Programme director
Chief Executive Officer of the National Business Initiative, Mr André Fourie
Members of the business community
Distinguished guests
Ladies and gentlemen
Everything happens for a reason. 2010 is the year we South Africans have been waiting for. The year God made for South Africa. Central to the success of the 2010 FIFA World Cup will be access to energy.
We appreciate the sacrifices that you have made to be away from your busy schedules in order to have a discourse with us on the future of energy security in our country. This is important particularly given the role that energy efficiency and demand side management can and must play in ensuring that we have certainty of security supply with all associated benefits such as enhancing the socio-economic well-being of our country.
It is heartening to see some chief executive officers and managing directors present here tonight. It is often the case that when tragic events happen then we close ranks and respond with the necessary fortitude.
This was the case when chief executive officers and managing directors took personal interest on the issue of electricity supply following the load shedding of 2008. They joined government and dedicated their time and space to dealing with this issue. Most of them even attended meetings with government as if their lives depended on it.
I regret to say that since load shedding stopped this trend has been reversed with the powers that be in some companies in the private sector delegating the responsibility of this crucial issue to other executives.
Experiences of countries that have successfully emerged from these tragedies point out that this can only be defeated if the top leadership of government and the private sector work together. I trust that your presence here tonight will propel us to ensure that this issue of the security of supply is dealt with at the appropriate level.
Today, I am talking to people who manage assets, people who understand that the importance of sweating an asset. We perhaps need to begin to report a "return on energy" in the same manner as we do with all other assets that we manage, with of course an understanding that some industries will show a better return than others because of their very nature.
We should then perhaps use this data to determine which portfolio of operations we continue to pursue and which to halt. This is after all the way, you the captains of industry decide the optimal portfolio that yields the best return for your investors, is it not?
We are in middle of warfare, an economic warfare. It is important to understand that we may lose some battles but we cannot lose this "war". We have been entrusted with a management of our energy resources. In managing these assets for the country, difficult choices will have to be made. Like in any war, there will be casualties, but we need to minimise the blood bath.
The economy is facing serious decisions going forward. It is clear that we cannot continue on the wasteful path that we have been on. It is even true that perhaps we cannot even continue on the same developmental path we have been on.
We all saw the horrific unemployment figures released by Statistics South Africa only the other day. One in four economically active South Africans are unemployed. We are the only ones that can change this situation. We all know that an economy will not grow without energy, but that does not mean inefficient use of energy. We all know that the next few years are going to be challenging.
As we build new capacity to supply the much needed electricity, we need to use what we got optimally. That also means making correct energy carrier choices. We can't continue heating water with electricity, we can't continue cooking with electricity and we can't continue using electricity for heating purposes. We can't continue using electricity to generate steam, when we used steam to generate electricity in the first place at 40 percent efficiency.
We say energy efficiency is "first energy". Before we make more, we need to make sure that we use what we got more efficiently. We need to sweat our current energy assets, not only ESKOM, but all of us. We need to understand how well we are doing against our colleagues in the same industry, in other countries.
We cannot lose this war. If we do, our country will not survive it. Without economic growth, we will lose the war on crime. Without economic growth we will lose the war on poverty, without economic growth we will lose the war on AIDS. We cannot lose this war. It is only when we join hands to ensure sustainable supply through firstly efficient use of what we got and finally adding appropriate new supply that we can survive as a nation.
Meeting with NBI leadership in 2009
Last year, when I met with the delegation of the National Business Initiative, led by the Chief Executive Officer, Mr André Fourie, I was particularly encouraged to hear about the commitment of the industry and the progress that has been made with regard to energy efficiency and demand side management.
It is particularly crucial that this was based on the commitments made through the energy efficiency accord, a voluntary initiative which has taken the country so far ahead. When I perused the report of the energy efficiency accord, I have come to appreciate the depth of the commitment and the progress we have made in this programmed.
This accord took place against the backdrop of the absence of even the most basic of the building blocks of enforcement legislation on energy efficiency. It was the period when it was clear to the government that, unless a voluntary accord was signed, we were inescapably headed for trouble as what we had hitherto taken for granted, that is access capacity of our electricity supply, was dangerously running out.
Through our presence here tonight and working together with industry, we are once again, given the opportunity to relive the spirit that drove the original decision to come up with the Accord. The situation with regard to electricity supply is as precarious now as it was when the original accord was signed.
In fact our President, Mr Jacob Zuma, speaking last week during the launch of our solar water heating programme in Winterveldt, which itself is a major Energy Efficiency and Demand Side Management (EEDSM) project, said the following about our state of affairs:
"We have enjoyed over 13 years of democracy without any risk of electricity supply failure. It became natural for people to use electric heaters, stoves, kettles and geysers resulting in South Africa becoming one of the highest electricity users per capita in the world. We took energy for granted".
Given the electricity supply disruption of 2007/08 caused in the main by the inability of our utility, ESKOM, to meet the electricity demand countrywide; we are through our presence tonight reaffirming our commitment to ensure that working together with major industrial players who are present here tonight, we are able successfully to avert a repeat of the escapable ignominy of load shedding and ill its associated negative consequences.
Energy policy and energy efficiency
You will recall that as early as the era of the White Paper on Energy Policy of 1998, through to the energy efficiency strategy of 2005, a common thread of energy efficiency could be seen throughout all these major energy policy development process. A target of 15 percent energy efficiency for the industry and 12percent nationally was set to be achieved by 2015.
