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DEPARTMENT’S STRATEGIC AND ANNUAL PERFORMANCE PLANS - BUDGET VOTE 29 2014/15 FINANCIAL YEAR Presentation to the Select Committee on Economic Business Development Mr Tseliso Maqubela Acting Director General 22 July 2014. Introduction Highlights and challenges of the first five (5) years

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PRESENTATION LAYOUT

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  1. DEPARTMENT’S STRATEGIC AND ANNUAL PERFORMANCE PLANS - BUDGET VOTE 292014/15 FINANCIAL YEAR Presentation to the Select Committee on Economic Business DevelopmentMr Tseliso MaqubelaActing Director General22 July 2014

  2. Introduction • Highlights and challenges of the first five (5) years • Key focus areas for the 2014/15 financial year • 2014/15 Budget and alignment to the department’s programmes • Conclusion PRESENTATION LAYOUT

  3. Introduction of the DOE Team • Establishment and mandate of the Department of Energy/Who we are • DOE was established in 2009 – outcome of the split of the Department of Minerals and Energy into Department of Energy and the Department of Mineral Resources • The Department is mandated with the responsibility of ensuring secure and sustainable provision of energy for socio-economic development in our country – a mandate that has been reconfirmed via the NDP and the President’s 2014 SONA. • Since its establishment, the Department’s financial and human capacity has seen a steady increase. INTRODUCTION

  4. The Department is supported by six state-owned entities reporting to the Minister of Energy. • These include regulators in the electricity, petroleum, gas and nuclear sectors, researchers in clean and renewable energy and other energy sectors, as well as promoting development within the sector. • The Department ensures that the strategic plans and annual performance plans of these entities are aligned to the overall Government priorities. • On the international front, the Department’s approach to international engagements focuses on energy security through maintaining and sourcing agreements with countries of interest – for skills development, technology, funding support and energy supply within the region. INTRODUCTION

  5. MACRO ORGANISATIONAL STRUCTURE OF DOE Minister Associated Institutions Deputy Minister Department of Energy Office of the DG Ministerial and Parliamentary Services Directorate Audit Services Branch Energy Policy, Planning and Clean Energy Branch Petroleum and Petroleum Products Regulation Branch Nuclear Energy Branch Energy Programmes and Projects Branch Corporate Services Branch Financial Management Services Branch Governance and Compliance

  6. STRATEGIC OUTCOMES The Department has identified the following Strategic Outcomes: • Security of Supply by ensuring that energy supply is secure and demand well managed; • Infrastructure development by facilitating an efficient, competitive and responsive energy infrastructure network; • Regulation and Competition certainty by ensuring that there is improved energy regulation and competition in the energy sector; • Universal Access and Transformation by ensuring that there is an efficient and diverse energy mix for universal access within a transformed energy sector; • Environmental Assets that are well protected and continually enhanced by cleaner energy technologies. • Climate Change response by implementing policies that adapt to and mitigate the effects of climate change. • Prudent Corporate Governance through implementation of good governance practices for effective and efficient service delivery.

  7. In its first five years of existence, the department has been focusing on the development and improvement of policy in support of energy security (as mandated), through an integrated energy planning approach while strengthening the regulatory framework within the energy sector and playing our role in helping to reduce the impact of greenhouse gas emissions. • New and old relations were established and reviewed, respectively, within the regions as well as the international platform at large with greater focus on promoting regional integration and promoting our participation in the international energy platform. THE FIRST FIVE YEARS OF DOE

  8. Improved access to energy services in rural communities through electrification of over 1.1 million new connections and the construction of Integrated Energy Centres. • This brought the figures of electricity connections to 6 mil for the past 20 years • Produced the country’s 20 year plan (IRP 2010) for electricity, with a deliberate bias towards cleaner energy. • Introduction of Independent Power Producers (IPPs) • The Department has gone a long way in creating regulatory certainty, which is bearing fruit through significant investments in energy infrastructure. HIGHLIGHTS FOR THE FIRST FIVE YEARS

  9. Inadequate generation capacity; • Distribution Infrastructure and management of distribution business; • Cost of energy; • Access to electricity; • Energy efficiency; • Lack of adequate skills levels and • Economic transformation. CHALLENGES

  10. The Department has reviewed its 2014/15 APP tabled in February 2014 to align it to the MTSF targets as well as the SONA; • For the 2014/15 financial year, the Department is appropriated R7.4bn, with 93% of the total budget earmark for transfer payments. • The bulk of the budget increase from the 2013/14 budget is allocated to the electrification programme and the solar water geyser programme. • The next two slides indicate the department’s areas of contribution to the twelve government outcomes and participation in the PICC and SIPs. THE 2014/15 ANNUAL PERFORMANCE PLAN

  11. DOE - CONTRIBUTION TO 12 GOVERNMENT OUTCOMES AND PICC The department contributes directly or indirectly to the following Outcomes Based Planning Approach: Outcome 4 – Employment: Decent employment through inclusive economic growth; Outcome 6 – Economic Infrastructure: An efficient, competitive and responsive economic infrastructure network Outcome 7 – Rural Development: Vibrant, equitable and sustainable rural communities with food security for all Outcome 8 – Integrated Human Settlements: Sustainable human settlement and improved quality of household life Outcome 9– Local Government: A responsive, accountable, effective and efficient local government system. Outcome 10 – Environment: Protect and enhance our environmental assets and natural resources. INEP is also reporting at this stage into SIP 1, 4, 6, 8, 9 and 10 of the PICC.

