South Africa Yearbook 2012/13

SOUTH AFRICA YEARBOOK 2012/13

Energy Energy

Energy is the vital force that powers business, manufacturing, the transportation of goods and the delivery of services to the nation. It is the lifeblood of modern living, as it has an impact on everything we do and affects our Energy very existence. South Africa’s steady economic growth, coupled with an increasing focus on industri- alisation and a mass electrification programme to take power into deep rural areas, has seen a steep increase in the demand for energy. In fact, South Africa’s energy demand is expected to be twice the current levels by 2030. The Department of Energy has, since its formation in 2009, been responsible for ensuring secure and sustainable provision of energy for socio-economic development. With the cooperation of Eskom, the department has embarked on a massive programme to bring the electricity supply and distribution system into balance. At a cost of about R340 billion, Eskom is building new power stations, including Medupi in Limpopo that will make its first contribution to the energy grid by 2013, and Kusile, which will come on stream in mid-2014. South Africa has always been heavily dependent on coal and although the country has ample supplies of coal, it is looking at ways to diversify its power-generating capacity. Government is also looking to support sustainable green-energy initiatives on a national scale through a diverse range of clean-energy options as envisaged in the Integrated Resource Plan (IRP). In terms of this plan, which is a 20-year projection on electricity demand and production, about 42% of electricity generated must come from renewable resources. To this end, government has signed contracts to the value of R47 billion investing in the renewable energy programme. This involves 28 projects in wind, solar and small hydro technologies, to be developed in the Eastern Cape, Western Cape, Northern Cape and in the Free State. In addition, government is continuing its Nuclear Energy Policy, which aims to increase the role of nuclear energy as part of the process of diversifying the primary energy sources to ensure energy security.

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Government is also continuing the imple- • The Central Energy Fund (CEF) Act, 1977 mentation of its energy efficiency programme (Act 38 of 1977), as amended, provides for for the industrial and domestic sector in line the determination of state levies. with the IRP to achieve the target for improved • The Nuclear Energy Act, 1999 (Act 46 of energy efficiency in South Africa of 12% by 1999) provides for the establishment of the 2015. National Energy Corporation of South Africa As part of its energy efficiency strategy, gov- (Necsa) and defines its functions, powers, ernment will also launch a public awareness financial and operational accountability, gov- campaign aimed at making energy efficiency ernance and management. It also regulates an integral part of domestic, commercial and the acquisition and possession of nuclear industrial activity. fuel, nuclear and related material and equipment, and the import and export thereof. Legislation and policies Other relevant legislation include: The Department of Energy derives its mandate • National Nuclear Regulator (NNR) Act, 1999 from the White Paper on Energy Policy, 1998, (Act 47 of 1999) the White Paper on Renewable Energy, 2003, • National Radioactive Waste Disposal Insti- and the National Energy Efficiency Strategy. tute Act, 2008 (Act 53 of 2008) The following legislation regulates the • Petroleum Pipelines Act, 2003 (Act 60 of energy sector: 2003) • The National Energy Act, 2008 (Act 34 of • Petroleum Pipelines Levies Act, 2004 (Act 28 2008), ensures that diverse energy resources of 2004) are available in sustainable quantities and • Gas Act, 2001 (Act 48 of 2001) at affordable prices in South Africa. In addi- • Gas Regulator Levies Act, 2002 (Act 75 of tion, the Act provides for the increased use 2002) of renewable energies, contingency energy • National Energy Regulator Act, 2004 (Act 40 supplies, the holding of strategic energy of 2004) feedstock and carriers, and adequate invest- • Electricity Act, 1987 (Act 41 of 1987), as ment in energy infrastructure. amended • The Electricity Regulation Act, 2006 (Act 4 • National Environmental Management Act, of 2006), establishes a national regulatory 1999 (Act 107 of 1999) framework for the electricity supply industry • Mineral and Petroleum Resources Develop- to be enforced by the National Energy Regu- ment Act, 2002 (Act 28 of 2002). lator of South Africa (Nersa). The Minister of Legislation tabled in Parliament during 2011/12 Energy is empowered to make determina- included: tions for the establishment of independent • Electricity Regulation Amendment Bill power producers (IPPs) to increase the sup- • The National Energy Regulator Amendment ply of electricity. Bill • The Petroleum Products Act, 1977 (Act 120 • The Independent Systems and Market of 1977), as amended, provides for meas- Operator Bill. ures in the saving of petroleum products and the economy in the cost of distribution, National Energy Efficiency Strategy the maintenance and control of price, the In November 2012, Cabinet approved South furnishing of certain information regarding Africa’s revised energy efficiency strategy. The petroleum products and the rendering of strategy was initially approved by Cabinet in service. It further provides for the licensing March 2005, and a review process was started of people involved in the manufacturing, in October 2008. The strategy sets the target wholesale and retailing of prescribed petro- for improved energy efficiency in South Africa leum products. at 12% by 2015.

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The objectives of the strategy are to: National building standards • promote and develop energy efficiency Energy efficient regulations for new buildings practices, norms and standards in different form part of the deliverables of South Africa’s energy sectors, including industries, com- National Energy Strategy to strengthen stand- mercial buildings, households, transport and ards and regulations for energy efficiency. agriculture The energy efficiency regulations apply to • develop energy efficiency policies and residential and commercial buildings, places guidelines of learning and worship, certain medical • facilitate information awareness, and capa- clinics and other categories of building. The city-building campaigns on energy efficiency regulations make it compulsory for all new and environmental issues buildings to be designed and constructed to • promote energy for sustainable development a standard that makes it possible for the user • mitigate negative impacts of energy use on to minimise the energy required to meet the the environment functional requirements. This will save energy • promote energy efficiency technologies and significantly, which will relieve pressure on the clean energy technologies including environ- electricity supply grid. mentally sound energy technologies In addition to temperature regulations, all • promote and facilitate international collabo- buildings will also have to be fitted with renew- ration and cooperation able-energy water-heating systems such as • ensure the Department of Energy’s par- solar systems, which also have to comply with ticipation at international forums on energy the South African national standards. efficiency and the environment, including the United Nations (UN) Commission on National Strategic Fuels Stock Policy Sustainable Development, the Kyoto Proto- The Energy Security Master Plan for Liquid col and the UN Framework Convention on Fuel identified a number of capacity constraints Climate Change. and challenges faced by the petroleum sector The strategy includes Eskom’s Demand Side in meeting the energy demand. In response Management (DSM). When a utility or local to these, the National Strategic Fuels Stock authority that supplies electricity influences Policy was finalised and expected to be pub- the way it is used by customers, this activity is lished for comments early in 2013. known as DSM. Municipalities are also imple- It sets out the framework for the storage of menting their own energy efficiency strategies. fuel stock by government and the industry. In addition, 32 large companies have joined It also seeks to guide the necessary invest- forces with the Department of Energy and ment decisions within the liquid-fuels sector to Eskom by signing an energy efficiency accord, ensure the security of energy supply. committing themselves to targets contained in the strategy. National Liquid Petroleum Gas (LPG) To assist households in becoming more Strategy energy efficient, the Department of Energy ini- As part of the promotion of clean energy tiated an appliance labelling campaign. Labels sources, an LPG Strategy was submitted to on household appliances inform consumers of Cabinet in 2011/12. The strategy’s main object- the energy efficiency of the appliances. The ives are to provide access to safe, cleaner, Department of Energy, in collaboration with efficient, portable, environmentally friendly and the Department of Public Works and Eskom, affordable thermal fuel for all households, and is retrofitting government buildings to make to switch low-income households away from them more energy efficient. This contributes the use of coal, paraffin and biomass to LPG. a saving of about R600 000 in electricity bills The strategy will highlight strategic options per year. that could be adopted for the orderly devel-

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opment of the LPG industry in South Africa National Nuclear Regulator (NNR) to make LPG an energy carrier of choice for The NNR provides for the protection of people, thermal applications. property and the environment against nuclear damage, through the establishment of safety Budget and funding standards and regulatory practices. Strategic The Department of Energy was allocated objectives between 2011 and 2014 include: R6,8 billion in 2012/13, of which 95% (R6,5 bil- • optimising the regulatory framework lion) was transferred to the following: • creating a high-quality performance and • the Integrated National Energy Programme service culture (Inep): R3,1 billion to connect 150 000 and • promoting good governance 10 000 households to the grid and none-grid • developing and maintaining sound organisa- systems, respectively tional infrastructure • Energy efficiency and DSM programmes: • developing a financially viable and sustain- R1 billion to accelerate the solar water heat- able funding model ing programme • managing talent and knowledge • the New Multiproduct Pipeline: R1,5 billion • enhancing stakeholder relations. for the final instalment • Necsa: R554 million to continue with its Nuclear Energy Corporation of central role as the anchor for nuclear energy, South Africa (Necsa) research, development and innovation Necsa is a public company and is wholly state- • the balance will be used for smaller projects owned. Its functions are to: and transfers to state-owned entities (SOEs) • undertake and promote research into nuclear reporting to the Minister of Energy as follows: energy and radiation sciences and technology - South African National Energy Develop- • process source, special nuclear, and restricted ment Institute (Sanedi): R50,1 million material including uranium enrichment - NNR: R30,9 million • collaborate with other entities. - Renewable Energy Fund Subsidy Scheme: The Nuclear Energy Act, 1999 provides for R40,4 million. the commercialisation of nuclear and related The operational budget comprised R307,27 mil- products and services, and delegates spe- lion, a 0,06% increase from 2011/12. cific responsibilities to Necsa, including the implementation and execution of national Role players safeguards and other international obligations. The Nuclear Energy Policy of 2008 elaborated National Energy Regulator of South on Necsa’s mandate relating to research and Africa (Nersa) development and nuclear fuel-cycle responsi- Nersa regulates electricity, gas and petroleum bilities. pipelines in South Africa. It adopted high-level Necsa’s main function is to serve as the strategic objectives over the next three years, anchor for nuclear energy research and devel- namely: opment, and innovation in South Africa. The • creating regulatory certainty in the energy research focus is directed mainly at nuclear sector technology applications, such as: • protecting the interests of the public and • the production of medical isotopes customers • applied chemistry with an emphasis on uran- • creating dispensation for fair competition for ium chemistry industry players • the application of radiation and nuclear tech- • creating energy supply certainty nologies • creating an effective organisation that deliv- • aspects of the nuclear fuel cycle, including ers on its mandate and purpose. waste.

