Programme director, Mr Brian Gallagher (British Trade Commissioner, South Africa)
Honourable Minister for Trade, Investment and Small Business, United Kingdom (UK), Lord Davies of Abersoch
Minister of Trade and Industry, Republic of South Africa, Dr Rob Davies
Minister of Mineral Resources, Republic of South Africa, Ms Susan Shabangu
Distinguished guests
Ladies and gentlemen
Good morning
2010 is the year that God created for the African continent and South Africa in particular. 99 days to go before the kick off of the FIFA World Cup, the first of its kind on the African soil. Ke Nako. Africa’s time is now. The cup will stay in Africa, If South Africa fails to win it, and one of the African countries will certainly do it!
Our presence here during this state visit is our way of meeting practically to do something to transcend our political power relations and end the uneven socio economic relations that effectively still define our engagement. We are here to build on the positive aspects of our historical past; we are here to take the proverbial step to build on what the successive post apartheid African National Congress (ANC) governments have sought to do during the course of our relations with the United Kingdom.
Almost all countries on this universe are increasingly devoting a large amount of their time dealing with the issue of energy security and the concomitant environmental impacts of energy use and handling. They have done so because they are mindful of the vital role of energy in the global economy.
In South Africa, our government recognises and acknowledges that renewable energy will significantly contribute to energy supply security by increasing diversification of energy sources, expanding access to energy services and contributing to sustainable development through the optimum use of cleaner energy resources. A number of renewable energy sources and technologies are available in South Africa, but most still need to be developed to their full potential.
In 2009, the ANC, our ruling party, declared that, “Working together we can do more!” Our movement was emphasising the need for cooperation, teamwork and the establishment of synergistic relationships/partnerships among all the parties involved (as well as those that are still outside the process). The business community, represented by men and women assembled here, has a responsibility to take advantage of the existence of sound bilateral relations in order to successfully conduct their activities.
Governments, still remain responsible for the creation of an atmosphere that is conducive for uninterrupted business activity. In South Africa we shall continue to do this through appropriate policy formulation and implementation as well as by providing regulatory certainty.
In South Africa the White Paper on Energy Policy of 1998 and all the post-1994 pieces of legislation seek, among others, to promote sustainable and economically viable investments in the energy sector while addressing the socio-economic imperatives of the post-apartheid era, particularly the empowerment of historically disadvantaged South Africans.
We have, however, noted that the investment by the private sector has not happened on the scale that was originally envisaged. In 2006 South Africa committed itself to a target of a minimum of 30 percent participation by the private sector in our electricity generation.
The President of the Republic of South Africa, Mr Jacob Zuma, has established an Inter-Ministerial Committee (IMC) to finalise decisions around Eskom’s funding model and create a platform for Independent Power Producers (IPPs) to operate in the electricity generation industry.
We all recognise the need to diversify energy supply by developing advanced, non-polluting, more efficient, affordable and cost-effective energy technologies to meet the rising global demand for energy, particularly in developing countries. Cognisant of the threat of climate change, we also recognise that it is important to balance our exploitation of fossil fuel resources with alternative energy options that could help mitigate and even reduce the impact of increasing Greenhouse Gas Emissions.
It is for this reason that the Department of Energy has identified clear targets for renewable energy options within the Integrated Resource Plan (IRP). This IRP merely reaffirms the Renewable Energy White Paper target of 10,000GWh (approximately four percent of the energy mix of renewable energy by 2013). The IRP also gives effect to the implementation of the energy efficiency and demand side management through a financial incentive scheme (the standard offer) and installation of the 1 million Solar Water Heaters (SWH) to displace about 3 000 MW from the grid.
The South African government through the Department of Energy (DOE) has partnered with the Clinton Foundation regarding the development of an industrial solar park concept, focusing specifically on the Concentrated Solar Power (CSP).
South Africa seeks capacity and skills development for methods and data that would enable the authorities, investors, power sector and industry to investigate and plan for large-scale exploitation of wind power for electricity generation. The Wind Atlas can find applications in at least two areas, namely to assist in the development of large grid connected wind farms and to provide more accurate wind resource data to identify potential off-grid electrification opportunities.
The Department of Energy, Eskom and Council for Scientific and Industrial Research (CSIR) are jointly funding the development of an off-grid electrification planning tool based on harnessing renewable energy resources. However, this off-grid electrification planning tool is dependent on good quality resource data and inputs.
The 10 000 GWh target can only be achieved through the appropriate development of renewable energy technologies. It is important to note that we are in the process of reviewing Renewable Energy White Paper in order to come up with more ambitious medium term and long term targets.
Due to limitations in skills on the necessary technologies as a result we anticipate that through relations with countries such as United Kingdom (UK) we could be able to get assistance. Other renewable energy technologies under consideration are wind, small scale hydro and landfill gas (biogas) for power generation.
The 52nd ANC conference held in Polokwane declared amongst others that the government, business and civil society need to join efforts towards the accomplishment of the goal for the reduction of waste generation and disposal by 50 percent and 25 percent respectively by 2012. Furthermore, the resolution requires that there be engagement in the promotion of clean technology and clean production methods.
