regulatory regime within the electricity supply industry 17 september 2013
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Regulatory Regime within the Electricity Supply Industry
17 September 2013
2
Table of Contents
• Introduction:– Electricity Supply Industry –Value Chain.
– Current Regulatory Regime.
• Overview of the ESI. – Electricity Generation Mix Policy Position (20 year plan).
– Current Production, Transmission and Distribution.
– Legislative and electricity generation policy overview.
• National Energy Regulator of South Africa.
• Legislative Mandate: – Procurement of New Gen Capacity.
– Feed-In Tariff vs. Bid-based Tariff
Electricity Supply Industry –Value Chain
Generation
3
Transmission Transmission LinesLines
TransmissionSubstations
TRANSMISSIONTRANSMISSION(765/220 kV)(765/220 kV)
Distribution Lines
DISTRIBUTION(132/33 kV)
Distribution Substations
POWER STATIONS
RETICULATION HV(11 & 22kV)
Reticulation LV
(380 / 220V)
Domestic
Commercial
AgricultureElectrification
Industrial
4
Introduction• Almost 97% of South Africa’s electrical power requirements is supplied by
Eskom.
• 10 out of 11 of base-load power stations are located in Mpumalanga. Amounts to 80 % of total power generated by Eskom.
• Rationale - power stations closer to primary fuel (input fuel)
• Power is transported to load points throughout the country via a total of 353 000 km (TX and DX network).
• This topology is widely referred to as Centralized Power Generation.
• Due to distant load centres, the reliability of supply is dependent on the TX and DX networks as well.
• Increasing demand for power imposes constraints on these networks, resulting in controlled (or non-controlled) load shedding. (2008 Western Cape scenario)
5
____________________Source: Eskom Website, Research Channel Electricity Review February 2011, Datamonitor South Africa Electricity Overview,
August 2010(1) Production figures are based on Eskom’s production(2) Falls under the Department of Public Enterprises
Overview of the South African electricity industry(Production/Transmission & Consumption)
Electricity consumption
Electricity production(1)
Overview
Electricity generation dominated by state-owned power company Eskom (2), which currently produces over 96.7% of the power used in the country
Eskom has a current nominal installed capacity of 44,175MW Government addressing electricity supply issues with Eskom and Independent
Power Producers (“IPPs”) South Africa needs over 45,600 MW new generation capacity by 2030 Eskom is part of Southern African Power Pool, a group of utilities in the region
aiming to create a common market for electricity in the region
Transmission and Distribution Overview
Currently, the transmission of electricity in South Africa is undertaken by Eskom The company has over 28,000km of transmission lines spanning the entire
country Electricity distribution is the final stage in the delivery of electricity to end users,
currently undertaken by Eskom, together with 187 municipalities Municipalities account for c.40% of the total electricity sales and c.60% of the
customer base
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South Africa’s Plant mix TYPE NUMBER MAX CAPACITY
Coal fired 13 stations 37 678 MW
Gas turbine 4 stations 1207 MW
Hydroelectric 2 stations 600 MW
Pumped storage 2 stations 1 400 MW
Nuclear 1 station 1 800 MW
Renewable Energy (Wind Farm)
1 station 3.2 MW
Distribution Embedded 4 stations 62 MW
TOTAL 27 Stations 44 175 MW
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____________________Source: Eskom Website, Research Channel Electricity Review February 2011, Datamonitor South Africa Electricity Overview, August 2010, 2010 BP Statistical Energy Survey(1) Map indicates South African power network and interconnections with neighboring countries(2) Figures represent Eskom’s capacity
Overview of the South African electricity industry(Current Sources of power)
Only one nuclear power station (Koeberg), a base-load station with a nominal installed capacity of 1,930MW (c.5%) Construction for the plant began in 1976 and full operation in 1985– Produced 12,806 GWh electricity in year ended 31 March 2010
Uses c.30tpa of enriched uranium Government authorized contracts in place to supply Koeberg for the next 8 years It is intended that nuclear will comprise 17% of South Africa’s base load energy mix by 2030
Hydro-electric power stations account for less than 2% of nominal installed capacity, while the gas/liquid fuel turbine accounts for c.6%(2)
Renewable Energy Programme – Current project in construction 2600 MW. (IPP’s) Potential to import hydro power (Grand Inga)
Nuclear power
Hydro-electric, Gas fuel and Renewable Projects
Coal power
c.93% of power in South Africa is generated from coal fired power stations South Africa is the 5th largest coal producing country in the world with coal reserves of 30,408mt (3.68% of world total) Coal accounts for 86% of Eskom’s nominal current capacity (37,755MW)
Electricity Supply Industry Legislative Overview
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____________________Source: Research Channel Electricity Review South Africa, February 2011(1) Excludes power to be decommissioned
Policy Adjusted IRP – Plans for South Africa’s generation mix
Long lead times for power generators and related infrastructure require timely firm commitments