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The corporation is also responsible for: It also provided support to postgraduate • operating the Safari-1 research reactor to research students, promoted career develop- undertake nuclear science research and ment and assisted internationally renowned development and to provide irradiation researchers to return to or remain in South services for the production of medical radio- Africa. isotopes • decommissioning and decontaminating nu- Central Energy Fund (CEF) clear facilities The CEF researches, finances, develops and • implementing the Nuclear Non-Proliferation exploits appropriate energy solutions across Treaty and the Comprehensive Safeguards the spectrum of energy sources to meet South Agreement with the International Atomic Africa’s future energy needs. It is also man- Energy Agency; the Africa Regional Cooper- dated to manage the Equalisation Fund, which ative Agreement for Research, Develop- collects levies from the retail sales of petroleum ment and Training related to Nuclear Sci- products to eliminate unnecessary fluctuations ence and Technology; and the Pelindaba in the retail price of liquid fuel and to give tariff Treaty. protection to the synthetic fuel industry. In the medium term, Necsa will focus on: The objectives of the CEF are: • radiation research, products and services • managing the energy business for the bene- • nuclear fuel research and development in fit of all South Africans relation to low-enriched uranium research- • playing an active role in the governance and reactor production facilities planning of all its subsidiaries and coordinat- • nuclear component manufacturing to sup- ing the long-term future of the group port future nuclear programmes and future • improving energy security of supply by power reactors diversifying sources, and building and man- • contributing to higher industrial manufactur- aging strategic energy stocks and energy ing standards and sustainable job creation. infrastructure • developing and investing in renewable and South African National Energy alternative energy sources and in energy Development Institute (Sanedi) efficiency Sanedi (previously Saneri) was restructured • developing human capacity and investing in to expand its mandate to also promote energy relevant research and development efficiency initiatives and demand-side man- • managing and optimally exploiting local stra- agement. Additionally, it will house South tegic energy and related resources Africa’s carbon-capture and storage research • mitigating against environmental impacts and development, and other energy research and maximising sustainable development. programmes. The original institute’s mandate was to The Department of Energy and PetroSA launched an Integrated Energy Centre in Mbizana in the stimulate innovation in energy research and Eastern Cape in November 2012. development, transform the gender and The centre is a one-stop shop offering services race profile of researchers in the sector, and of energy goods. It will house an information improve South Africa’s competitiveness in centre, a convenience store, a car wash, an energy research internationally by procuring energy shop, ablution facilities and a fuels fore- research, facilitating cooperation with others court. Petrol, diesel, paraffin and liquid petroleum in the research community and commercialis- gas will be sold at the centre. ing innovations achieved under its auspices Previously, Mbizana residents had to travel by disseminating research and development at least 15 km to the nearest town to purchase results and, if required, conducting its own every-day commodities such as electricity, petrol and diesel. research programmes.

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Integrated energy centres (IECs) In 2011/12 state-owned enterprises commit- The IECs Programme is one of the initiatives ted over R131 million to help fund social and the department has adopted to contribute to community programmes, with the bulk of funding rural development and job creation in the fight coming from Eskom and Transnet. against energy poverty. Sasol supported the drive to commemorate Through Sasol Synfuels International, Sasol the 20th anniversary of the release of former is pursuing international opportunities to com- President Nelson Mandela by establishing an mercialise its gas-to-liquids (GTL) and coal-to- IEC at Qunu. liquids (CTL) technology. In 2010, the department reported challenges Sasol’s energy cluster focuses on the manu- facing the Kuruman (Northern Cape) and facturing, refining and marketing of automotive Eshane (KwaZulu-Natal) IECs. The depart- and industrial fuels, oils and gas. ment, together with Total (Pty) Ltd and the With partners in China, the company municipalities in these areas, revived the pro- launched a feasibility study into a CTL plant jects, which were re-opened during 2011/12. with a potential capacity of around 80 000 bar- The department is also working with the rels per day. Department of Rural Development and Land End products include petrol; diesel; jet fuel; Reform to develop future IECs, in line with fuel oil; illuminating paraffin; liquefied petro- the Comprehensive Rural Development Pro- leum gas; pipeline gas; lubricants and greases; gramme. The two departments conducted an bitumen and naphtha. energy needs assessment in Muyexe Village Sasol’s local energy cluster comprises the in Giyani. following: In 2011, the department launched a further • Sasol Oil: Handles crude oil refining activ- two IECs, funded by PetroSA, the national oil ities as well as blending and marketing of company of South Africa. liquid fuels and lubricants. On average, 60 temporary jobs are created • Sasol Gas: Supplier of pipeline gas to indus- during the construction phase of each IEC, and trial and commercial customers. 10 permanent jobs once the centre is opera- • Sasol Mining: Produces about 40 million tons tional. Four new IECs were in development (Mt) of saleable coal per year. in 2012/13, and will contribute a further 240 • Sasol Synfuels: Operates the coal-based construction-related jobs and 40 permanent synfuels manufacturing facility at Secunda, jobs. in Mpumalanga.

Sasol Eskom Sasol is an integrated energy and chemical Eskom generates, transmits and distributes company. It beneficiates coal, oil and gas into electricity to industrial, mining, commercial, liquid fuels, fuel components and chemicals agricultural and residential customers and with the help of its proprietary Fischer-Tropsch redistributors. Additional power stations and processes. major power lines are being built to meet rising Sasol mines coal in South Africa, produces electricity demand in South Africa. Eskom will gas in Mozambique and oil in Gabon. Its continue to focus on improving and strengthen- chemical manufacturing and marketing opera- ing its core business of electricity generation, tions span the globe. In South Africa, Sasol transmission, trading and distribution. refines imported crude oil and retails liquid Eskom buys electricity from and sells it to fuels through its network of retail convenience the countries of the Southern African Develop- centres. Sasol also supplies fuels to other ment Community (SADC). Future involvement distributors in the region and gas to industrial in African markets outside South Africa – the customers in South Africa. SADC countries connected to the South Af-

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rican grid and the rest of Africa – is limited to offshore, in South Africa and undertakes the those projects that have a direct impact on necessary marketing, promotion and monitor- ensuring security of supply for South Africa. ing of operations. • Petronet owns, operates, manages and National Nuclear Energy Executive maintains a network of 3 000 km of high- Coordination Committee pressure petroleum and gas pipelines, on In November 2012, Cabinet was briefed on the behalf of the government. first meeting of the National Nuclear Energy Executive Coordination Committee, chaired by Energy resources Deputy President Kgalema Motlanthe, to over- South Africa produces about 5% of its fuel see any future nuclear procurement processes needs from gas, about 35% from coal and as well as the energy build programme. about 50% from local crude oil refineries. About It endorsed the proposed phased decision- 10% is imported from refineries elsewhere in making approach for implementation of the the world. The country has a sizeable capital nuclear programme. It also endorsed the stock and management capacity to produce designation of Eskom as the owner-operator fuel from gas. The Department of Energy’s as per the Nuclear Energy Policy of 2008. Hydrocarbons and Energy Planning Branch is Cabinet approved the Nuclear Communication responsible for coal, gas, liquid fuels, energy and Stakeholder Engagement Strategy. efficiency, renewable energy and energy planning, including the energy database. The Southern African Power Pool The White Paper on the Promotion of Renew- (SAPP) able Energy and Clean Energy Development The SAPP allows the free trading of electricity (2002) commits South Africa to producing 5% between SADC member countries, providing of the country’s energy supply from renewable South Africa with access to the vast hydro- energy sources by 2013. power potential in the countries to the north, notably the significant potential in the Congo Liquid fuels River (Inga Falls). SAPP has made it possible The recommendations made in the Energy for members to delay capital expenditure on Security Master Plan for Liquid Fuels, new plants due to the existence of intercon- approved by Cabinet in 2007, continue to nections and a power pool in the region. SAPP be implemented, with the focus primarily on member countries are Mozambique, Bo- addressing short- to medium-term infrastruc- tswana, Malawi, Angola, South Africa, Leso- tural constraints within the liquid fuels sector. tho, Namibia, the Democratic Republic of South Africa faces a number of specific chal- Congo (DRC), Swaziland, Tanzania, Zambia lenges in the liquid fuels sector: and Zimbabwe. Gas stocks for the existing gas-to-liquids plant from offshore fields are declining. South Other role players Africa should source sufficient feedstocks to • iGas is the official state agency for the devel- support – and, ideally, increase – production. opment of the hydrocarbon gas industry in The best option to secure feedstocks would southern Africa. be to invest in gas fields close or adjacent to • PetroSA is a government-owned oil and existing fields in the southern Cape, as mar- gas company mandated by Cabinet to lead ginal costs are lower and it will allow for further developments in gas infrastructure in the exploitation of existing fields, maximising use Western Cape. of existing capital. PetroSA is best placed to • The Petroleum Agency of South Africa lead this petroleum refinery investment, given promotes the exploration and exploitation its existing capital and its management experi- of natural oil and gas, both onshore and ence.

