Draft National Water Resource Strategy 2 (NWRS 2):

Eskom submission to the Portfolio Committee on Water

and Environmental Affairs

23 - 26 October 2012

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Section 1

Importance of water to Eskom

Section 2

Initial comments on the NWRS 2

Importance of water to EskomEskom’s Strategic Imperatives

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2

3

4

5

6

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Importance of water to EskomWater use and water risks

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Eskom water use:

• Water volume requirements peak in 2021 at 380Mm3 /a

• By 2030, water requirements reduce to 275Mm3/a

Future locality for new power stations:•Coal-fired: Waterberg Soutpansberg, Free State, Mpumalanga

•CSP/Solar – N.Cape

•Nuclear, Wind, OCGT / CCGT – Coast

Strategic importance of water:Current heavy reliance on relatively water intensive, wet cooled power stations•Produce 78% of MWh

•Consume 98% water

Strategic importance of electricity:Economic & social development requires reliable and affordable electricity

Build program R340Bn employ 50% localsW

ater

use

Wat

er r

isks

Importance of water to EskomEskom’s involvement in the formulation of the National Water Resources Strategy 2 (NWRS 2)

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The Department of Water Affairs (DWA) drafted a new National Water Resources Strategy (NWRS 2). Eskom provided submissions for forming the basis of the Energy Chapter within the NWRS 2.

Eskom’s first submission to DWA was made in November 2011 in a report which covered:

•The importance of electricity to the socio-economic growth of South Africa and therefore the importance of power generation retaining its “Strategic Water User” status .

•The future water requirements for South African power generation based on the current capacity and the future capacity plans (IRP 2010).

•Eskom’s water resource management activities.

•Recommendations for consideration in NWRS 2.

DWA published the Draft NWRS 2 in September 2012 for public comment and participation.

Eskom’s second submission to DWA is scheduled for December 2012 and will be based upon a gap analysis and detailed review of the Draft NWRS 2 and be taken into account during the DWA Public Consultation phase.

This presentation highlights certain Eskom concerns in the Draft NWRS 2, and does not address Eskom’s detail recommendations to DWA for aligning the NWRS 2 with energy and other policies, strategies or plans.

Importance of water to EskomFirst submission to DWA - 16 recommendations

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Eskom’s recommendations on NWRS 2 (November 2011)

1.

Planning

2.

Policy

3.

Operational

Improve alignment between water and energy planning processesa

Encourage “trade-off discussions across relevant Government departmentsb

Engage with stakeholders beyond Eskomc

Broaden the forum for SADC and wider water / energy discussionsd

Understand impact of climate change on the security of water supply to Eskom and power producerse

Rapidly implement the Waste Discharge Charge System

Encourage water users to subscribe to the principles of the UN Global Compact CEO Water Mandate

Address gaps in the current water sector governance framework

Encourage improved and faster service provision

Where possible, limit dependence of power stations on one water source

a

b

c

d

e

Refine the current pricing strategy and tariff principles

Implement a national dry-cooling policy

Develop a standardised cross industry framework for measuring and reporting water footprint

Encourage DWA stakeholders to expand energy demand management and WC/WDM practices

Define the responsibilities of a Strategic Water User

Develop a formal policy for desalination attached to coastal power stations

b

c

d

e

f

a

Importance of water to EskomRecommendations to enhance the strategy

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Focus Areas Recommendations

Unclear strategic framework

• The link between “Strategic Goals”, “Water Management Strategies” and “Enabling Strategies” is unclear

• The content in each of the strategies is overlapping and sometimes inconsistent

Few strategies are automatically implementable

• Only some strategies are defined clearly enough to enable them to be implemented by relevant parties

• In many cases, the objective has been provided but no approach or solution is defined

Unclear and un-prioritised implementation approach

• Structured framework / timeline not present which links all the different strategies (although timelines per strategy have been defined)

• Interdependencies between strategies have not been identified

• Strategies have not been prioritised

No detailed quantitative and qualitative water assessment

• The strategy doesn’t provide a detailed quantitative assessment of water usage and water quality for South Africa and SA’s different catchments - nor the plans by sector in the future (e.g. The future water demands by sector across South Africa)

• Develop a more structured framework which clearly links strategic goals to activities and enabling actions

• Additional work to go into defining policies / procedures prior to final document approval

• Improved mapping of timeline

• Highlighting interdependencies and implications of not meeting certain goals

• Prioritisation of all strategies / actions

• Bottom up analysis of all water use and water quality by catchment / river system