Firm commitment necessary now
Firm commitment in IRP 2012
RTS Capacity
Medupi
Kusile
Ingula
DO
E OCG
T IPP
Cogeneration, Ow
n Build
Wind
CSP
Landfill, Hydro
Sere
Decom
missioning
Coal (PF, FBC, Im
ports, own build)
Gas CCG
T
Peak-OCG
T
Import H
ydro
Wind
Solar PV
CSP
Nuclear Fleet
Total New
and Com
mitt
ed Build
MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW MW
2010 380 0 0 0 0 260 0 0 0 0 0 0 0 0 0 0 0 0 0 640
2011 679 0 0 0 0 130 200 0 0 0 0 0 0 0 0 0 0 0 0 1,009
2012 303 0 0 0 0 0 200 0 100 100 0 0 0 0 0 0 300 0 0 1,003
2013 101 722 0 333 1,020 0 300 0 25 0 0 0 0 0 0 0 300 0 0 2,801
2014 0 722 0 999 0 0 0 100 0 0 0 500 0 0 0 400 300 0 0 3,021
2015 0 1,444 0 0 0 0 0 100 0 0 (180) 500 0 0 0 400 300 0 0 2,564
2016 0 722 0 0 0 0 0 0 0 0 (90) 0 0 0 0 400 300 100 0 1,432
2017 0 722 1,446 0 0 0 0 0 0 0 0 0 0 0 0 400 300 100 0 2,968
2018 0 0 723 0 0 0 0 0 0 0 0 0 0 0 0 400 300 100 0 1,523
2019 0 0 1,446 0 0 0 0 0 0 0 0 250 237 0 0 400 300 100 0 2,733
2020 0 0 723 0 0 0 0 0 0 0 0 250 237 0 0 400 300 100 0 2,010
2021 0 0 0 0 0 0 0 0 0 0 (75) 250 237 0 0 400 300 100 0 1,212
2022 0 0 0 0 0 0 0 0 0 0 (1,870) 250 0 805 1,143 400 300 100 0 1,128
2023 0 0 0 0 0 0 0 0 0 0 (2,280) 250 0 805 1,183 400 300 100 1,600 2,358
2024 0 0 0 0 0 0 0 0 0 0 (909) 250 0 0 283 800 300 100 1,600 2,424
2025 0 0 0 0 0 0 0 0 0 0 (1,520) 250 0 805 0 1,600 1,000 100 1,600 3,835
2026 0 0 0 0 0 0 0 0 0 0 0 1,000 0 0 0 400 500 0 1,600 3,500
2027 0 0 0 0 0 0 0 0 0 0 0 250 0 0 0 1,600 500 0 0 2,350
2028 0 0 0 0 0 0 0 0 0 0 (2,850) 1,000 474 690 0 0 500 0 1,600 1,414
2029 0 0 0 0 0 0 0 0 0 0 (1,128) 250 237 805 0 0 1,000 0 1,600 2,764
2030 0 0 0 0 0 0 0 0 0 0 0 1,000 948 0 0 0 1,000 0 0 2,948
1,463 4,332 4,338 1,332 1,020 390 700 200 125 100 (10,902) 6,250 2,370 3,910 2,609 8,400 8,400 1,000 9,600 45,637
Committed Build New Build Options
2025-203036.8%
2020-202420.0%
2010-201418.6%
2015-201924.6%
Planned New Generation Mix 2030(1)
Time Schedule New Power Generation Building
Nuclear17.0%
Solar PV14.9%
Gas12.9%
CSP2.1%
Coal29.7%
Hydro7.2%
Wind16.3%
Electricity Generation: Policy Position (IRP2010)
National Energy Regulator of South Africa
National Energy Regulator of South Africa
Legislative Regime: Procurement of New Generation Capacity
• In terms of section 34 of the ERA, the Minister may determine the following:– Generation capacity required;– Buyer of electricity and seller of electricity;– Type of energy source to be used for electricity generation– Provide for private sector participation
• Section 34’s determination is only legally binding once NERSA has concurred to it.
• All new generation procurement (from August 2009) shall comply with section 34 of ERA. (current RE-IPP programme is undertaken in line with s 34).
• S 34 is guided by Government policy position (IRP2010)
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Legislative Regime: Feed-In Tariff vs Bidding Tariff
• Feed-In Tariff.– Tariff at which power is sold to the grid is prescribed before bid stage.– Determination of such tariff is based largely on theoretical assessment.– If tariff too low market will not be responsive.– If tariff too high consumer overpays.– NERSA does not have a legislative mandate to prescribe tariffs upfront.
(can only make a ruling on a tariff proposal by the electricity supplier (being it Eskom or an IPP).
• Bidding Tariff.– Tariff at which power is sold to the grid is determined through a
competitive bidding process.– RSA set tariff caps per technology.– Tariff caps based on “market-sounding, Request for Proposals”– NERSA issues individual generation license based on proposed funding
model which determines tariff output.– If individual tariff too high individual bid might not be selected.– Adopted RSA model.
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Electricity Pricing Regime
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National Energy
Regulator
National Energy Regulator (NERSA) regulates the South African electricity industry
NERSA licences electricity generation, transmission, distribution and trading activities in South Africa
NERSA sets tariffs based on its Multi-Year Price Determination Methodology (MYPD)
– Annual revenues are set for a three year period currently from 1 April 2010 to 31 March 2013
Electricity Pricing Policy
In November 2008, the Government approved the Energy Pricing Policy (EPP) which sets the determination of regulated revenues going forward
– Future regulated revenues will be based on the replacement value of its assets
– Ensures long-term sustainability of the industry to fund future capacity expansion requirements
EPP aims to reach cost-reflective tariffs that will reflect the full economic cost of supplying electricity to a customer
– EPP determines a 5 year transition period that will end in FY2015 to reach cost-reflective tariffs
Department of Energy
Department of Energy is mainly responsible for electricity generation planning via Integrated Resource Plan (IRP), which determines electricity generation capacity expansion requirements in South Africa
– Objective is to develop a sustainable electricity generation capacity over the next 20 years
____________________Source: DoE website, NERSA website
NERSA- DoE Role in electricity price setting
Thank You
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