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In the longer term, the Mossel Bay Refinery aged a shift to greater use of public transport. could use either liquefied natural gas imports The South African liquid-fuels sector presents or Karoo shale gas, if it becomes available. several opportunities for investors throughout Refining capacity has run out and South Africa the petroleum value chain. now has to import a share of its refined fuel A key feature of the South African liquid-fuels needs. There are five options to deal with this, sector is that most transport fuel is produced namely: in the coastal areas, about 68% of which is • building a new oil-to-liquid refinery (such as consumed in the inland region of Gauteng. the proposed Mthombo Project in Coega) This requires investments in storage and dis- • building a new coal-to-liquid refinery tribution facilities for the supply of petroleum • upgrading the existing refineries; allowing products at the point of need. significant expansion of one or more of the A new R15-billion pipeline to transport petro- existing refineries leum from Durban to Johannesburg is under • importing refined product construction. • building a refinery in Angola or Nigeria and The 555-km trunk pipeline, with pump sta- buying a share of the product of that refinery. tions, terminals and a 160-km inland pipeline The least risky and most cost-effective option network, will increase capacity from the exist- is to continue importing a share of refined prod- ing 4,4 billion litres to 8,4 billion litres and is ucts until the country reaches a stage where it expected to become operational by the end of can absorb the output of either a new refinery or December 2013. a major upgrade of an existing refinery. South These mega infrastructural projects and Africa will, therefore, continue to import, taking related support infrastructure require a close a decision on the next step by 2016/17. Tim- and ongoing partnership between SOEs and ing is important, given lead-time requirements private companies. to develop a new refinery (estimated at about eight to 10 years) that would be expected to Oil and natural gas produce output by 2025 to 2028 (if no other South Africa has very limited oil reserves. options are implemented). About 60% of its crude oil requirements are Other issues related to liquid fuels include: met by imports from the Middle East and Africa. • Clean fuel standards: Health issues and the Refined petroleum products such as petrol, advent of new, more efficient automobile diesel, residual fuel oil, paraffin, jet fuel, avia- engines mean that South Africa needs to tion gasoline, LPG and refinery gas are pro- migrate to international clean fuel standards. duced by the following methods: • Vehicle carbon tax: If South Africa adopted a • crude oil refining (oil refineries) consistent carbon price across the economy, • CTL and GTL fuels (Sasol) and this price was around R100/t carbon, it • natural GTL (PetroSA). would translate into an increase of only 5% The wholesale and retail markets for petroleum at petrol pumps (compared to 20% for the products in South Africa are subject to a set of electricity sector), thus sending only a weak government controls. signal to consumers to conserve petrol or Government regulates wholesale margins diesel. A much more effective instrument and controls the retail price of petrol. The would be a tax on vehicle sales based on industry has entered into product-exchange their carbon-emission signatures. agreements to serve different markets. • Electric vehicles: Over the next 20 years, Together, these controls provide for access South Africa can expect to see greater use to fuel throughout the country and protect con- of electric vehicles, making it even more vital sumers, while rendering a reasonable return to start decarbonising electricity generation. on investment to the oil industry and enhancing The Department of Energy has also encour- opportunities for employment.

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Refineries and Sasol produce LPG and According to the United States of America illuminating paraffin (kerosene). Most LPG is (USA) Energy Information Administration, consumed in the country and the rest is used technically recoverable shale-gas resources in refineries as fuel and/or exported regionally. in South Africa form the fifth-largest reserve The department views natural gas as an globally. Confirmation of recoverable reserves evolving energy source, despite the coun- is still necessary through further drilling of try’s limited gas reserves. There are projects test wells. Even if economically recoverable underway to explore the potential of importing resources are much lower than currently es- natural gas, both as liquid natural gas and timated, shale gas as a transitional fuel has the compressed natural gas. potential to contribute a very large proportion To this end, the IRP was developed, which of South Africa’s electricity needs. incorporates gas among alternative energy In investigating the potential for accessing sources for electricity generation. The IRP pre- shale gas in the Karoo Basin in the North- sents a 20-year view on South Africa’s energy ern Cape, Cabinet decided that only normal mix that seeks to balance growth in demand exploration would take place until a proper and with South Africa’s commitments to reduce relevant regulatory framework had been put in its dependence on coal and to lower climate- place, and until government was satisfied that it changing emissions. could deal adequately with the consequences The IRP aims to: of the technique known as hydraulic fracturing. • improve the country’s global competitive- Cabinet established a task team to evaluate ness the use of a hydraulic fracturing technique in • support job creation the extraction of shale gas. This task team • improve management of natural resources comprised representatives from the depart- • reduce and mitigate greenhouse gas (GHG) ments of environmental affairs, water affairs, emissions in line with commitments on science and technology, energy, mineral reduction targets. resources, the Petroleum Agency of South Cabinet’s approval of the IRP and the tabling Africa, the Council for Geoscience, Square in Parliament of the Independent System and Kilometre Array (known as SKA) South Africa, Market Operator Bill in March 2011 bode well the Water Research Commission and Eskom. for the facilitation of participation of IPPs in The task team, in turn, appointed a working electricity generation in South Africa. Under group of experts that brought on board tech- the approved IRP, imported gas is expected to nical advisers and academics from the Uni- make up 6% of all new electricity generation, versity of the Free State and University of the hydro power 6%, open-cycle gas turbines 9%, Western Cape, who served as a reference coal 15% and nuclear 23%. group. This translates into 15% of electricity being This team was tasked with evaluating the obtained from gas. Natural gas accounts for potential environmental risks posed by the use 3% of the country’s primary energy consump- of hydraulic fracturing as a method of extract- tion. ing shale gas, and the negative and positive social and economic impacts of shale gas Alternative gas resources exploitation as identified in the Karoo Basin. Experiments are underway to assess the In August 2012, Cabinet approved the task potential for mining coal-bed methane gas, team’s report on the matter and lifted the although the overall potential of this resource moratorium on the processing of applications for producing electricity in South Africa is for exploration in the Karoo Basin. It was also probably less than previously thought. Under- made clear that this was conditional on the ground coal gassification technology is also establishment of the appropriate regulations, being developed. controls and coordination systems, which is

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expected to be in place by the end of 2013. able costs and, as a result, a large coal-mining Hydraulic fracturing will be authorised under industry has developed. the strict supervision of the monitoring com- In addition to the extensive use of coal in mittee. In the event of any unacceptable out- the domestic economy, about 28% of South comes, the process may be halted. Africa’s production is exported, mainly through There will be ongoing research, facilitated by the Richards Bay Coal Terminal, making South relevant institutions, to develop and enhance Africa the fourth-largest coal exporting country scientific knowledge, including but not limited in the world. to geo-hydrology of the prospective areas, South Africa’s coal is obtained from collieries methodologies for hydraulic fracturing in South that range from among the largest in the world Africa and environmental impact. to small-scale producers. About 51% of South African coal mining is Electricity done underground, while the rest is produced Results from Census 2011 indicate that 84% by open-cast methods. The coal-mining indus- of the 51,7 million people in South Africa has try is highly concentrated, with five companies access to electricity. accounting for 85% of saleable coal produc- However, the electricity demand is expected tion. to double over the next 20 years as govern- Production is concentrated in large mines, ment implements its Programme of Action, with 11 mines accounting for 70% of the output. including the Infrastructure Development Pro- South African coal for local electricity produc- gramme, to put the country’s economy onto a tion is among the cheapest in the world. The higher growth path. beneficiation of coal, particularly for export, To this end, more than R340 billion will be results in more than 65 Mt of coal discards spent on Eskom’s New Build Programme. This being produced every year. will bring on line a further 11 641 MW of new About 21% of the run-of-mine coal produced capacity in the short term, adding to Eskom’s is exported, and 21% is used locally (excluding existing 40 000 MW of capacity. power-station coal). The rest is not saleable Government’s goal is to ensure that all South and is discarded. African households have electricity by 2014. The remainder of South Africa’s coal production feeds the various local industries: Coal • 62% is used for electricity generation South Africa’s indigenous energy-resource • 23% for petrochemical industries (Sasol) base is dominated by coal. Internationally, coal • 8% for general industry is the most widely used primary fuel, account- • 4% for the metallurgical industry (Mittal) ing for about 36% of the total fuel consumption • 4% is purchased by merchants and sold of the world’s electricity production. locally or exported. By international standards, South Africa’s The key role played by South Africa’s coal coal deposits are relatively shallow with thick reserves in the economy is illustrated by the seams, which make them easier and cheaper fact that Eskom ranks first in the world as a to mine. At the present production rate, it is steam coal user and seventh as an electricity estimated that there is more than 50 years of generator. Sasol is the largest coal-to-chem- coal supply left. icals producer in the world. About 65% of South Africa’s primary energy needs are provided by coal. This is unlikely to Renewable and alternative fuels change significantly in the next two decades, The Department of Energy has the sole man- owing to the relative lack of suitable altern- date to promote the use of renewable energy, atives to coal as an energy source. Many of the initiate projects to advance the use of renew- deposits can be exploited at extremely favourable energy and annually monitor the precise

