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Update on Regulatory Developments to Support Solar Park Concept 28 October 2010 Upington, South Africa ompi.aphane@energy.gov.za. Contents. Regulatory provisions for new generation capacity Integrated Resource Plan Solar Park Opportunity Conclusion. Planning (IRP).

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  1. Update on Regulatory Developments to Support Solar Park Concept28 October 2010Upington, South Africaompi.aphane@energy.gov.za

  2. Contents • Regulatory provisions for new generation capacity • Integrated Resource Plan • Solar Park Opportunity • Conclusion

  3. Planning (IRP) Determination by Minister Power purchase agreement Grid connection Regulatory provisions for new generation capacity • Balancing supply/demand simultaneously as meeting other objectives • - Carbon • - Supply adequacy • - Water • - price • Minister commissions feasibility study, with outcomes relating to: • allocation of financial, technical and operational risk between buyer and generator • Whether appropriate generator should be Eskom or an IPP • In consultation with Regulator – on licensing matters • Concurrence with National Treasury – buyer support • Standardized provisions in relation to certain risk allocation • Regulator to ensure that buyer able to recover full amount of costs incurred by buyer over PPA term • Eskom will be required to enter into PPA with buyer that meets requirements set out • Buying function to be undertaken initially by ring-fenced entity within Eskom, ultimately separated out • Non-discriminatory access • NTC and the Regulator to timeously provide assistance as Minister may require for purposes of developing and monitoring the implementation of an IRP • - evacuation corridors Public consultation process to commence soon

  4. Integrated Resource Plan • IRP2010 has been completed and published for public comments • The final draft will be published, taking into account the inputs from the stakeholders

  5. Resolving Capacity constraintsLong Term – IP 2010 Medium Term – National Emergency Response and Business Continuity Plan The need to replace the old fleet Restoring the requisite reserve margin National Emergency Response and Business Continuity Plan No reserve margin period of high risk power cuts Country Electricity Plan (IRP2010) This Presentation Data source Eskom 5

  6. Medium Term RiskAll Indicators predict long and hard storms ahead Use of Emergency generators Increasing Under Frequency Alarms Increasing Daily operating reserves Reducing Daily Unplanned capacity losses Increasing

  7. IRP 2010 - Balancing Competing Objectives Security of Supply Low Cost Low Carbon Low Water

  8. Scenarios are not plansThey are simple glimpses of extreme futures used to evaluate trade-offs between competing objectives Scenarios Balanced Scenario Risk Adjusted Plan Policy Adjusted Plan Reducing Uncertainty

  9. 15 Scenarios created and evaluated3x Low Cost, 8x Low Carbon, 2x Reduced Demand, 2x Regional Development

  10. From Scenarios to the plan

  11. Diversify Generation Mix – By 2030Balancing Risk, Cost and Carbon Low Cost Scenario Low Carbon Scenario Balanced Scenario New Capacity Allocation

  12. Affordability/PriceIndicative Price Paths Low Carbon Balanced Low Cost Scenario

  13. RSA beneficiating competitivenessIndustrial electricity pricing comparison (2010-2020) If we do not balance RSA loses competitiveness Source: XTA Commissioned Frost and Sullivan Model

  14. Balancing Affordability, Price & CarbonDiminishing returns on carbon reduction Low Carbon needs ~22GW more installed than Low Cost Diminishing Returns! Bubble Six ~ Total MW Installed

  15. WaterTotal water consumption trends Low Cost Scenario Balanced Low Carbon

  16. Solar Park Opportunity Opportunity

  17. Funding Considerations • Funding remains a serious issue. • The majority of projects can be privately funded – removes the risk from the Govt. • Certainly expect the renewable energy tranche to be private sector funded

  18. Summary conclusionsFrom Scenarios evaluation Cost/Price/ • Obligation to protect the environment prohibit the lowest cost • Growth and job creation demand RSA protects competitiveness Carbon/Affordability • We cannot afford Copenhagen but, • We can get to LTMS by 2025 Security of Supply • All scenarios equalized adequacy of Security of Supply

  19. Summary Recommendations The public consultation process continuing The “Balanced Scenario” represents the best fit of the realities of known physical constraints, prescribed specific objectives or desired future conditions. Inherent uncertainties can be reduced (but never eliminated) by repeating the IRP planning process going forward as and when new information becomes available.

  20. Way ForwardIRP 2010 - Proceed with Balanced Scenario to complete ASAP National Emergency Response and Business Continuity Plan – Launch ASAP The need to replace the old fleet CRITICAL and URGENT Attention Required Restoring the requisite reserve margin Under Control Proceed with Balanced Scenario to complete ASAP National Emergency Response and Business Continuity Plan No reserve margin period of high risk power cuts Country Electricity Plan (IRP2010) Data source Eskom 20

  21. Thank You Q&A

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