. • ISMO refers to an autonomous body or operator of the National Electricity Transmission System who will be responsible for buying electricity from generators and selling it to customers at wholesale level.

5. INTEGRATED RESOURCE PLAN 2010-2030 Electricity generation focused

6. IRP2010-2030 Is a “living” plan, which will be updated on an ongoing basis to reflect the changing needs of South Africa and to learn from the inevitable changes in our economical, social and technological environment. This will be the first IRP that government directed must seek to find a balance between competing government objectives: • Affordability • Reducing carbon emissions (Towards a Green Economy) • Water conservation • Localisation and, • Regional development Change brings new opportunities but too much change is high risk!

7. Balancing the Tensions Between Objectives • The IRP must balance economic, social and environmental objectives • It should provide affordable energy, • while ensuring security of supply, • providing opportunities for creation of local industry clusters, • and helping to achieve the emission targets committed to in Copenhagen • WISE COMPROMISES REQUIRED

8. 7 Decreasing costs of renewables allow for a higher renewables share at the same total system costRevised Balanced Scenario and Policy-Adjusted IRP in comparison 90% 90% 15% 16% 23% 5% 5% 25% 5% 9% 5% 6% 6% 5% 0% 0% 9% < 0,1% 15% < 0,1% 0% 42% 0% 30% 10,1 0,0 0,05 0,0 1,0 1,0 35,5 1,8 2,1 0,0 2,4 0,0 65,5% 65% 20% 20% 5% 6% 1% 0,8% < 0,1% 0,2% 9% 7,5% Before consultation process: Revised Balanced Scenario (RBS) After consultation process: Policy-Adjusted IRP Total additional new capacity (without committed) until 2030 in GW Total additional new capacity (without committed) until 2030 in GW 25 25 Share of total new GW 20 20 17,8 Subject to later revision 15 15 8,4 Solar PV 11,4 9,6 9,6 10 10 Import Binding 1,0 CSP Own build 6,3 6,3 5,8 Import 6,6 1,3 3,9 5 5 3,3 8,4 Wind 2,6 2,4 1,9 5,0 3,0 0 0 Coal Nuclear Hydro Gas - CCGT Peak - OCGT Renew- ables Coal Nuclear Hydro Gas - CCGT Peak - OCGT Renew-ables Committed new builds 10,1 0,0 0,05 0,0 1,0 1,0 Existing fleet (2010) 35,5 1,8 2,1 0,0 2,4 0,0  = 260TWh in 2010 Energy share  = 454TWh in 2030

9. 5 Carbon intensity reduced by ~34% while coal and nuclear are still the backbone of the energy supply How the Policy-adjusted IRP would affect the mix of power generation by 2030 Sources of energy supply Energy mix Capacity installed EoY in GW1 Electric energy supplied in TWh p.a. 100 Re-newable TWh's in 2030 (14%) PV Carbon free TWh's in 2030 (34%) CSP PV 80 Wind CSP Hydro Wind Nuclear Hydro 60 CCGT/OCGT Nuclear OCGT CCGT 40 Coal Coal 20 0 2010 2015 2020 2025 2030 2010 2015 2020 2025 2030 CO2 intensity 912 g/kWh 600 g/kWh -34% 1. Pumped storage capacity of 1,4 GW in 2010 and 2,7 GW in 2030 is not included since it is a net energy user

10. Long lead times for power generators & related infrastructure require timely firm commitments Firm commitment necessary now Final commitment in IRP 2012 1. Built, owned & operated by IPPs 2. Commitment necessary due to required high-voltage infrastructure, which has long lead time 3. Commitment necessary due to required gas infrastructure, which has long lead time 4. Possibly required grid upgrade has long lead time and thus makes commitment to power capacity necessary

11. FROM IRP TO IMPLEMENTATION: SOUTH AFRICA INTRODUCES A RENEWABLE ENERGY IPP BIDDING PROCESS IN AUGUST 2011 TARGET: 3 725MW BY 2016