• Projected water use based on sector input and water resource quality

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Section 1

Importance of water to Eskom

Section 2

Initial comments on the NWRS 2

Draft NWRS 2 strategic frameworkEskom supports the core strategies and makes recommendations in following areas

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#1 Encouraging water stewardship

throughout value chain

#2 Misalignment between water and

energy planning processes

#3 Improve national water resources

infrastructure management

#4 Improve water sector service

provision

#5 Review current water pricing strategy

and investment framework

#6 Declining water quality adversely

affects Eskom operations

#7 Climate Change

#8 Assurance of supply to “strategic

water users”

#1 Encouraging water stewardship throughout value chain

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Requirements of a standard cross-industry framework for water footprinting

Need to “implement an accounting framework for WC/WDM”, but NWRS 2 is not specific

• Does not address alignment with energy demand management, nor focus on specific sectors

• Highlights potential funding requirements, but not the source

• Opportunities for a funding model for WC/WDM initiatives should be assessed

Need to improve public awareness (e.g. UN Global Compact – CEO Water Mandate), but NWRS 2 does not specifically target businesses which play a significant role in South Africa’s water usage

Recommendations:

Define, implement, monitor and enforce a water accounting policy for both strategic and non-strategic users

Implement processes and systems to be more effective in –

• Compliance monitoring and enforcement

• Eradicating illegal water use and water losses

Eskom provided a water footprint for power generation based on IRP 2010; NWRS 2 needs to show how water sector will support the development

Encourage DWA to enforce principles of the UN Global Compact – CEO Water Mandate

• Encourage other large water users to lead and mobilise managing water risk effectively at catchment, supply chain and company level

• Ensure that other role players in energy and power generation sectors are consulted

CEO Water Mandate

Key areas include –•Direct operations•Supply Chain•Watershed management•Collective action•Public policy•Community engagement•Transparency

#2 Misalignment between water and energy planning processes

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Require alignment to address Water-Energy-Food nexus

Draft NWRS 2 takes a broader view and puts water at the centre of national planning decisions; however –

•Nothing specific mentioned regarding –

• Infrastructure and water resources plan to support the IRP 2010 and related developments

• Striving for consolidated Water Resource Studies and EIA’s, SEA’s, IWUL’s, EMPR’s

• Increasing speed at which locations are selected for power generation build

•No ‘trade-off’ discussions across relevant Government departments (DWA, DOE, DEA, DMR, etc.)

•Certain strategic goals might have to be compromised to help meet other related goals (e.g. reduces emissions but increases water usage)

Recommendations:

Develop infrastructure and water resources plan to support the IRP 2010 and related developments

Development of cohesive and balanced environmental / water / climate change policy for power generation

Require single environmental approval process

Development of new SADC and African forums where energy and water (and potentially food) stakeholders discuss planning and policy issues

#3 Improve national water resources infrastructure management

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Recognised the importance of separating roles and also build skills

Indicated that economic regulation is being explored and decision around institutional design will be taken by end of 2014

Emphasised the need to improve asset management, reduce backlog in infrastructure maintenance

Recognised capacity gaps both at national level and at regional institution level (e.g. CMA, RWIs, WMAs)

Key Strategic Objectives of Draft NWRS 2 include:

Establishing an effective regulatory function

Strengthening role of DWA as regulator and other regulatory institutions – includes enhancing DWA capacity, establishing Regulatory Branch and fast tracking establishment of CMAs

Promoting Regulator’s accountability to improve public confidence

Address gaps in national water resources infrastructure management

Recommendations:

Management of national water resources infrastructure remains a primary concern:

• Ownership, financing, development, management and operations of national water resources infrastructure will be strengthened by ring fencing Water Trading Entity into Government Component separate from Policy and Regulation

• Not clear if governance structure will separate roles and responsibilities of DWA as regulator, policy maker and implementer of national water infrastructure

DWA to initiate immediate steps to improve performance of national water resources infrastructure management function and related financial management aspects

#4 Improve water sector service provision

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Address gaps in water service provision

Recommendations:

1. Prioritise handling and issuing of Strategic Water Users’ Water Use Licensing at central government level

2. Expedite institutional reform, e.g. setup CMAs, implement economic regulator and WRIA

3. Improved asset management and maintenance of existing water supply infrastructure

4. New infrastructure development to provide for new energy capacity

Current water services that have an adverse impact on industry performance, including –