We were encouraged by the fact that while the requisite and inevitable legislation and regulations were not yet in place, you as the industry, guided by a lodestar of an efficient and greener South African economy, deemed it necessary to trot ahead and lead by example by committing yourself to the spirit and letter of the energy efficiency accord.
Our presence here tonight is once again a feather in the cap of the energy efficiency accord. It is these modest and yet significant steps that cushioned us against the worst effects of the electricity shortages of 2007/08.
The results of these decisions will be enjoyed for many generations to come. While the focus was on energy intensive industries, room has now been created for other industries and the commercial sector to join the energy efficiency campaign, through the introduction of inter alia:
* Efficient lighting and heating, ventilation and air conditioning and employee education
* The health sector in terms of efficient lighting and heating, ventilation and air conditioning, non-electric water heating and employee education
* As well as the industrial sector in terms of efficient production processes and cogeneration.
As a government led by our movement, the ANC, we remain committed to the efficient use of available resources as we are not oblivious to the fact that these are finite. We are also firmly committed to broadening our energy mix, thereby moving away from being fossil dominated to a more balanced combination which places a high premium on the use of more efficient technologies and renewable energy resources.
From the government side, we have put together a number of initiatives to promote energy efficiency. We are proposing, through the National Treasury, tax incentives to be applied to companies that demonstrate energy efficient practices. We are currently finalising regulations that are meant to minimise double dipping.
* Producers, you will recall that renewable energy feed-in tariff structure has been proposed.
* For the electricity consumers, consideration is being made under the Electricity Regulation Act for the Energy Conservation programme.
The energy legal and regulatory environment
Since the inception of the energy efficiency accord, a number of regulatory steps have been introduced to provide a more stable legal and regulatory framework namely; the Electricity Regulation Act (2005) which provides for the energy efficiency practices of the licensees (which indirectly affect consumers such as yourselves) and the National Energy Act (2008) which will directly affect consumers like yourselves.
These key developments have enabled us to be more surefooted with regard to the direction that we want to take in the energy efficiency space. In this regard, we have some ground to cover as we still have to promulgate enabling regulations for these initiatives to bear some fruit. We need to foster and enhance partnerships with bodies and companies that are associated with organisations such as the NBI. This will help us to ensure that we do not create gaps as we move towards the legislated era of energy efficiency and demand side management.
Global competitiveness
I have noted that most of your organisations or companies are active players in global markets. However, in order to be competitive your input costs have to be ff as low as possible. As you are aware, we are operating in the labour market that is regulated and where beside automation, labour costs will be a given cost.
It is inevitable therefore that some of the companies represented here will be buying some of the products and services from the international markets. This leaves them with energy input costs as something that they can do something about as a management decision.
This has to take place as we, in the same vein, have to grapple with the negative impact of the lack of energy efficiency emphasis across the entire energy space. While we recognise the centrality of energy efficiency to achieving our objectives, it is also important to ensure the optimisation of our industrial business processes.
There is a need and a window of opportunity for some of your business processes to be realigned in order to minimise input costs. On the latter we trust that we shall all learn from the international best practice and emulate the same commitments here in our country
Green Economy
As you are aware, South Africa remains one of the highest energy intense countries per capita around the world; this is mainly a result of the commodity industries that we have wilfully created over a period of time. We have made a conscious decision to move towards a green economy. In that regard, we want to see the development of green industries, production of low carbon intense goods and services that are able to compete in the global markets.
Clean development mechanism benefits
I have noted with regret that of all the commitments that were made in the first accord, the South African industry has had very little to benefit from the clean development mechanism (CDM).
Going forward, there is a need for the NBI to assist its membership in coordinating the registration of these projects with the DNA office in my department. The benefits could be used to offset the costs invested in the energy efficiency interventions.
Monitoring and verification
In order to derive CDM benefits, it is essential for the energy consumption baseline to be determined, followed by the post intervention monitoring and verification. I would like to suggest that, within the operations sections of organisations, energy management divisions be established to make the work of energy efficiency interventions, monitoring and verifications a lot easier. There is no reason why organisations cannot share energy management expertise.
Repositioning of the NBI
I would like to encourage the NBI membership uses the good offices of the NBI and serve as a focal point for the determination of service level agreement and the tariff determination in our country. There is a need to create an even greater awareness of the NBI brand so that more organisations should wish to be associated with it.
The benefit of this approach will be such that there will be economies of scale and scope which will invariably address issues of carbon disclosure, energy efficiency and demand side management.
As you are aware, the regulations on energy efficiency are currently being finalised through the consultative process of the Department of Trade and Industry, the energy efficiency strategy is being finalised through my Department of Energy and of course, a number of regulations under the Electricity Regulation Act and the Energy Act are being developed to operate those pieces of legislation.
In that regard, a concerted collective effort will be required to make sure that the interest of government and the industry are balanced.
From the energy perspective, I welcome any voluntary development which will bring us closer to achieving the energy security requirements of our country through sustainable development. It will be a bonus if the voluntary energy efficiency processes of the NBI can dovetail into the national regulated process of energy efficiency in a smooth and uninhibited manner.
Institutional leadership role in energy efficiency
On that note, I would like to encourage further collaboration between the industry and government in securing a brighter and greener economy for posterity. The continued leadership and stewardship of the chief executive officers and their boards have an obligation to making South Africa an energy efficient investment destination of international standing.
Thank you for the work well done. I am looking forward to some engagement with some of you tonight on how we should and can work together to take the process forward.
I thank you.
Issued by: Department of Energy
11 May 2010
