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Energy Policies for Sustainable Development in South Africa

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Energy Policies for Sustainable Development in South Africa Energy policies for sustainable development in South Africa Options for the future Edited by HARALD WINKLER Lead authors Ogunlade Davidson, Harald Winkler, Andrew Kenny, Gisela Prasad, Jabavu Nkomo, Debbie Sparks, Mark Howells, Thomas Alfstad Contributing authors: Stanford Mwakasonda, Bill Cowan, Eugene Visagie Energy Research Centre, University of Cape Town April 2006 Published by the Energy Research Centre University of Cape Town Private Bag Rondebosch 7701 South Africa Website: www.erc.uct.ac.za 2006 ISBN: 0-620-36294-4 Contents Acknowledgements viii Executive summary ix Abbreviations and acronyms used xv Part I: Energy for sustainable development – a profile of South Africa 1 1 Energy for sustainable development: an introduction 1 2 Energy policy 4 2.1 Introduction to South Africa’s energy system 4 2.2 Energy policy – an historical perspective 5 2.2.1 Introduction 5 2.2.2 The apartheid period 6 2.2.3 After the 1994 elections 6 2.2.4 After 2000 10 2.3 Energy for sustainable development – critical issues 13 2.3.1 Energy provision to the poor and disadvantaged 14 2.3.2 Access to cleaner technologies 15 2.3.3 Complying with environmental regulations 16 2.3.4 Energy integration and security in Africa 16 2.3.5 Conditions for a sustainable energy system 17 2.4 Outlook for the future – technologies and policies 18 2.4.1 Energy supply and the SAPP 19 2.4.2 Energy efficiency 19 2.4.3 Renewable energy 20 2.4.4 Cleaner fossil fuels 21 2.4.5 Cross-cutting issues 21 3 Energy demand 23 3.1 The current situation 23 3.1.1 History of energy demand 23 3.1.2 South Africa’s energy demand in a comparative perspective 25 3.1.3 Demand for electricity 26 3.1.4 Demand for liquid fuels 29 3.1.5 Final energy consumption by sector 30 3.2 Energy for sustainable development – critical issues 36 3.2.1 Energy intensity 36 3.2.2 Energy efficiency and inefficiency 37 3.2.3 More efficient technologies and cleaner fuels 39 3.2.4 Concluding remarks on main issues 40 3.3 Outlook for the future of energy demand 41 3.3.1 How is demand expected to change in future? 41 3.3.2 Drivers of energy demand 42 3.4 Emerging gaps 43 4 Energy supply in South Africa 45 4.1 Energy reserves and primary production 45 4.1.1 Coal 46 4.1.2 Oil 47 4.1.3 Natural gas and coalbed methane 48 4.1.4 Uranium 48 4.1.5 Biomass 48 4.1.6 Hydroelectric power 50 4.1.7 Solar 50 4.1.8 Wind 51 4.2 Energy transformation 52 4.2.1 Electricity generation 52 4.2.2 Production of liquid fuels 56 4.2.3 Renewable energy 58 4.3 Issues for future energy supply 59 4.3.1 Energy reserves and prices 59 4.3.2 Electricity supply 59 4.3.3 Liquid fuels 60 4.3.4 Renewables 60 5 Social issues 61 5.1 Analysis of the current situation 61 5.1.1 Introduction 61 5.1.2 Household energy access 61 5.1.3 Household energy use 64 5.2 Sustainability issues for energy development 68 5.2.1 Access, affordability and acceptability 68 5.2.2 Subsidies 69 5.2.3 Energy and job creation 69 5.2.4 Economic empowerment of the historically disadvantaged 70 5.2.5 The need to inform and educate the poor on energy issues 70 5.2.6 Gender and energy 70 5.3 Energy-related social issues 71 5.3.1 Future energy generation and job creation 71 5.3.2 Effects of electricity prices and subsidies 71 5.3.3 Energisation approaches 72 5.3.4 Energy and integrated development approaches 75 5.3.5 The challenge of inter-sectoral linkages 75 5.4 Emerging gaps 76 6 Energy and economic development 77 6.1 Analysis of the current situation 77 6.1.1 Situational analysis of the energy sector 77 6.1.2 Energy and energy-economy linkages 77 6.1.3 Externality costs 81 6.2 Energy for sustainable development – critical issues 82 6.3 Future outlook 85 6.3.1 Some issues on energy demand 85 6.3.2 Restructuring and energy diversification 85 6.3.3 Realising the potential benefits of energy efficiency 86 6.3 Emerging gaps and challenges 87 7 Energy and the environment 88 7.1 Analysis of the current situation 88 7.1.1 Broad overview 88 7.1.2 Legislation and policy 88 7.2 Critical local issues 89 7.2.1 Petroleum 89 7.2.2 Transport pollution 91 7.2.3 Impacts of kerosene as a fuel 91 7.2.4 Coal production and use 92 7.2.5 Gas-fired