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quantity of energy produced from renewable Every year, the department collects data on energy. renewable energy contributions from relevant The White Paper on Renewable Energy stakeholders to assess or evaluate progress (2003) has set a target of 10 000 GWh of towards this goal. energy to be produced from renewable energy The target can be achieved mainly from pro- sources (mainly from biomass, wind, solar and duction of renewable energy by grid, off-grid (a small-scale hydro) by 2013. source of energy not connected to a grid) and Following Cabinet approval of the White bio-fuel facilities. This renewable energy will be Paper, the Department of Energy proceeded used for power generation to the grid and for with the development of its renewable energy water heating purposes. strategy. The implementation plan of the The 10 000 GWh 2013 target would be various technologies was identified in a macro- equivalent to electrifying approximately two economic study undertaken in 2003. The White million households having an annual electri- Paper’s target of 10 000 GWh renewable city consumption of 5 000 kWh. Put another energy contribution to final energy consump- way, the 10 000 GWh target is equivalent to tion by 2013 was confirmed to be economically about 5% of the present electricity generation viable with subsidies and carbon financing. in South Africa. This is equivalent to replacing Achieving the target will: two 660-MW units of Eskom’s combined coal- • add about 1 667 MW of new renewable fired power stations. energy capacity, with a nett impact on gross domestic product as high as R1,071 billion Biofuel a year The biofuel sector has grown rapidly interna- • create additional government revenue of tionally. However, South Africa has remained R299 million only a peripheral participant in the sector’s • stimulate additional income that will flow growth. There are several reasons for this: to low-income households by as much as • being a relatively new sector there are vari- R128 million, creating just over 20 000 new ous complex regulatory barriers that need to jobs be finalised • contribute to water savings of 16,5 million • the global economic crisis and the resultant kilolitres, which translates into a R26,6 mil- reduction in oil prices reduced the com- lion saving. mercial viability of some investments and Renewable energy sources, other than negatively affected investor sentiment biomass (the energy from plants and plant- • national debates have tended to focus on derived materials), have not yet been exploited food-versus-fuel arguments and the poten- optimally in South Africa. tial to create biofuels using crop surpluses. The vision of the Department of Energy is to South Africa has significant potential to develop make adequate and affordable energy avail- a commercially viable biofuels sector notwith- able to developing communities through a standing the country’s water-poor status. The mix of providing alternative energy resources Industrial Development Corporation (IDC) and at a reasonable cost. The aim is to satisfy the the CEF are the main investors in the sector in basic needs of the developing sector and at the South Africa. The IDC, in particular, is involved same time promote the effective use of South in all four of South Africa’s current biofuel pro- Africa’s vast alternative energy sources. jects. To monitor progress towards the White The biofuels sector has strong linkages to Paper’s target of producing 10 000 GWh of agriculture, manufacturing and distribution and energy from renewable energy sources by has the potential to create substantial numbers 2013, a monitoring and evaluation project has of labour-intensive jobs in the agriculture sec- been set up. tor in particular. In addition, second-generation

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biofuel technology will also contribute to South In September 2012, fuel company Total unveiled Africa meeting its renewable energy targets its first sustainable service station in Fairland, sustainably. Johannesburg. Innovative eco-friendly fea- Government has committed to a 2% blend tures include natural lighting, enhanced venti- target for biofuels inclusion in the national fuel lation, double-walled underground tanks, solar panels and energy-reducing glass for lower elec- supply. If South Africa increased its blending tricity consumption, easy-access recycling recep- target to 10%, some 125 000 direct jobs could tacles, and a water-harvesting facility that col- be created, many of which would be based in lects rainwater in underground tanks to use for rural areas, where poverty is widespread. the bathrooms, or to water the plants and rinse off the forecourt floor. Hydro power Energy from water can be generated from waves, tides, waterfalls and rivers and will stand-alones or in a hybrid combination with never be depleted as long as water is avail- other renewable energy sources. Advantage able. South Africa has a mix of small hydro- can be derived from the association with other electricity stations and pumped-water storage uses of water – such as water supply, irriga- schemes. tion and flood control– which are critical to the Pumping uses some electricity, but this is future economic and socio-economic develop- done in off-peak periods. During peak hours, ment of South Africa. when extra electricity is needed, the water Ocean energy could potentially be derived is released through a turbine that drives an from the various characteristics of the sea. electric generator. Peak hours are usually from For example, the rise and fall of the waves 06:00 to 08:00 and 18:00 to 20:00. could be converted into hydraulic pressure by South Africa used to import electricity from mechanical compression devices. the Cahora Bassa hydropower station in Such pressure could drive a turbine gener- Mozambique and will do so again once the ator to produce electricity, while the tidal varia- transmission line is repaired. There is also the tion, sea current and different thermal layers in potential to import more hydropower from coun- the ocean could also be used. tries such as Zambia, Zimbabwe and Zaire. If The main reason why this energy resource is this happens, South Africa could become less not being harnessed is that no reliable techno- dependent on coal-fired power stations. logy for generating electricity from this resource However, the generation of hydro-electricity exists. is not without environmental effects; for exam- Various companies are testing systems ple, large areas of land may be flooded when internationally to develop technically viable dams are built, which will disrupt wildlife hab- solutions. Once technical reliability has been itats and residential and farming areas. proven, cost-effectiveness in relation to other Global pressures regarding the environmen- solutions will have to be established. tal impact and displacement of settlements Eskom is continuing resource surveys of the by huge storage dams will likely limit the Agulhas Current on the east coast of South exploitation of hydropower on a large scale. Africa and of wave energy, in partnership with Irrespective of the size of its installation, any the Department of Environmental Affairs and hydropower development will require author- the Bayworld Centre for Research and Educa- isation in terms of the National Water Act 1998, tion. Act 36 of 1998. Results have proved the technical feasibility The Eastern Cape and KwaZulu-Natal of extracting significant large-scale renewable are endowed with the best potential for the energy from the current. development of small, i.e. less than 1 MW, The Bramhoek and Bedford dams have both hydropower plants. These plants can either be been completed and the R23-billion Ingula

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Pumped Storage Scheme will be implemented much as 65%, which could significantly benefit during 2013/14. To date, 2 400 MW of capacity households’ energy costs. has been awarded to renewable projects. Energy-efficient homes may be constructed In August 2012, Cabinet approved a draft at the same direct cost (and lower life-cycle treaty between South Africa and the DRC for cost) as energy-wasteful houses. The chal- the development of the Grand Inga Hydro- lenge is to develop awareness and to ensure electric Project. The project on the Congo implementation of basic energy efficiency River could become the largest hydro-electric principles. project in the world, and is expected to gener- Government is considering the following ate a massive 40 000 MW of electricity − more building norms and standards: orientation for than the current electricity generation in South the purposes of passive solar design, lighting, Africa, with the potential to supply clean and and installation of solar water heaters, insula- cost-effective hydroelectric power to meet the tion, ventilation, heating and air conditioning. needs of the DRC and surrounding or nearby The minimum direct normal radiation to countries, including South Africa. justify a combined solar-thermal power plant According to the IRP’s 20-year projection is 1 800 kWh/m2 per year. According to the on electricity supply and demand, about 6% Renewable-Energy Resource Database, the of electricity generated in the country will be area exceeding the minimum required direct required to come from hydro resources. normal radiation in South Africa covers about 194 000 km2. A 100-MW solar-thermal plant Solar power requires roughly 3 km2 (1 800 kWh/m2 a year). Most areas in South Africa average more than If 1% (1 940 km2) of the identified area is avail- 2 500 hours of sunshine per year, and aver- able for solar-thermal power generation, South age daily solar-radiation levels range between Africa has an installed potential of 64,6 GW, 4,5 kWh/m2 and 6,5 kWh/m2 in one day. The which is about 36 217 GWh per year. Back-up southern African region, and in fact the whole and energy-storage constraints are limiting the of Africa, is well endowed with sunshine all wider economic use of solar-electricity genera- year round. The annual 24-hour global solar tion (solar thermal and photovoltaic). radiation average is about 220 W/m2 for South In November, Spanish renewable energy Africa, compared with about 150 W/m2 for parts group Abengoa started construction on two of the USA, and about 100 W/m2 for Europe. concentrated solar power projects in South This makes the local resource one of the Africa. Abengoa, one of the 28 first-phase highest in the world. The solar resource is the IPPs, will build a 50 MW solar power tower most readily accessible in South Africa. It lends near Upington and a 100 MW parabolic-trough itself to a number of potential uses. solar power plant near Pofadder, both in the The country’s solar-equipment industry is semi-desert Northern Cape province. developing rapidly to meet demand. Annual The two plants will reduce South Africa’s photovoltaic panel-assembly capacity totals carbon dioxide emissions by about 498 000 t 5 MW, and a number of companies in South a year, while creating between 1 400 and 2 000 Africa manufacture solar water heaters. construction jobs and about 70 permanent Solar power is used increasingly for water- operation jobs, as well as numerous indirect pumping through the rural water-provision and jobs to fulfil the needs required by the plant sanitation programme of the Department of and its construction. Water Affairs. Research has shown that low-cost hous- Wind power ing could be made “energy smart” by using Eskom’s Klipheuwel wind energy facility, just elementary solar-passive building design north of Cape Town, is the first large wind- practice. This could result in fuel savings of as turbine facility in sub-Saharan Africa. The pilot