Programme Director, South Africa is a signatory to both the United Nations Framework Convention on Climate Change and its Kyoto Protocol. This allows South Africa to participate in the Clean Development Mechanism (CDM). The Clean Development Mechanism (CDM) was established in terms of Article 12 of the Kyoto Protocol (KP) in 1997 as one of three ‘flexible mechanisms’ allowing annexure one parties (developed countries) to achieve a portion of their emissions reduction commitments through projects in non-annex I countries, as well as assisting developing countries achieve their sustainable development.
It is clear that Clean Development Mechanism is at the moment the vehicle for us to obtain funding to implement clean energy projects. UK is classified as annexure one party under the Kyoto Protocol and it has a target to comply with. In accordance with the rules and procedures of Kyoto Protocol, UK can use some of the emission generated from Clean Development Mechanism to meet its target. Given that our economy is coal based, there is a great potential to develop these projects. These can range from renewable energy, energy efficiency, cogeneration and energy generation from waste.
The UK is amongst the highest buyer of certified emission reduction, this present South Africa with an opportunity to grow its Clean Development Mechanism market. As a signatory to the Kyoto Protocol we have established the designated national authority within the Department of Energy to facilitate the development of Clean Development Mechanism projects. We would therefore like to urge the UK to encourage its private sector to invest and to use the certify emission reduction projects originating from our country.
Programme director; let me highlight the possible areas of collaboration to support the development of the carbon market in South Africa:
* Facilitate the UK utilities’ investment in South African CDM projects
* Prioritise purchasing of South African Certified Emission Reductions by UK industry
* Expansion of the climate change fund (currently sitting with the UK government) for capacity building in climate change
* Capacity for government and private sector personnel
* Capacity for CDM industry association
* Collaboration on customisation of CDM methodology for South Africa.
Despite the disappointing outcome of the 2009 Copenhagen meetings, optimism still prevails that during 2010 Mexico COP 17 we will see more countries adopting binding targets going forward. South Africa’s long term mitigation scenarios put us on a trajectory of 34 percent target by 2020 and 42 percent by 2025. There is therefore a need for our energy sector to be diversified by ensuring that our electricity is also produced from cleaner alternative energy sources.
We need to be “greener” by producing more renewable energy and using existing energy and other resources more efficiently and sparingly to enable us to meet our needs while also not compromising the future generation’s ability to meet theirs.
I am happy that the National Energy Regulator of South Africa (NERSA) approved the first and second phase of Renewable Energy Feed in Tariffs (REFIT) which is one of the biggest milestones we have achieved on the renewable energy front.
Some of you may also recall that in my budget vote speech of 2009/10, I announced the need for the establishment of the Independent Systems Operator (ISMO). The ISMO is intended to level the playing field between producers and consumers of electricity in a manner that protects the smaller players from potential market abuse by the bigger players. I am glad to announce that the process of establishing the ISMO is moving at a faster pace because we will be tabling the establishment legislation before April 2010.
The Generation License, Renewable Energy Feed in Tariff (REFIT), Independent Systems Market Operator, the Power Purchase Agreements (PPA) and the liquidity of the Independent System Market Operator are the essential characteristics of viable Independent Power Producers (IPPs). We are currently working on parallel processes. Our ultimate objective is to ensure that all these systems are in place as quickly possible. NERSA is currently putting together procurement guidelines as prescribed in the new generation regulation and through the collaboration of the Department of Energy, the NERSA and the National Treasury there will be a standardised PPA.
Programme Director, I am happy to announce that in 2005, following the adoption of the Energy Efficiency Strategy of the Republic of South Africa, a number of progressive South African companies signed a voluntary energy efficiency accord with government. This accord was facilitated by the National Business Initiative (NBI) and its main aim was to assist in implementing the strategy and contributing to the achievement of the announced energy efficiency targets.
While trying to increase generation capacity, we are also involved in a number of energy efficiency and demand side management programmes in all of our economic sectors, particularly the household sector and heavy industries. These efforts also come in light of our commitment to address climate change challenges. We would also like to call upon our international counterparts and partners to support us in matters related to clean energy technologies by way of entering into effective cooperation agreements, which will also increase investments opportunities in the following areas:
* Monitoring systems for energy efficiency programmes
* Auditing, measuring and verification of energy efficiency programmes
* Partnership with local manufactures to produce locally based energy efficiency hardware and climate change technologies
* Capacity Building and skill transfer in the energy efficiency sector in the industrial, commercial and residential sectors
* Skills and technology transfer
* Establishment and capacitating of Regional Energy Offices
* Increasing testing facilities for energy efficiency and renewable energy hardware to bolster SABS’s capacity.
Programme director; let me confirm that in June 2008 the government of the Republic of South Africa approved the Nuclear Energy Policy for implementation. The long-term vision of the policy is to become globally competitive in the use of innovative technology for the design, manufacture and deployment of state of the art nuclear energy systems and power reactors as part of the energy mix, as well as the deployment of nuclear fuel cycle systems to ensure security of supply. These nuclear power reactors will play a role in mitigating climate change by reducing greenhouse gas emissions.
