Responding to the Electricity Challenges:

Five Point Plan Overview

19 December 2014

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Presentation outline • Purpose • Problem statement • Strategic thrust• Elements of the 5 point Plan

– Eskom’s 30-days emergency measures – Co-generation – Gas imports – Coal Independent Power Producers (IPPs)– Demand-side Management

• Conclusion

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Purpose

• Brief Business on the following: – Cabinet decision on addressing the current electricity

challenge– The elements of the Five Point Plan

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Problem statement

• The country is facing a real risk of load shedding daily.• Approximately 14,000MW or about one-third of total Eskom

generation capacity on average is offline. Of this 14,000MW, over 8,000MW is due to unplanned (breakdown) maintenance.

• To reverse this trend, Eskom needs space to execute preventative (philosophy based) maintenance instead of the reactive maintenance. What’s required?– In the immediate, the focus will be on sustained maintenance

and operational efficiency to reduce the level of this unpredictable breakdowns, and

– In the medium to long term, the focus will be to bring in new generation capacity to alleviate the constrained system and accommodate demand growth

• The key objective is to improve plant performance while limiting load shedding

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Strategic thrust

• Cabinet agreed that in addressing the electricity challenges, it is essential that the national interest be the primary consideration

• This acknowledges that some parts of society and the business sector may be impacted more than others and Government will need to carefully consider difficult trade-offs.

• The purpose of the 5 Point Plan is to present a strategy of immediate and short term interventions (next 3 years) to:– limit the risk of load shedding, in a manner that also ensures that Eskom

is able to play a strategic role in the developmental state despite its constrained capacity to do so over the next 3 years at least.

– Support Eskom to create space to improve plant reliability and then participates in building new capacity

– Instil public confidence in Government’s response and to indicate that Government is in control of the situation.

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Elements of the 5 Point Plan

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Eskom Emergency Measures over the next 30 days

• Approximately 14,000MW or about one-third of total Eskom generation capacity is currently offline.

• Of this 14,000MW, over 8,000MW is due to unplanned maintenance As part of the interventions All possible avenues to improve the operational efficiency of Eskom power stations will be explored so as to improve Eskom’s current level of availability from 72% to its target of 80%.

Key interventions • Focus will be given to improve

strategic maintenance and operational efficiency.

• An independent assessment on Eskom’s maintenance practices will be undertaken to identify areas of improvement

• Eskom will prioritise key plants for focused and strategic maintenance

• This approach will lead to plants and units accounting for substantial MWs being brought back online.

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Co-generation • Renewal of the contracts to provide power

beyond March 2015. • In line with the Electricity Regulation Act,

government will be going on a procurement process for additional co-generation opportunities that exist

• In addition, it is been estimated that an additional 1,000MW are still available within South Africa which could be brought online within 18 months.

• The emphasis in this programme will not only be to ensure additional electricity supply to the grid, but also to make sure that costs are contained through extensive contract management oversight. The key focus is to ensure that the pricing is optimum.

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Gas imports

• There are significant opportunities for importing gas which would allow for gas to be used for electricity generation. Gas will be sourced to generate electricity of between 500MW to 2,000MW in the short to medium term. This would be new-build and could come on-stream within 36 months.

• In addition, importation of gas through Saldanha could also replace diesel for Eskom’s Ankerlig OCGT plant which would result in efficiency improvements and additional 10% capacity improvement

• The Government will embark on country to country negotiations to access gas from African countries that are able to supply South Africa. A key opportunity is for gas to be shipped via Saldanha Bay and/or alternatively from Mozambique

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Coal IPP• This programme is at an advanced level following a RFI

issued earlier this year and will provide for IPPs with a generation capacity of about 2,400MW

• Request For Proposals (RFP) out in the market since 12 December 2014– Submission for bids are due on 8 June 2015– Announcement preferred bidders August 2015– Legal close by preferred bidders is expected by March 2016.– Financial Close by preferred bidders is expected around June

2016– Commissioning (1st MW) by early 2019

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Demand Side Management • The following actions are contemplated:

– Government and Eskom will be engaging the energy intensive users to explore further efficiency improvement opportunities.

– There are also demand-side measures that have not been utilised in the country, such as Demand Response which could be free up 500 MW within 6 months. An RFP in this regard will be issued by the DOE in January 2015.

– In addition, a range of existing demand-side interventions will be improved such as the introduction of mandatory regulations for the use of low-energy light bulbs, the energy efficient street lighting, and retrofitting of Government buildings with low energy systems.

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Conclusion

• The Five Point Plan reflects government to address the current challenges

• Current challenges a national and require a national response and Eskom is central

• Private sector has a clear role to play in support the implementation of the plan

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