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phase of the Klipheuwel Research and Dem- expected to start supplying power by October onstration Project ran from 2002 to 2005. 2013. The R550-million wind farm will be the During that time, the Klipheuwel Pilot Wind first of its kind in the province. Nine 3-MW Farm generated more than 12 GWh of elec- turbines will provide 80 million kWh a year to tricity, reducing carbon dioxide emissions by the local electricity grid, accounting for nearly 11 000 t. The three wind turbines operated at half of Nelson Mandela Bay’s 10% renewable an average availability of 90%. The project’s energy target. It will provide electricity close to research phase has been completed and the source to around 5 000 to 6 000 homes. Over wind farm will be operated commercially for its the 20-year period of its licence, renewable anticipated 20-year lifespan as calculated from energy company Metrowind will plough an 2006. estimated R50 million back into local commu- The Darling Wind Farm in the Western nities, who will own a 5% stake in Van Stadens Cape has four wind turbines, which can supply Wind Farm through a trust. 5,2 MW. All the electricity produced would be In November 2012, Ireland’s Mainstream sold to Cape Town as part of a long-term power Renewable Power started construction on agreement with the city. The facility consists solar and wind power projects in the country, of four German-designed wind turbines. The as part of a €500-million (about R5,5-billion) structures are 50 m high with the blades span- investment. Mainstream Renewable Power is ning 31 m. Each turbine will produce 1,3 MW, one of the 28 IPPs that signed contracts with bringing the total output of the wind farm to the South African Government in the first round 5,2 MW. of the Renewable Energy Independent Power The project is referred to as the National Producer Procurement (REIPPP) Programme. Demonstration Project and will be used as an Mainstream Renewable Power and its part- example for future public-private partnerships ners will build a 138-MW wind farm in Jeffreys in the establishment of alternative electricity Bay in the Eastern Cape, and two 50 MW solar generation. photovoltaic parks in the Northern Cape – one The R75-million project was the first green- near De Aar and one at Droogfontein near energy initiative in the country to produce elec- Kimberley. All three projects are scheduled to tricity from wind power commercially. be fully operational by mid-2014. It was developed through collaboration The projects are expected to produce between the Darling Independent Power 635 GWh of electricity, enough to supply up to Producer, the Development Bank of Southern 48 000 households and displace approximately Africa and the CEF. The Danish International 628 000 t of carbon emissions per year. Development Agency also funded part of the project. Hybrid systems Construction on the first commercial wind Hybrid energy systems are a combination of farm at the Coega Industrial Development two or more renewable energy sources such Zone, Port Elizabeth, in the Eastern Cape was as photovoltaic, wind, micro-hydro, storage expected to start in September 2012, and was batteries and fuel-powered generator sets to provide a reliable off-grid (a source of energy May 2012 saw the opening of the PetroSA Syn- not connected to a grid) supply. thetic Fuels Innovation Centre at the University of Currently, there are two pilot hybrid systems the Western Cape. This is the country’s first aca- in the Eastern Cape at the Hluleka Nature demic facility offering research on improving the Reserve on the Wild Coast and at the neigh- quality of diesel. PetroSA, South Africa’s national oil company, provided funding of R36 million to bouring Lucingweni community. establish and operate the centre for an initial five- The Hluleka hybrid mini-grid system consists year research programme. of two proven 2,5 kW wind generators and three Shell solar photovoltaic module arrays

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fitted with 56 100-watt photovoltaic modules The 49M Campaign launched in 2011, is aimed wired in series (total 10,6 kW). An integrated at challenging South Africans to be more energy design approach, which resulted in a joint efficient by reminding them that they have the energy, water purification and telecommunica- power to make a difference. For Earth Hour tion system, was followed. The energy system on 31 March 2012, 49M encouraged people to save energy by switching off all unused electri- makes use of renewable energy (wind and city appliances. A total of 402 MW was saved – solar), solar water heaters and LPG. One enough electricity to power the city of Mangaung diesel generator is retained for back-up sup- in the Free State for a day. ply. The Hluleka system has been in operation By May 2012, the campaign had reached more since June 2002. than 40 000 South Africans in one-on-one con- The Lucingweni hybrid system consists of versations and over seven million people through 50-kW solar photovoltaic panels and 36-kW the above-the-line campaign. wind generators serving 220 dwellings (four lights per dwelling, radio, television, mobile Nuclear phone charger, street lighting, telecommunica- Nuclear energy is set to play a critical role in tions and water pumping). South Africa’s IRP implementation process. For this reason the National Nuclear Energy Tradable renewables Executive Coordination Committee was estab- The White Paper on Renewable Energy Policy lished in 2011 as the authority for decision- proposed that tradable renewable energy making, monitoring and ensuring general certificates be investigated to find out whether oversight of the nuclear energy expansion these could be one of the funding streams to programme. support the implementation of the renewable The success and deployment of nuclear energy programme in South Africa. This would power requires public acceptance, and public be in addition to other funding options, i.e. sale education is the most important topic sur- of physical electrical power through a power rounding nuclear energy. purchase agreement into the electrical grid at Concerns regarding the safety of nuclear prevailing electricity (energy) market prices and energy in view of the Fukushima incident in certified emission reductions trading through Japan in 2011, when an earthquake and sub- the clean development mechanism (CDM), a sequent tsunami damaged a nuclear power UN framework mechanism that encourages plant, causing nuclear meltdown and the developing countries to implement emission- release of radioactive materials, were factored reduction projects to earn certified emission into the South African approach. Proper safety reductions. measures were put in place and overseen by A tradable renewable energy certificate is the appropriate expert authorities. As a mem- an electronic record that verifies the origin ber of the International Atomic Energy Agency, of energy by a registered renewable energy South Africa is obliged to comply with the entity. It is also referred to as a green certific- relevant guidelines and safeguards on nuclear ate or green tag. Tradable renewable energy plants. certificates are based on separating the vari- The nuclear sector in South Africa is mainly ous attributes of renewable resource-based governed by the Nuclear Energy Act, 1999 energy provision from the physical energy (Act 46 of 1999) and the NNR Act, 1999. The carrier, electric or otherwise. It is another rev- Department of Energy administers these Acts. enue stream for renewable energy IPPs and The Department of Health administers the its major advantage is that, apart from potential Hazardous Substances Act, 1973 (Act 15 of extra income, certificates can be traded world- 1973) related to Group 3 and Group 4 hazard- wide and separately from the electricity grid ous substances. Cabinet approved the Nuclear infrastructure. Energy Policy for South Africa in 2008.

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Skills development strategies and acquisition In May 2012, South Africa’s Anglo American and retention of the relevant skills to support Platinum (Angloplat) launched the prototype of the nuclear programme have to be formulated. the first fuel-cell-powered underground locomot- The following categories will be addressed: ive. • construction skills Hydrogen-powered fuel-cell locomotives are more economical and environmentally friendly • plant-operation skills than traditional rail transport, as it is powered by • skills for the relevant government depart- a cleaner and more secure energy source. ments A fuel cell is essentially a gas battery that pro- • regulatory skills duces electricity as long as it is fed with hydro- • supporting industry skills gen gas. Power is available for 24 hours per day • decommissioning and rehabilitation skills with no need to change or recharge the battery. • radioactive waste management. This means less downtime and increased pro- The Nuclear Fuel Cycle Strategy for the bene- ductivity. ficiation of uranium resources is a key factor with special focus on: working in the physical, medical and biologi- • securing South African uranium mineral cal sciences. The facilities provide opportu- resources nities for modern research, advanced • developing a uranium conversion plant education, the treatment of cancers and the • developing a uranium enrichment plant production of unique radio-isotopes. • developing a fuel fabrication plant. • The Nuclear Fuels Corporation of South Eskom is investigating the possibility of gener- Africa is responsible for uranium-ore refine- ating up to 20 000 MW of new nuclear power ment and export. capacity by 2025. This will entail recapitalising The department participates in the Women in certain nuclear agencies, financing others and Nuclear South Africa Programme. Government setting up new ones. is expected to accelerate preparatory work to The following main organisations are directly ensure greater reliance on nuclear energy and involved in the nuclear sector: other renewable energies. The department has • The Department of Health’s Directorate: introduced initiatives such as the South African Radiation Control issues licences for Group 3 Young Nuclear Professionals Society and the hazardous substances (electronic product Women in Nuclear South Africa Programme to generating X-rays, other ionising beams, promote the industry among historically disad- electrons, neutrons or other particle radia- vantaged people. tion or non-ionising radiation) and Group 4 hazardous substances (radioactive material Programmes and projects outside a nuclear installation, which does not form part of or is used or intended to be The Integrated Resources Plan (IRP) used in the nuclear fuel cycle, and which is By 2030, the department aims to have reduced used or intended to be used for medical, sci- the country’s dependency on coal to 60%, with entific, agricultural, commercial or industrial the rest of the country’s power coming from purposes). low-emitting sources such as solar, hydro and • The Koeberg Nuclear Power Station, the nuclear. only nuclear power station on the African If successfully implemented, the IRP will see continent, is responsible for about 6% of total South Africa diversify its mix of power sources electricity generation. It is owned by Eskom, away from coal, which is currently where the which reports to the Minister of Public Enter- country gets about 90% of its power, and at the prises. same time double its energy output. • The iThemba Laboratory for Accelerator- Despite the increase in output, the decrease Based Sciences brings together scientists in coal burning will result in a nett reduction of

