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Application of Energy Act Will Avoid Mistakes of the Past, Says DME

August 11, 2009

Portfolio Committees on Energy and Mining

Tseliso Maqubela, currently deputy director general of hydrocarbons and energy of the old department of mining and energy (DME), told a joint sitting of the new minerals and energy committees that with the passing of the new Energy Act last year that for the first time South Africa could undertake an integrated energy plan to avoid mistakes of the past.

He explained to parliamentarians, some of them new to the energy portfolio, that with the anchor of the Central Energy Fund Act in place and now with the passing of the Gas Act, the Petroleum Products Act Amendment Act, the Petroleum Pipelines Act, the Electricity Regulation Act and the National Nuclear, together with a brace of acts covering the appropriate levies, waste disposal and regulations, the Energy Act could now become an effective tool for taking South Africa into a new generation of energy scenarios.

Maqubela said that the country was by no means out of its current difficulties. “We are still under the threat of blackouts and brownouts”, he said, “and if it were not for recession, we would probably be sitting here in the dark right now”.

There was still about 30% “waste” of electrical power mainly in upper income homes and industry generally, he said. Whilst the country awaited to hear the decision of NERSA on the 34% increase requested by Eskom, the country still had about 2000 different electricity tariffs applying and nobody knew how any increase, whatever it was finally agreed at, would translate via municipalities into actual usage costs per kilowatt hour.

Describing the key players as Sasol, Engen, Shell, BP, Total, Chevron and PetroSA with their refineries and stakeholders varying from Transnet and Eskom to fuel retailers, union members and nuclear reactor companies, Maqubela said the fact still remained that one Transnet pipeline in the immediate term still carried 70% of the fuel imported from the coast and the Portnet harbour offloading facilities for imports still both held the main strategic cards.

The vulnerability of South Africa in strategic energy terms was therefore intolerable and plans were in progress for additional pipelines to feed inland areas, especially if rural development was to go ahead. Also, the country had to face the fact that in the immediate future, there was limited capacity to deal with “unplanned incidents”. Transnet was to tackle the rail issue with urgency, DME had been told.

However, Maqubela said at last all had been started in the form of infrastructure either with plans or building, but the country still imported over 2 billion litres of refined fuel which was undoubtedly going to increase to 8 billion litres with “enormous problems for the economy” unless all interventions took place.

He said that not until 2011 would the new pipeline, East Coast to Gauteng, be completed and the Coega refinery with PetroSA was still at feasibility stage, as was Sasol’s new coal to liquid project.

The oil companies were currently building at the moment additional oil storage facilities to hold extra strategic stock but there was not sufficient progress in that area on cleaner fuels, which were being demanded by international standards to keep vehicle manufacturers with more sophisticated engines in the country or their cars on the road. Nor had a strategic stocks policy yet been articulated, he added.

On liquid fuels, Maqubela said that SA now had a master plan focusing on developing supply chain solutions in the shorter term, particularly with the problems surrounding aviation fuels with World Cup 2010 arriving. However, in general terms, longer-term solutions through the implementation of the integrated energy infrastructure building programme, had now been started.

On electricity, the facts were that cabinet had ruled that Eskom undertake 70% of generation, with independent power producers (IPPs) taking up the balance – cabinet also setting a target in power generation to be met.

Overriding all was the fact that the major portion of energy was currently being produced from coal in South Africa, which brought up the further fact of the whole question that SA remained right at the top of greenhouse gas emitters, a fact likely to bring the country into conflict with the Copenhagen 2009 global discussions.

With Eskom pulling out of nuclear power plant building, decisions were now awaited from the new government, Maqubela said, with reports due shortly from feasibility investigations on the actual nuclear energy route to be followed in the form of the nuclear electricity responses.

Maqubela’s figures presented to parliamentarians showed that nuclear energy numbers were included if the cabinet targets were to be met.

The challenges to be faced by the new ministry of energy remained the same as faced by DME, Maqubela said, which were to provide universal access to electricity and thermal energy and provide funding to meet this 2014 target; to increase skills capacity to allow such programmes, create jobs through the Expanded Public Works Programme and structure a poverty tariff to cushion the poor.

Backlogs in providing household energy were highest by an overwhelming amount in Gauteng because of informal settlements, KwaZulu Natal and the Eastern Cape, with Limpopo coming in fourth.

Under questioning, Maqubela admitted that “greater comfort zones” needed to be offered to IPPs if they were to invest in South Africa in order to produce energy, the primary constraint being, according the parliamentary questioner, the lack of a competitive environment with Eskom dominating the market place and unfair competitive practices such as collusion between state and parastatal being the practice of the day.