In implementing the decision to introduce additional nuclear power generation capacity to the country’s base-load the intention is to diversify the electricity generation mix away from its almost exclusive reliance on coal whilst addressing the need to reduce the country’s carbon footprint, to stabilise the grid and to reduce the risks associated with limited water availability.
It has been clear that we need to formulate Skills Development strategies to address skills shortage, acquisition and retention of the relevant skills in appropriate numbers and also determine the type and quantity of skills required to support the entire nuclear programme:
The following categories will be addressed:
* construction skills
* plant operation skills
* skills for the relevant government departments
* regulatory skills
* supporting industry skills
* decommissioning and rehabilitation skills
* radioactive waste management.
The nuclear fuel cycle strategy for the beneficiation of uranium resources is a key factor with special focus on:
* securing South African uranium mineral resources
* developing a uranium conversation plant
* developing a uranium enrichment plant
* developing a fuel fabrication plant.
As the business community you need to take advantage of the R385 billion capital expenditure programmes that is currently being undertaken by Eskom through its build programme. This should be extended to include inter alia infrastructure for liquid fuels Transnet’s New Multi-Products Pipeline (NMPP), PetroSA’s Project Mthombo and Sasol’s Project Mafutha], as well as opportunities that are available through the convergence of energy carriers. We can no longer continue to refer to electricity without mentioning liquid fuels and vice versa.
The South African liquid fuels sector presents several opportunities for investors throughout the petroleum value chain. Our national oil company, PetroSA, has just concluded its feasibility study on a 400 000 barrels a day refinery at Coega in the Eastern Cape. This refinery will produce high quality fuels (equivalent to Euro five emission standards) and help us cease from being a net importer of finished products. This is an opportunity of a lifetime for other players to get involved in the South African petroleum sector.
A key feature of the South African liquid fuels sector is the fact that most of the transport fuel is produced in the coastal areas but about 68 percent thereof is consumed in the inland region of Gauteng. This requires investments in the storage and distribution facilities for the supply of petroleum products at the point of need. A new R15 billion, 24 inch pipeline to transport petroleum a product from Durban (in the East Coast region) to Johannesburg (in Gauteng) is under construction for completion in the 2011/12 financial year.
Ladies and gentlemen, these mega infrastructural projects and the related support infrastructure require a close and ongoing partnership between state-owned entities and private companies.
The Department of Energy, having undertaken pilot projects on liquefied petroleum gas (LPG), has embarked on a drive to promote the use of LPG by households for space heating and cooking. As a first step in our efforts to promote LPG we will promulgate regulations for the retail price of LPG supplied to residential customers before the end of next month (April 2010). Since South Africa does not have an abundance of natural gas, the search and harnessing of pockets of gas including gas from landfill sites and coal bed methane, has started in earnest.
On the other hand South Africa is a coal-based economy, being home to 150 000 barrels per day oil equivalent Coal-to-Liquids (CTL) facility in the Mpumalanga province and almost 75 percent electricity generation from coal-fired power stations. Since the use of fossil fuels like coal is expected to persist into the foreseeable future, clean coal technologies and carbon capture and storage (CCS) programmes are essential. While pursuing the energy mix strategy we dare not fool ourselves by thinking that we will just discontinue the use of conventional fuels without expanding the pool of viable substitute energy carriers.
We have an open door policy in respect of our policy formulation processes and we are therefore issuing a specific invitation to you as business people from our two countries to play a role in our energy projects. This has the potential to benefit our two countries and could be extended to the sharing of lessons, expertise as well as good practices.
As a democratic government we shall continue to place greater emphasis on strategic issues such as education upliftment, fighting poverty and striving to reduce economic inequalities and underdevelopment as well as crime and corruption.
When all has been said and done it is by and large concrete business ventures that signal the consummation of political/bilateral relationships. I’m very pleased that today we are here because we each have the possibility and the means to ensure this consummation.
In conclusion, programme director, as we respond to the global issues of climate change, renewable energy should contribute more to South Africa’s energy mix and we anticipate that we shall continue to see more and larger projects being commissioned. In doing so, we will also be intensifying our efforts in creating descent and sustainable jobs. The department will continue supporting renewable energy project developers in order to scale up the development of these technologies as rapidly as possible. We will also continue investigating and implementing initiatives that will ensure energy security while addressing our socio-economic challenges.
South Africa, in its quest for creating descent and sustainable jobs, cannot overlook the centrality of the energy sector as a key driver of socio-economic development. The Industrial Policy Action Plan (IPAP) recently tabled by Minister of Trade and Industry, Comrade Rob Davies, has brought hope to masses of unemployed and poor people in our country and reawakened the dreams of entrepreneurs and investors alike.
It our wish that the partnership that would be consolidated during this state visit will culminate in concrete business ventures, which will improve lives of the peoples of Africa and South Africa in particular.
We are looking forward to seeing you in South Africa in June. Ke nako - Africa’s time is now! The cup remains in Africa!
I thank you.
Issued by: Department of Energy
3 March 2010