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carbon dioxide emissions by 2030 to less than to Conference of the Parties (COP17), which 275 Mt a year, and a 60% reduction in water took place a the end of 2011, by Eskom, IPPs usage. and municipalities as part of a carbon offset The IRP 2 was approved by Cabinet in March and legacy programme. 2011. Renewable energy sources make up The South Africa Renewables Initiative was 42% of projected new and additional capacity launched at COP17 as an international part- to be added over the period, and will constitute nership to support the rapid and ambitious 9% of installed capacity by 2030. scaling up of renewable energy in a manner The IRP laid the foundation for the country’s that delivers economic, social and environ- energy mix up to 2030, and sought to find an mental benefits. appropriate balance between the expectations In addition, amendments to building regula- of different stakeholders considering a number tions to promote the use of renewable energy of key constraints and risks, including: and thermal efficiency have been finalised. • reducing carbon emissions Approximately 200 000 solar water heating • new technology uncertainties such as costs, units were installed between 2009 and Decem- operability, lead time to build ber 2011, towards the target of one million units • water usage by 2014. Of these, 70% have been installed • localisation and job creation in rural areas and 30% in the higher-income • southern African regional development and areas. It is envisaged that the balance of the integration target will be funded by an electricity tariff • security of supply. increase in the period 2012 to 2014. The IRP 2 provides for a diversified energy Regarding objectives set for the green eco- mix, in terms of new generation capacity, that nomy under the New Growth Path, the imple- would comprise: mentation of the IRP will make a significant • coal at 14% (government’s view is that there contribution to stimulating the domestic green is a future for coal in the energy mix, and economy. that it should continue research and devel- Over 12 000 construction-related and more opment to find ways to clean the country’s than 1 000 permanent jobs are expected to be abundant coal resources) created under the programme. • nuclear at 22,6% • open-cycle gas turbine at 9,2% and closed- Renewable Energy Independent Power cycle gas turbine at 5,6% Producer Procurement (REIPPP) • renewable energy carriers, which include Bidding Programme hydro at 6,1%, wind at 19,7%, concentrated The flagship programme under the IRP is the solar power at 2,4% and photovoltaic at REIPPP Bidding Programme for the provision 19,7%. of 3 625 MW of capacity from IPPs. Progress thus far constitutes 1 415 MW of In December 2011, 28 preferred inde- Phase 1 of a total of 3 725 MW to be procured pendent renewable power producers was by 2016. Some 97 environmental authorisa- announced, comprising 18 solar photovoltaic tions were approved during the first bidding projects, eight onshore wind projects and two phase of the REIPPP, which represents in concentrated solar power projects. All projects excess of 10 454 MW. In its first roll-out phase, must be generating power by mid-2014. the REIPPP will see an initial 1 400 MW of The department then initiated a fresh bidding renewable energy being added to South Af- round for other technologies such as cogen- rica’s energy mix, while bringing an estimated eration from biomass, including sugar and R47 billion in new investment into the country. paper, biogas, landfill gas, and small hydro. A total of 4 MW of solar photovoltaic capa- The 19 selected preferred bidders in this sec- city was installed in the country in the lead-up ond round were announced in May 2012.

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In September 2012, it was announced that allocated to the electrification programme, the the third bidding round for small power or less department aimed to connect an additional than 5 MW-capacity bidding were postponed 150 000 households, build 10 substations and to May 2013. contribute about 5 000 jobs. In 2010/11, the In November 2012, Government signed department created 5 811 jobs and connected agreements with the 28 first-window IPPs. This 195 000 homes to the electricity grid, exceed- would see an initial 1 400 MW of renewable ing its target by 45 000 households. energy being added to South Africa’s energy In 2011/12, the electrification programme mix, and bring an estimated R47 billion in new was allocated R3,119 billion, with municip- investment into the country. While the majority alities receiving R1,151 billion and Eskom of the bidders are foreign companies, 67 South R1,882 billion, while R86 million was allocated African companies formed partnerships with for non-grid connections. This catered for the them. planned 192 000 grid and non-grid connec- The projects are spread across some of tions for the year. South Africa’s most rural and least developed For bulk infrastructure projects, R345 million provinces, including the Eastern Cape, North- was allocated to municipalities and R243 mil- ern Cape, Limpopo, North West and the Free lion to Eskom. State. The wind and solar projects are expected to Cleaner Fuels Programme be integrated into the country’s national energy To improve the quality of transport fuels, the grid during 2014. department reviewed the fuel specifications Bidders also committed to community and standards to reduce harmful emissions, development initiatives within a 50-km radius and to align standards with global vehicle of each project. The bidders have collectively technology trends and environmental require- committed R2 billion towards socio-economic ments. This is expected to encourage vehicle development, and R1 billion towards empow- manufacturers to introduce more fuel-efficient ering women in the energy field. engine technologies with lower carbon and In total, these bidders will spend R12 billion noxious gas emissions. The department over the duration of the implementation agree- drafted a position paper for consultation and ments on South African contractors. intended to announce new fuel specifications in 2011/12. Integrated National Electrification Programme (Inep) New Build Programme The Department of Energy began funding Inep Eskom’s New Build Programme was launched in April 2001, with Eskom implementing the in 2005, with the aim of adding more than programme on the Department of Energy’s 17 000 MW to the national electricity grid by behalf. Operating costs relating to this electri- 2018. By mid-2011, more than 5 000 MW fication programme are incurred by Eskom as of new generation capacity and more than the licensed distributor supplying electricity to 3 000 km of new transmission lines had been its consumers. added to the country’s electricity grid. Inep is a modern energy option and also has a positive socio-economic impact on the lives In May 2012, South Africa launched its first verif- of South Africans. There have been improve- ied wind atlas, which maps out potential hotspots ments in the education, health and social as a tool for wind-farm developers as the coal- circumstances of communities that have been hungry country pushes toward renewable energy. electrified through the grid and off-grid techno- The atlas models the wind climate in the North- logies. By 2011, South Africa’s energy penetra- ern, Eastern and Western Cape provinces, which is backed up by measured data from 10 masts. tion stood at over 75%, and with R3,2 billion

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As part of the programme, Eskom has spent In May 2012, Hydro Alternative Energy from Florida R20,5 billion on recommissioning three power in the United States of America announced nego- stations that have been out of service for over tiations with the City of Durban to develop a project 20 years: Camden, Komati and Grootvlei, that would harvest hydrokinetic energy from the all in Mpumalanga. Together, the stations fast-flowing Agulhas current off the KwaZulu-Natal can produce an estimated 3 800 MW, which coastline. The current is one of the most consistent equals that of a new power station. currents in the world, making Durban an ideal loca- The cost of recommissioning the retired tion to harness it. Generating electric power from sea currents has never been done before; with all stations is estimated at almost R100 billion previous sea and wave generation technologies less than a new station, and the electricity will being tidal-based. be available sooner. Camden was reopened in 2010, with work progressing on Komati and Grootvlei. Eskom aims to have all three the environment. The super-critical design is operational by 2013. Eskom’s first. Two new coal power stations are under Kusile, on the other hand, will be the first construction – the 4 800-MW Medupi Power power plant in South Africa to have cutting- Station near Lephalale in Limpopo and Kusile edge fuel gas desulphurisation technology in Mpumalanga, which is also expected to installed. This means that its exhaust gases have an output of 4 800 MW. will be processed to remove all traces of Medupi is scheduled for full commercial sulphur oxides before being released into the operation by 2015 and Kusile by 2018, atmosphere. Excess sulphur dioxide in the air although individual units will be brought online is one of the causes of acid rain. earlier as they are completed. South Africa’s energy demand is expected On 8 June 2012, the Hydrostatic Pressure to be twice the current levels by 2030. Once Test for Unit 6 at the Medupi Power Station all six units are completed, Medupi will be was unveiled. The test was undertaken to able to produce enough electricity to power ensure that the boiler was fully functional and almost all of Gauteng. ready to start generating electricity for South Africa’s national grid. Medupi, the first coal- Carbon capture and storage roadmap fired power station to be built in South Africa Although South Africa has a programme to in 20 years, is due to make its first contribu- increase the use of renewable energy and tion to the grid at the end of 2013. energy efficiency, coal is likely to provide The boiler and turbine contracts for Medupi most of the country’s primary energy for the are the largest contracts that Eskom has next few decades. signed in its 87-year history. The planned The displacement of fossil fuels by renew- operational life of the station is 50 years. It able and nuclear energy is seen as a gradual is one of the largest construction sites in task. Carbon capture and storage is a transi- the Southern Hemisphere, employing about tion measure from fossil fuel to nuclear and 17 000, with about 40 000 job opportunities renewable energy. To this end, the South Af- expected to be created by the new power sta- rican Centre for Carbon Capture and Storage tion. was established in March 2009. When complete, Medupi will be the world’s The five phases of the roadmap and their largest dry-cooled coal-fired plant. It will status are as follows: incorporate super-critical machinery, which • A preliminary investigation was undertaken can operate at higher temperatures and pres- by the Council for Scientific and Industrial sures than older-generation equipment, and Research for the then Department of Miner- is also more efficient, resulting in better use als and Energy to ascertain whether South of natural resources and lowered impact on Africa had potential capturable carbon-

