PRESENTATION OF THE 2006/7 MTEF STRATEGIC PLAN TO THE SITTING OF THE MINERALS AND ENERGY PARLIAMENTARY PORTFOLIO COMMITTEE

17 MAY 2006

DG’S SPEAKING NOTES

Presentation of the 2006/7 MTEF DME Strategic Plan

Slides 1 – 6

Introduction

Honourable Members, you are all aware that the energy sector has been very topical in the past six months. We have seen a number of challenges in this sector. You will recall that in December 2005 we had a fuel shortage that had quite an effect that varied from minor annoyance to serious impact to some sectors of the economy. At the beginning of the year we had a number of blackouts, especially here in the Western Cape. Taking these into cognisance, we had to do an assessment of both the internal and external environment to establish the required strategic focus into the future.

We also had to acknowledge that, while we are attending to short term challenges, we should not overlook the fact that what could be long term plans might end up being short term challenges in future.

We are also very aware that this sector is also influenced by what is happening in the international arena. We, like everyone else are exposed to vagaries of fluctuations in the crude oil price.

It was in this context that we decided that the Energy sector as a whole should focus in the following areas:

Security and diversity of supply

It is clear that for the government’s Accelerated Shared Growth Initiative for South Africa (ASGISA), energy is going to play a very crucial role. Our task is to ensure that there are measures in place to secure energy sources that will power the economy of this country into a future where we all share in the benefits.

For the Hydrocarbons and Energy Planning this meant that a robust Integrated Energy Planning that will look both in the short term and long term need to be established. The plan will indicate to us the energy sources available to us and those that will need to be developed in future. This will include looking at our strategic stock policy, for both crude oil and petroleum products.

For the electricity supply, this means a robust plan that will ensure that there is adequate power supply in the country, both in the medium term and in the long term.

It is our intention to strengthen the regulatory framework to ensure effective regulation of the distribution channels of energy sources

As part of our diversification of primary energy sources, we intend to promote renewable energy, not because it is the right thing to do, but to ensure that we have other options for our energy mix.

To govern the industry to be cleaner, healthier and safer

In line with this strategic objective, we intend to phase out the use of paraffin as the household energy. We have no illusions that this will be easy, considering the wide availability of paraffin. However, it is our view that we need to act in order to stop the annual misery that comes with burning of homes and possessions due to use of paraffin. It is our intention to look at alternative modern energy sources to ensure that they are made available and affordable. The strategy will include pricing of LPG, low smoke fuels and safe use of other energy sources.

Implementation of the Radioactive Waste Management Policy and Strategy

Honourable members will recall that in the past financial year, we reported that we were conducting extensive workshops where comments were solicited from the members of the public. This policy was approved last year. The policy created certainty and confidence to the South African public that there is a plan and strategy on nuclear waste management.

Development of nuclear energy policy

With the policy on radioactive waste management being approved, we believe it is now opportune time to create certainty on the future of nuclear energy in South Africa. We believe the time for a policy that will chart the way forward to nuclear energy, as one of the energy sources available to us, has come.

Slide 6

The 5 year plan for the hydrocarbons includes the following:

Implementation of the Petroleum Products Amendment Act.

Low smoke fuels.

 

Coal reserves and resources

Strategic stocks policy

Gas infrastructure

Slide 7 - 13

For the Energy Planning, I will concentrate on:

White Paper on Renewable Energy

We are currently providing fiscal support of once – off capital grants for commercial projects (all renewable and biofuels). In the Budget Speech, the Minister of Finance indicated that there will be tax incentives of up to 40% concession on general fuel levy for biodiesel.

Slide 14 - 16

Biofuels strategy

 

Slides 17 – 22

Nuclear Energy

Slides 23 – 31

Electricity

With regards to electricity, the "black – outs and "brown outs" continue to dog us. You will recall that this used to be a problem in the distribution channel, which mainly falls under the municipalities. The problems experienced indicate that there are now problems in both the supply and the bulk supply infrastructure. We have been assured by Eskom that the recovery plan for this winter is in place and other demand side management initiatives are also in place.

On the governance side, we intend to improve the regulatory environment through:

We intend to table the amendment to the Electricity Regulation Bill to address dual regulation inherent in the Act.

In 2004, the President announced in his State of the Nation Address the intention to achieve universal access in 2012. According to our plans, in order to achieve this goal, we need funding of no less than R2.5 billion per annum. We are currently receiving on average R1.4 billion per annum. This means, at current levels of funding, we are receiving R1 billion less than we should. This will have a serious impact on our attempt to achieve this target. We, however, continue to engage with relevant role players to ensure that we receive appropriate funding.

Generation capacity

Honourable members, I present to you the short to medium term plan for the electricity generation. The plan indicates that Eskom will commission more than 8 000 MW of electricity in the next six years. It is expected that private sector players will build an additional 1 000 MW. The second and final stage of the bidding process for the private sector participation has commenced, and it is expected that the preferred bidder will be announced towards the end of this year. It is expected that the construction of the two power plants (one in Kwa – Zulu Natal and another in the Eastern Cape) will be competed at the second of quarter of 2009 in time to meet the winter demand.

Honourable members, I present to you our strategic plan for the next five years.

 

I thank you.