power generation 94 7.2.6 Nuclear energy – potential impacts 94 7.2.7 Biomass fuel impacts 94 7.2.8 Environmental issues related to renewable energies 95 7.3 Critical global issues 97 7.3.1 Greenhouse gas emissions and climate change 97 7.3.2 Other global agreements or protocols 99 7.4 Outlook for the future 100 7.4.1 Future environmental policy goals 100 7.4.2 Future commitments on GHG reductions 100 8 Identifying and modelling policy options 104 8.1 Industry and energy efficiency 104 8.1.1 Mining 104 8.1.2 Iron and steel 105 8.1.3 Chemicals 105 8.1.4 Non-ferrous metals 106 8.1.5 Non-metallic minerals 106 8.1.6 Pulp and paper 107 8.1.7 Food, tobacco and beverages 107 8.1.8 Other 107 8.1.9 Energy intensity changes 108 8.1.10 Structural change in industry 109 8.1.11 Demand projections 110 8.1.12 Implementing policy options 110 8.2 Commercial energy use 114 8.2.1 Definition of commercial sector and commercial sector activity 114 8.2.2 Energy use patterns in the commercial sector 115 8.2.3 Characteristics of energy demand technologies 116 8.2.4 Demand projections 117 8.2.5 New building thermal design 117 8.2.6 HVAC retrofit 118 8.2.7 Efficient HVAC systems for new buildings 118 8.2.8 Variable speed drives for fans 118 8.2.9 Efficient lighting systems for new buildings 118 8.2.10 Heat pumps for water heating 119 8.2.11 Solar water heating 119 8.2.12 Fuel switching 119 8.3 Residential energy policies 119 8.3.1 Defining the sector – six household types 119 8.3.2 Energy use patterns in the residential sector 122 8.3.3 Characteristics of energy technologies 123 8.3.4 Projections of future residential energy demand 124 8.3.5 Solar water heaters and geyser blankets 127 8.3.6 Energy-efficient housing 128 8.3.7 Subsidies for energy efficiency in low-cost housing 128 8.3.8 Efficient lighting 129 8.4 Agriculture 130 8.4.1 Agricultural sector activity 130 8.4.2 Energy use in the agricultural sector 130 8.4.3 Demand projections 131 8.5 Coal mining 132 8.6 Electricity generation – gas, renewables, hydroelectricity and nuclear 133 8.6.1 Switch from coal to gas 135 8.6.2 Renewable energy for electricity generation 135 8.6.3 The nuclear route – the pebble-bed modular reactor (PBMR) 139 8.6.4 Importing hydroelectricity from the region 140 8.6.5 Reducing emissions from coal-fired power plants 141 8.7 Transport and liquid fuels 142 8.7.1 Liquid fuel supply 142 8.7.2 Transport sector activity 143 8.7.3 Transport energy use 143 8.7.4 Characteristics of energy demand technologies 144 8.7.5 Demand projections 145 8.7.6 Liquid fuel policies 146 8.8 Energy-related environmental taxation 146 9 Modelling framework and drivers 147 9.1 Model description 147 9.2 General assumptions and drivers of future trends 148 9.2.1 Economic growth 148 9.2.2 Population projections and impact of Aids 148 9.2.3 Technological change 149 9.2.4 Future fuel prices 150 9.2.5 Discounting costs 152 9.2.6 Emission factors 152 10 Results of scenario modelling 153 10.1 Reference case 153 10.2 Industrial energy efficiency scenario 159 10.3 Commercial efficiency and fuel switching scenario 161 10.4 Cleaner and more efficient residential energy scenario 163 10.5 Electricity supply scenario options 168 10.5.1 Imported gas 168 10.5.2 Imported hydroelectricity 168 10.5.3 PBMR nuclear 169 10.5.4 Electricity supply: renewable energy 170 10.6 Liquid fuel – bio-fuel refinery scenario 171 10.7 Fuel input tax scenario 172 11 Energy indicators of sustainable development 175 11.1 Environment indicators 175 11.2 Social indicators 180 11.3 Economic indicators 183 12 Conclusions 187 12.1 The reference case 187 12.2 Demand-side scenarios 188 12.2.1 Industrial sector 188 12.2.2 Commercial sector 188 12.2.3 Residential sector 189 12.3 Supply-side scenarios 189 12.3.1 Electricity supply 189 12.3.2 Liquid fuels and biodiesel 190 12.3.3 Tax on coal 190 12.4 Overall conclusion 190 Appendix 191 References 196 Acknowledgements This publication combines research from a two-phase project, the first supported by the United Nations Department of Economic and Social Affairs (UNDESA) and the second phase funded by the International Atomic Energy Agency (IAEA). The research was undertaken by the Energy Research Centre (ERC) – an amalgamation of the former Energy and Development Research Centre and the Energy Research Institute.
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