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dioxide sources and storage sites. The developed to locate a storage site suitable results of that investigation, released in for a test injection. Pre-atlas knowledge 2004, showed that South Africa had cap- had identified four possible carbon-dioxide turable emissions and potential storage geological storage basins: sites. Based on this premise, further inves- -- Orange Basin (offshore of the west coast) tigations were initiated. The preliminary -- Outeniqua Basin (offshore of the southern investigation also identified that the synfuel coastline and site of the only producing industry in South Africa produced 30 Mt per gas/petroleum wells in South Africa) year of 95% concentration carbon dioxide. -- Durban/Zululand Basin (east coast) • The Carbon Dioxide Geological Storage -- Karoo On-Shore Basin (near the main Atlas, launched in August 2010, will locate coal fields and most coal-based electricity and characterise potential storage sites at a generation and synfuel production). theoretical level and on a geological basin The first three are conventional types of extent. The atlas will then be taken into the storage – that is depleted oil/gas wells and South African Centre for Carbon Capture deep saline formations. The fourth, the and Storage’s programme of work and be Karoo Basin, has sandstone formations that

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are subject to low permeability and also to Through this programme, it intends to diversify dolerite intrusions. its energy mix and increase access to energy. Consequently, further investigation is The department will ensure that all projects required as to how carbon dioxide could be under this programme are labour-intensive, stored in these less favourable formations. educational and empower communities. The Karoo Basin is the closest to the cur- In 2011/12, the department allocated rent major sources of carbon dioxide emis- R25 million for this project, which is imple- sions. mented by Sanedi. • The CO₂ Test Injection Experiment of safely injecting carbon dioxide into South African Designated National Authority (DNA) reservoirs is essential to understanding the for Clean Development Mechanism suitability of the local geology as a storage (CDM) medium. It is also necessary to ascertain The Department of Energy is mandated to the dispersion and transformation reactions regulate and promote the implementation of of carbon dioxide in the storage medium a CDM in South Africa. This is done to make and its effects on the surroundings of the sure that South Africa complies with its obliga- storage medium. This experiment will be tions under the Kyoto Protocol and the UN informed by similar injection activities Framework Convention on Climate Change. underway internationally. As custodian of CDM, the DNA is responsi- • A demonstration plant will test an integrated ble for ensuring that CDM investments are in operating system under local conditions line with sustainable development objectives and form an essential link between feasibil- and that South Africa benefits from the CDM. ity trials and a full-scale commercial plant. In 2011/12, the DNA received and reviewed This phase will demonstrate the safe injec- 58 clean development project proposals; tion of carbon dioxide into South African 52 project identification notes and six project geological formations. The magnitude of design documents. the demonstration plant is in the order of Two projects were registered with the CDM’s hundreds of thousands of tons of carbon executive board. These were the Ekurhuleni dioxide per year. Land-fill Gas Recovery Project, which has the • If positive outcomes of the demonstration potential of ensuring a reduction of 243 629 t plant ensue, a full-scale commercial plant is of carbon dioxide equivalent (CO₂) a year, and envisaged. This phase will be dependent on the Fuel Switch Project on the Gluten 20 dryer the outputs of the previous phases. of the Germiston Mill of Tongaat Hulett Starch Pty (Ltd), which has the potential of reducing Working for Energy Programme 8 360 t of CO₂ a year. In 2010, the Department of Energy launched By the end of 2011/12, South Africa had the Working for Energy Programme, with the 19 registered projects, six of which had been primary objective of using the feedstock cre- issued with certified emission reductions ated from clearing alien biomass vegetation to amounting to 1,7 Mt of CO₂. The CDM uptake produce power. was slow, mainly because of the complexities The programme focuses on two things: the associated with the CDM project cycle. The provision of energy through renewable-energy DNA conducted programmes to raise aware- technologies and the facilitation of energy ness and to build capacity in this area. management. Both use labour-intensive methodologies to stimulate sustainable job creation, Liquid Fuels Roadmap local economic development, technology skills As a result of the identified constraints transfer and capacity development within a throughout the liquid fuels supply chain, the South African context. Department of Energy embarked on a pro-

214 South Africa Yearbook 2012/13

Construction of the two terminals that complete tive officer were expected to be appointed by the first phase of freight logistics group Transnet’s the end of 2012. The Department of Energy New Multi Product Pipeline (NMPP) is on track, will position the SFF to improve the country’s The mechanical, electrical, instrumentation and strategic petroleum reserves and enable the piping work started in January 2013. country to better respond to catastrophic The terminals – one in Heidelberg and the global events that impact on the petroleum other in the Cutlet Complex at Island View in trade. Durban – are expected to be completed by the end of 2013. The NMPP is a key strategic investment for South Africa that will ensure the supply Renewable energy programmes from of petroleum products to regions. Eskom Once complete, the NMPP will have capacity to Eskom has an active research programme carry five products, namely 95 and 93 unleaded investigating ways to harness South Africa’s petrol, 500 and 50 PPM diesel, and jet fuel. renewable energy sources for power generation. Eskom is looking to increase the renewables component of its supply mix. cess to develop a Liquid Fuels Infrastructure The long-term strategic energy plan includes Roadmap. A key objective of this roadmap is a mix of all viable sources, including renewa- to ensure that South Africa has access to reli- bles, to be implemented where commercially able, affordable, clean, sufficient and sustain- viable. The two most advanced areas under able sources of energy to meet the country’s investigation are wind-generated and concen- liquid fuel demand. trated solar thermal power. In addition, in dealing with the supply chal- Eskom’s renewable energy journey has lenges of refineries, in 2012 the department been affected by several factors, including the conducted an audit of the country’s refiner- changing nature of power generation, environ- ies to assess the state of the refineries and mental concerns and procuring loans that will to obtain an understanding of their current fund solar and wind-electricity generation. capacity. Other loans obtained to expand the pro- A preliminary investigation indicated that grammes to develop renewable energy projects South Africa’s refineries are experiencing include €100 million from the Agence Fran- reduced production levels, which is equally a çaise de Développement, and US$260 million threat to liquid fuels security of supply. (part of a US$3,75 billion loan) from the World Bank. Construction on the project was under- The 20-Year Liquid Fuels way in 2012. Infrastructure Plan The 20-Year Liquid Fuels Infrastructure Plan Sere Wind Farm will form the basis for the implementation of Eskom signed two loan agreements totalling the Presidential Infrastructure Coordinating US$365 million with the African Development Commission Strategic Implementation Project Bank (AfDB) in September 2011, which will regarding refinery upgrades and develop- go towards financing Eskom’s 100-MW Sere ment, and will make recommendations on Wind Farm in Vredendal, Western Cape. the future of the refinery infrastructure in the The loans consist of US$265 million from country. the AfDB’s own resources and US$100 million As a further response to the global situa- from the Clean Technology Fund, a climate tion and domestic development imperatives, investment fund that promotes the transfer of the department decided to strengthen the low-carbon technologies. The Sere Project will Strategic Fuels Fund (SFF), a subsidiary of go into commercial operation towards the end the CEF. A new SFF board with the requisite of 2013. complement of skills and a new chief execu-

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Ingula Pumped Storage Scheme watts of electricity. The types of technologies Another project is the 1 333-MW Ingula used are solar photovoltaic and concentrated Pumped Storage Scheme in KwaZulu-Natal, photovoltaic, which operate with semiconduc- with a roll-out cost of R23 billion. tors and solar panels, as well as concentrated This plant comprises two dams that are con- solar power, which uses mirrors to reflect the nected via an underground powerhouse, with sun’s rays. four 333-MW pump turbines. Each dam has Photovoltaic systems make a direct conver- a capacity of roughly 22 million m³. Water will sion into electricity, and are ideal to use at peak flow from the upper dam to the lower in peak load times. The only drawback is that there is times, generating power as it passes through no cost-effective way to store this power, so it the turbines, and when the demand is low the is only viable when the sun is shining. turbines will pump the water back to the upper Concentrated solar power, on the other dam. hand, captures the sun as heat and turns it into The Ingula Pumped Storage Scheme is steam to power turbines, which in turn gener- scheduled to come on line in 2014 and add ate electricity − much like coal-fired plants. Its 1 332 MW of hydro power to South Africa’s advantage is that it is cheap and efficient to electricity grid, as well as making a significant store heat, so power can be supplied around contribution to job creation and rural develop- the clock. ment. According to the Department of Energy, about 15 300 jobs will be created through Underground coal gassification the solar park to boost the economy of the Eskom also has an underground coal gas- Northern Cape, where there are high levels of sification project in the pilot stage, with a test unemployment. The park will also diversify the plant next to Majuba Power Station in Mpuma- province’s industry profile, which is currently langa. The gas produced is co-fired with coal limited to mining and agriculture. in Majuba’s Unit Four, and contributes 3 MW to South Africa’s first solar plant of its kind was the station’s output. unveiled in October in Ekurhuleni, Gauteng. When the pilot plant delivered its first batch of The solar power plant, situated at the gas to Majuba in October 2010, Eskom made environmentally friendly OR Tambo Precinct history as the event marked the first produc- in Wattville outside Benoni, produces about tion of commercial electricity from underground 200 kW of electricity through 860 photovoltaic coal gassification outside the former Soviet solar panels on 2 500 m² of land, generating Union. enough energy to power about 133 low-cost The process entails using coal seams that houses. cannot be mined for various reasons – they Energy produced by the solar pant will be may be too deep, or fractured, or of poor qual- connected to the grid using 18 inverters and ity – and turns the coal into clean gas on site. one combiner unit. With the region’s substantial coal reserves, there is potential in this source of power. Compact fluorescent lamp (CFL) Eskom has developed a 10-year transmission exchange development plan which includes renewable Through Eskom’s Efficient Lighting Campaign, energy integration. South Africans saved 1 800 MW between 2004 and 2010 – enough to power a city the size of Concentrated solar power Durban. A solar park is a concentrated zone of solar Eskom’s CFL roll-out encouraged South plants that are built in clusters, sharing com- Africans to switch from incandescent bulbs mon transmission and infrastructure. Together, to energy-efficient CFLs – miniature versions these clusters generate thousands of mega- of full-sized tubular fluorescents – in line with