  12. SIP1: Unblocking the Northern Mineral Belt with the Waterberg as the catalyst • SIP 4: Unlocking the economic opportunities in North West Province • SIP 6: Integrated Municipal Infrastructure • SIP 8: Green Energy in Support of the South African Economy • SIP 9:Electricity generation to support socio-economic development • SIP10: Electricity Transmission and Distribution for All. PICC AND STRATEGIC INTEGRATED PROJECTS (SIPs)

  13. Increase access to electricity with an additional 265 000 grid connections and 15 000 non-grid installations; • Increase momentum on the installation of solar water heating units; • Finalise the Integrated Energy Plan (IEP) with more detailed infrastructure plans; • Address maintenance and refurbishment backlogs in the electricity distribution industry; • Strengthen the liquid fuels industry; and • Facilitate the process leading to the implementation of decisions taken on the nuclear programme. KEY FOCUS AREAS FOR THE 2014/15 (FY)

  14. Earmarked transfer payments to public entities, municipalities and other implementing institutions amounts to R6.89 billion which is equivalent to 92.94% of the Department’s total budget of R7.42 billion. • The remaining budget is for operational expenditure and this has been the trend of the budget for the past 4 years • The history of the fiscus allocation is as follows: • 2010/11 - R5.648 Billion • 2011/12 - R6.200 Billion (Increased by 9.7%) • 2012/13 - R6.734 Billion (Increased by 8.6%) • 2013/14 - R6.503 Billion (Decreased by 3%) • 2014/15 - R7.415 Billion (Increased by 14%) 2014/15 BUDGET COMMENTS

  15. 2014/15 BUDGET BREAKDOWN

  16. 2014/15 BUDGET ILLUSTRATION

  17. 2014 ENE ALLOCATIONOVERVIEW – PER PROGRAMME

  18. TRANSFER PAYMENT SCHEDULE

  19. Integrated National Electrification Plan • Finalization of Mini-ADAM distribution infrastructure pilots • Solar Water Gysers • Independent Power Producers • Nuclear Energy DEPARTMENT PROGRAMMES FOR 2014/15

  20. INEP - FUNDING MODEL

  21. Allocations for 2013/14

  22. INEP PERFORMANCE (13/14) 2013/14 connection target was 260 000 INEP manage to achieve 303 773 connections – over performed by 46 773 connections. Good co-operation from Eskom and less so good from Municipalities

  23. Allocations 2014/15 The reduction in the municipality programme by R 460 million and increase in the Eskom programme by R460 mil are factored into the above table, which will have the result that an additional 30 000 connections will have to be achieved by Eskom in 2014/15.

  24. Municipalities 14/15 allocations

  25. Eskom 14/15 allocations Note that R662,7 mil of all municipal allocations, while R2,314 bil of Eskom allocations are earmarked for the 24 least resourced District Municipalities for the 14/15 financial year, in line with support of SIP 6 initiative. Total grid allocation of R2.977 bil, as well as the full non-grid allocation of R96 mil makes out 73 % of the total INEP allocations for 14/15.

  26. Renewable Energy Independent Power Producers (REIPP) • IRP 2030 and the Renewable Energy Independent Power Producers (REIPP) • To-date, the Department has: • Under Bid Window 1, entered into 28 agreements on 5 November 2012 (about 1400 MW), of which about 600 MW of Green Energy is already been generated and supplied into the national grid by 14 IPPs. • Under Bid Window 2, entered into 19 agreements on 9 May 2013 (about 1 050 MW) . • 17 IPPs have started with construction • Under Bid Window 3, the DOE published the names of 17 preferred on 5 November 2013 (1 460 MW). • All bidders are currently busy with Financial Close. • Corrective measures are now been developed or in the process to be implemented with respect to the Socio-Economic Development.

  27. The Solar Water Heating Programme: • Eskom is the designated implementation agent and the SWH system procurer under the NSWHP • Available funds will be shared between Low and High Pressure systems in the ratio of 80:20. • Municipalities, being the sphere of government at the coalface of service delivery will provide required information, e.g select project sites, provide unemployment information and create avenues for local SMMEs. • Service level agreements will be signed between Eskom and Municipalities for project implementation. DEPARTMENT PROGRAMMES FOR 2014/15 - SWH

  28. DEPARTMENT PROGRAMMES FOR 2014/15 - SWH

  29. Within the Nuclear Energy Programme, the Department will: • Demystify nuclear energy through public awareness campaign; • Finalise financing and funding mechanisms for the nuclear programme; • Commission the economic impact assessment study of localization of nuclear programme; and • Appoint a Transactional Advisor to conclude technical work as precursor to launch the nuclear procurement. Nuclear Programme

  30. In this financial year, we intend to develop the following pieces of legislation: • Electricity Regulation Amendment Bill whichwill provide a regulatory framework that promotes IPP participation. • National Energy Regulator Amendment Bill which will: • Improve credibility of the decision making process by establishing an Appeal Board; • Improve the governance, accountability of the regulator; and • Promote efficient regulation of the energy sector and improve governance. • Gas Amendment Bill thatwill promote an efficient, competitive and responsive economic growth; and leveraging available gas resources (appropriate dispensation inclusive of Compressed Natural Gas, etc). • Independent Systems and Market Operator (ISMO) Bill toencourage IPP participation in electricity generation through establishment of an independent buyer. 2014/15 Legislative Programme

  31. The budget over the MTEF period does not respond to the following: • The budget has been adapted and funds re-prioritised to meet the departments strategic priorities, SONA, NDP, MSTF and broader government priorities • Transfers to Entities and Municipalities will continue to represent a significant portion of the departments budget, with an average of 93%, hence in line with service delivery, however there are human & financial constraints in the departments oversight role and policy development areas • Overall performance expected of the department, especially in line function areas • The funding priorities over the MTEF period will be discussed with National Treasury on the 4th August 2014 Closing Remarks

  32. Thank You!

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