“Water Sector Institutional Arrangement” strategy includes key changes to enable –

Water Use Licensing backlog: Licensing process is complex, onerous and slow

Clearing water use licensing backlog by 2016

Reserve determinations are done based on water use licenses – WUL backlog results in poor data

Delegating water use licensing to CMAs

Limited / no compliance monitoring and enforcement Intensifying compliance monitoring and enforcement

WC/WDM only applied in certain sectors Driving and intensifying WC/WDM across all sectors

No independent or effective economic regulator Establishing effective economic regulator

Poor billing and revenue collection (WTA deficit) Improving billing and revenue collection

Poor and/or late delivery of projects Aligning prioritisation and delivery of projects

#5 Review current water pricing strategy and investment framework

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Water pricing strategy to affect Eskom investments, operations and tariffs

Eskom supports the following Strategic Actions in the Draft NWRS 2:

Developing appropriate funding models for development of water infrastructure

Aligning prioritisation and delivery of projects across the water value chain

Aligning development of project proposals, identify and rectify gaps in planning and implementation schedules

Providing appropriate funding for new agencies and ensuring necessary state funding is available

Review and revise current pricing strategy to address price capping and exclusions

Investigate new ownership models for infrastructure - consider options for financing, designing, building, constructing and maintaining

Integrated infrastructure investment approaches followed in the past have not succeeded in addressing all challenges and improved financing methods are required to meet socio-economic goals

Recommendations:

Eskom, DPE and DoE need to participate in National Pricing Policy and investment framework review

• Enable DWA to plan for, and develop long term water infrastructure more effectively

• Ensure quicker approval and investment in water infrastructure

• Enable WC/WDM across all sectors

• Access climate change and green funds

DWA needs to ensure pricing policy protects local communities and disadvantaged

DWA should consider options for a “Blended Tariff” structure across South Africa

#6 Declining water quality adversely affects Eskom operations

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Need to improve water quality and enforcement of regulations

• Eskom is being impacted by deteriorating water quality

• Draft NWRS 2 identifies reason for continued poor water quality as “can be attributed to weak governance, lack of regulation and poor compliance and enforcement”

• Although the need to enforce compliance to regulation (e.g. Waste Discharge Charge System), measures and the tools to do that are not yet defined

• Limited capacity exists in Regional Offices to enforce complianceRecommendations:

Rapidly implement Waste Discharge Charge System Enforce “polluter pays principle” Implement Compliance Monitoring & Enforcement function required for those users causing a negative

impact Transformation of Water Management Institutions required to support such a goal

#7 Climate Change

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Climate Change and water security

Climate change

•Eskom requests DWA to quantify risks from Climate Change on current and future water supply through research and monitoring of hydrological flows and trends

•Requires early warning and forecasting for disaster risk reduction

Water security

•Limit dependence of power stations on one water source

Recommendations:

Climate change research should be one component of the broader research to be conducted by DWA and included in the National R&D Strategy

• Both the Climate Change Adoption Strategy and the R&D Strategy will enable a better understanding of Climate Change on South Africa’s water resources

• R&D Strategy should support funding of water related research Potential impacts of Climate Change on security of water supply in key catchment areas need to be shared

with Eskom to ensure water security

To mitigate water security risks, DWA should ensure each water supply system is backed up by multiple resources or power stations are located next to available water resources

• Draft NWRS 2 does not make any reference to mitigating this risk

#8 Assurance of supply to “strategic water users”

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Definition and responsibilities of a “strategic water user”

Limited fresh (surface) water available for strategic and other use, and it is proposed that all surplus fresh water be placed under direct control of the Minister

Not clear if / how Water Allocation Reform may impact Eskom , e.g.

•Eskom future status as strategic water user not defined

•Allocation priorities or assurance of supply to strategic water users not defined

Definition or responsibilities of a “strategic water user” not included in any NWRS 2 strategy

•Priority 4 of Water Allocation Priorities specifically deals with the allocation of water for uses that are strategically important to the national economy, and then other uses

•Specific development and security challenges include electricity, food security, and mining, as well as associated job creation

Recommendations:

Urgent need to define “strategic water user” within priority outcomes of Cabinet, the National Development Plan, the New Growth Path and spatial development plans

Need to define responsibilities of “strategic water user”

Power generation to remain “strategic water user” to support economic growth

Discussion

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Thank you