216 South Africa Yearbook 2012/13

global trends. CFLs use up to 80% less elec- At the same time, the countries to the north tricity than traditional incandescent light bulbs, could benefit through access to the coal-fired while providing the same amount of light. power resources in the south. Such an arrange- The CFLs were distributed free to consumers ment should stabilise the energy requirements across the country in exchange for their exist- of the region well into this century. ing incandescent bulbs. The environmentally Exploitation of the vast hydropower re- friendly light bulbs, which used to cost between sources would constitute a significant infusion R60 and R80 each, came down in price in 2011 of renewable-energy resources into the energy to about R15 per bulb on average. economy of the region over the medium to long The campaign has been remarkably effect- term. ive. Its highlights included: The Lesotho Highlands Water Project could • between 2007 and 2012, more than 30 mil- contribute some 72 MW of hydroelectric power lion CFLs were distributed free of charge to to the system in the short term. South Africa Global pressures regarding the environmen- • more than seven million tons of CO₂ emis- tal impact and displacement of settlements by sions were saved huge storage dams are likely to limit the ex- • more than 30 000 jobs were created. ploitation of hydropower on a large scale. Between 2011 and 2014, the CFL Sustainabil- Irrespective of the size of installation, any ity Programme is to distribute between 20 mil- hydropower development will require author- lion and 40 million CFLs. isation in terms of the National Water Act, 1998 By November 2012, Eskom had distributed (Act 36 of 1998). 54 million light bulbs. Energy and the global environment International cooperation South Africa is among the top 20 emitters of GHGs in the world and the largest emitter Sustainable development in Africa in Africa, largely because of the economy’s The Intergovernmental Memorandum of Under- dependence on fossil fuels. It emits more than standing (MoU) on the Western Power Corridor 400 Mt of carbon dioxide per year. Project was signed in October 2004. The National Climate Change Strategy, This New Partnership for Africa’s Develop- developed by the former Department of Envir- ment flagship programme intends to pilot the onmental Affairs and Tourism, requires that use of hydro-electric energy of the Inga rapids government departments collaborate in a site in the DRC to ensure the security of supply coordinated manner to ensure that response in the SADC. measures to climate change are properly The participating utilities are those of directed and carried out with a national focus. Namibia, South Africa, the DRC, Botswana The Department of Energy is expected to and Angola. A joint-venture company has respond to and mitigate climate change. been formed to initiate studies determining the South Africa is classified as a developing viability of the project and to build, own and country or a non-Annex 1 country. This means operate the infrastructure. that within the international political and nego- The main project outside South Africa’s tiation context, South Africa is not required to borders is Westcor. It entails a five-way inter- reduce its GHG emissions. governmental MoU signed between the utilities The South African economy depends of the DRC, Angola, Namibia, Botswana and greatly on fossil fuels for energy generation South Africa. Westcor will tap into some of and consumption, and therefore is a sig- the potential in the DRC. Inga III, a 3 500-MW nificant emitter due to relatively high values hydro plant on the Congo River, will be the first being derived from emission intensity and of these projects. emissions per capita.

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Therefore, South Africa is proactively mov- Cross-border gas trade agreement ing the economy towards becoming less car- To facilitate the movement of gas across bon-intensive, with the Department of Energy international borders, cross-border gas trade playing a prominent role. The department agreements have been signed with Mozam- has introduced systems to access invest- bique and Namibia. ment through the CDM of the Kyoto Protocol. Since the arrival of natural gas from Mozam- It developed the White Paper on Renew- bique in 2004, the contribution of natural gas to able Energy and Clean Energy Development, the primary energy supply has risen from 1,5% together with an energy efficiency programme, to 3,3% (2005). to support diversification in pursuit of a less This figure is expected to rise to 4,3% when carbon-intensive energy economy. the new Mozambique-South Africa gas-trans- The Grand I MoU signed with the DRC is an mission pipeline reaches maximum capacity. important milestone in working towards sus- The South Africa-Namibia Gas Commission tainable African partnerships aimed at devel- addresses harnessing the natural gas reserves oping strategies for low-carbon economies and in the Kudu Gas Field. interconnected energy systems. The Tete-Maputo Power Transmission Import and export of fuel products Line, also known as the Centre-South Project The importation of refined products is restricted (Cesul), in Mozambique, will improve the abil- to special cases where local producers cannot ity to evacuate power from the projects in the meet demand. It is subject to state control to northern Mozambique complex, particularly promote local refinery usage. releasing the hydropower potential relating to When overproduction occurs, export permits Mpanda Nkuwa and Cahora Bassa, among are required and generally granted, provided others. that the needs of both South Africa and other The South African Renewables Initiative Southern African Customs Union members are secures international financing partnerships met. More diesel than petrol is exported, owing in investment in deploying renewable energy; to the balance of supply and demand of petrol and develops renewable supply chains through and diesel relative to refinery configurations. securing a critical mass of renewable energy, Although petrol and diesel make up 55% of without imposing undue burden on the fiscus total liquid-fuel exports, South Africa is also or the South African consumer. the main supplier of all other liquid fuels to In line with this objective, the Department of Botswana, Namibia, Lesotho and Swaziland. Energy has signed a Declaration of Intent with At a bilateral level, the Department of Energy Germany, the United Kingdom, Denmark, Nor- signed seven agreements/declarations of way and the European Investment Bank. This intent with the International Energy Agency, agreement will lead to the establishment of a the Swiss Confederation, Ghana, Lesotho, fund to assist in the deployment of renewable Denmark, Korea, and the DRC. energy. These agreements cover access to capa- Further, the department participates in struc- city-building, funding, technology, exchange of tures such as the: information and development of energy infra- • International Renewable Energy Agency structure on the continent with the objective of • International Energy Forum increasing generation capacity. • International Partnership for Energy Effi- ciency Cooperation Conclusion • UN Industrial Development Organisation With South Africa’s growing population and • Clean Energy Ministerial increasing need for energy, the Department • African Union-European Union Energy Part- of Energy is continuously working towards nership. ensuring energy security, achieving universal

218 South Africa Yearbook 2012/13

access, transforming the energy sector and • a decision will be made on whether South ensuring the optimal use of energy resources. Africa should continue importing petroleum A great deal has been achieved during the products or invest in a new refinery. last financial year. Some milestones include: Goals beyond 2020 include contracting more • the construction of the New Multiproduct than 20 000 MW of renewable energy, includ- Pipeline ing an increasing share from regional hydro- • the launch of the energy efficiency campaign electricity. About 11 000 MW of Eskom’s older • installation of more than 250 000 solar water coal-powered stations will be decommissioned, heater systems but close to 6 000 MW of new coal capacity will • completion of the wind atlas, which accur- be contracted – part of it from other southern ately quantifies the country’s wind energy African countries. resources Long-term goals also include the promotion • signing of seven bilateral agreements and of cleaner coal technologies through research declarations of intent, covering areas of and development investments, and techno- cooperation in capacity-building, funding, logy-transfer agreements. technology and infrastructure. The extent of economically recoverable By 2020, it is envisaged that: coalbed seam and shale gas reserves will also • coal rail capacity will match coal export port be better understood. Subject to acceptable capacity at Richards Bay environmental controls, these gas resources, • the Kusile coal-fired power station will be supplemented by liquefied natural gas imports, commissioned and at least 7 000 MW of will begin to supply a growing share of power renewable energy will be contracted, mostly production. This could avoid the need for fur- from private IPPs ther base-load nuclear generation. • liquefied natural gas infrastructure will be in South Africa has committed to substantial place to power the first combined-cycle gas reductions in carbon dioxide emissions by turbines 2025 and supports research, technology • pro-poor electricity tariffs will be better development and special measures aimed at targeted to include all qualifying electricity environmentally sustainable economic growth. customers • electrification coverage will reach at least 85%, with affordable access to complement- ary energy sources that include solar water and space heating

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Acknowledgements

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