12. RENEWABLE ENERGY IPP BIDDING PROCESS • The procurement documents were released on the 03 of August 2011 and compulsory bidders conference for the first and second window on the 14 of September 2011. • The document provides for procurement of 3725MW in five different rounds subject to the availability of the MW • The Department. Under round one: • Received 53 Bids on the 4th of November • Announced 28 preferred bidders in December 2011 • With regards to round two: • Received 79 bids on the 5th of March 2012 • These bids amount to 3 255MW whilst the cap was 1275MW

13. RFP KEY EVALUATION CRITERIA • The RFP provides for a 70/30 split on price and economic development as per the exemption from the PPFA • Breakdown of the 30% weighting on economic development is as indicated below

14. Contractual Arrangement Implementation Agreement Power Purchase Agreement Government Framework Support Agreement

15. Analysis of MW allocation and remaining MW

16. EASTERN CAPE VS OTHER PROVINCES

17. Preferred Round 1 IPP bidders situated in the Eastern Cape

18. Preferred Round 2 IPP bidders in the Eastern Cape Cape

19. SUMMARY: STATUS OF LARGE SCALE RE PROJECTS IN THE E CAPE Currently Eastern Cape has 73 Renewable Electricity IPP applications in the pipeline at various stages. 60 Wind applications to Eskom (4200 MW) More than 10 Solar PV applications ( greater than 500 MW).

20. OPPORTUNITIES • Remapping of rural-urban economic dynamic; • Direct foreign and national investment; • Direct local community investment; • Skills development opportunities; • SMME/Local supplier development opportunities (Eskom Strategy); • Manufacturing and job creation opportunities; • Basis for Green/Low Carbon Economy.

21. Local Content Manufacture • Towers (Coega) • Micro Turbines (NMBM) • Small Turbines 300kW to 1000kW (BCMM) • Solar Panels (ELIDZ, 300 Direct Jobs)

22. EASTERN CAPE PROVINCIAL SUSTAINABLE ENERGY STRATEGY

23. STRATEGY VISION AND GOALS VISION The Eastern Cape provides the most enabling provincial environment for sustainable energy investment and implementation in the country • Job creation and skills development; • Alleviate energy poverty; • Reduce Greenhouse Gas emissions and environmental pollution; • Improve industrial competitiveness; • Promote renewable energy production in the Province; and • Promote the development of a renewable energy manufacturing industry and technology development.

24. Strategic Priorities • Undertake a strategic assessment of the regulatory environment Strategic assessment of the regulatory environment including an Eastern Cape Provincial locational perspective on renewable energy; • Provide an enabling environment for municipalities to purchase renewable energy from independent power producers (IPPs); • Provide an enabling environment for municipalities to promote/purchase co-generation and micro grid-connected Renewable Energy; • Provide an enabling environment for the attraction and establishment of renewable energy generation facilities in the Province; • Provide assistance to municipalities to promote and enforce energy efficiency for electricity users, including users in the manufacturing sector; • Provide an enabling environment for the establishment of a manufacturing industry in support of Renewable Energy production in the Province; • Improve the provincial government’s use of energy; • Promote Green Skills development; • Promote research and development; • Support universal access to energy; • Promote the bio-fuels industry.

25. Current Activities • Provincial Sustainable Energy Baseline Study • European Union Eastern Cape Renewable Energy Conference (27th to 30th November) • Support to Independent Power Producers and other RE projects • Hosting of the provincial sustainable energy forum.

26. Future Activities • Sustainable Energy Capacity Support to provincial and local government (incl. forum) • Sustainable Energy Skills support at the vocational level. • MECs Preferred Bidders Committee

27. Security of energy supply remains a key priority, not be compromised. Affordability is key consideration and must not be ignored. Energy mix a firm policy of government where renewable energy technologies will have to be combined with gas, coal or nuclear. Milestones for the RE IPP procurement programme are available on the website – www.ipp-renewables.co.za. E Cape one of the provinces blessed with renewable energy resources, has greater need for more electricity to support rural development, job creation and overall economic development Conclusions

28. THANK YOU FOR YOUR ATTENTION Websites: http://www.energy.gov.za http://www.ipp-renewables.co.za http://www.dedea.gov.za Provincial contacts: Alistair.mcmaster@deaet.ecape.gov.za Mickey.Mama@deaet.ecape.gov.za