Department of Energy MTSF Progress Presentation to the Parliamentary Portfolio Committee on Energy 12 October 2016

Implementing the NDP 2030: The MTSF 2014-2019 MTSF is government’s first five year implementation plan of the NDP 2030 - covering the period 2014 – 2019. MTSF is structured in accordance with the 14 Outcomes of Government. Quality basic education A long and healthy life for all All people in South Africa are, and feel safe Decent employment through inclusive economic growth Skilled and capable workforce to support an inclusive growth path An efficient, competitive and responsive economic infrastructure network Comprehensive rural development and food security Sustainable human settlements and improved quality of household life Responsive, accountable, effective and efficient local government system Environmental assets and natural resources that are valued, protected and continually enhanced Create a better South Africa, a better Africa and a better world An efficient, effective and development-oriented public service Social protection Nation building and social cohesion

What is the MTSF and what does it do? Five year implementation plan for the NDP and the commitments in the governing party’s election manifesto Provides detail for implementing the second phase of the democratic transition Clarifies what is meant by the radical economic transformation and how it will be achieved Incorporates targets and actions from other key government plans such as the New Growth Path, National Infrastructure Plan and the IPAP Emphasises improving service delivery, the performance of the public service and the efficiency and effectiveness of local government Provides clear targets and timeframes for implementation of key actions, to enable monitoring of implementation The contents of the MTSF have been incorporated in the performance agreements of Ministers and DGs. The President, the Presidency, and Cabinet closely monitor the implementation of the MTSF

Department of Energy MTSF commitments for Outcome 6 Outcome 6 comprises of the following Sub-Outcomes & Actions Sub-outcome 1: Regulation, funding and investment improved Sub-outcome 2: Reliable generation, transmission and distribution of energy ensured Sub-outcome 3: Maintenance, strategic expansion, operational efficiency, capacity and competitiveness of our logistics and transport infrastructure ensured. Sub-outcome 4: Maintenance and supply availability of our bulk water resources infrastructure ensured: Sub-outcome 5: Expansion, modernisation, access and affordability of our information and communications infrastructure and electronic communication services including broadband, and digital broadcasting Sub-outcome 6: Coordination, development and implementation of strategic integrated projects in the National Infrastructure Plan

DoE Outcome 6 Sub-Outcome Commitments (1) Sub-outcome 1: Regulation, funding and investment improved Amended National Energy Regulator Act and Electricity Regulation Act. Establish appropriate mechanisms to prefund capital and create a smooth price path over a longer-term for Eskom Develop a Private Sector Participation Framework (PSP) in the energy sector in base load and renewable electricity generation, liquid fuels and gas. Sub-outcome 2: Reliable generation, transmission and distribution of energy ensured Develop the Integrated Energy Plan (IEP) Develop and implement a Gas Infrastructure Master Plan Refine, update and implement the Integrated Resource Plan (IRP) Establish an independent system operator Reform of the electricity supply industry to introduce IPPs in support of electricity security of supply

DoE Outcome 6 Sub-Outcome Commitments (2) Sub-outcome 2: Reliable generation, transmission and distribution of energy ensured Develop Southern Africa’s hydro-electric resources and enhance inter- regional electricity trade Ring-fence the electricity-distribution businesses of the 12 largest municipalities and resolve their maintenance and refurbishment backlogs Review bulk electrical infrastructure required for universal access to electricity, prepare an implementation plan, and implement Improve demand-side management, including through smarter management of electricity grids Improve governmental support for combating illegal use of electricity Commission at least 7000 MW of renewable energy by 2020 Develop a funding mechanism for upgrading of existing refineries to ensure they meet new fuel-quality standards

3 Year Comparison on DOE Outcome 6 4th Quarter Data for Financial Years: 2014/15, 2015/16, and 1St 2016/17

Progress on Outcome 6 sub outcome 1: Regulation, funding and investment improved Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Amended National Energy Regulator Act and Electricity Regulation Act. Consultations on the two Bills have been concluded and will be tabled at Cabinet on 20 May 2015. IMC (Energy) indicated that they will provide political guidance regarding proposals on electricity industry end-state. Electricity price path under development, as part of the IRP update process taking into account the build programme and the appropriate tariff increases over the medium term. IMC (Energy) indicated that they will provide political guidance regarding proposals on electricity industry end-state. Soliciting SLA opinion on the proposed review board proposed under the NERA, in order to address concerns about potential conflict of interest. Some progress however MTSF target of April 2016 has passed. New plans with proposed dates are required.

Progress on Outcome 6 sub outcome 1: Regulation, funding and investment improved Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Establish appropriate mechanisms to prefund capital and create a smooth price path over a longer- term for Eskom Support package for Eskom, approved by cabinet in 2014 to address funding gap Inclusion into the Finance Task Team for actioning includes: Key inclusion in package is emphasis on sustainable electricity supply Ensuring financial sustainability of Eskom Short term funding challenges addressed to bring in additional capacity Electricity price path under development, as part of the IRP update process taking into account the build programme and the appropriate tariff increases over the medium term Electricity price path under development, as part of the IRP Update process taking into account the build programme and the appropriate tariff increases over the medium term Unlikely to be achieved. The MTSF target date of July 2015 not met whilst progress has not changed from the previous quarter

Progress on Outcome 6 sub outcome 1: Regulation, funding and investment improved Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Develop a Private Sector Participation Framework (PSP) in the energy sector in base load and renewable electricity generation, liquid fuels and gas REIPP Programme now at Window 5 stage Co-generation contracts renewed that retained over 800 MW supplied by the private sector. 1800MW Coal IPP RFP issued and will be closing in June 2015 Co-generation contracts renewed that retained about 800 MW supplied by the private sector 1800MW Coal IPP RFP, plus RFI for Gas issued in Q1 2015 Evaluation of the 900MW coal IPP completed and announcements imminent. Evaluation of the Expedited Bid Window underway and to be completed in August 2016. Co-generation contracts renewed that retained about 800 MW supplied by the private sector. Regulations to facilitate additional co-generation to be issued for public comments in August 2016 Good Progress with estimated 24 000 jobs created, Private sector investment of R194 billion unlocked since introduction of REIPPP.

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Develop the Integrated Energy Plan (IEP) Done. To be submitted as part of Energy Master Plan this year. IEP has been completed and is ready for submission to the ESEID Cluster. After submitting in March 2016, DoE addressing issues raised by various Departments. Target date for resubmission is September 2016, taking into account the need to align with the Integrated Resource Plan MTSF target of February 2016 has passed, however it is highly likely that September 2016 target will be met The Slow pace in finalising Integrated Energy Plan and Integrated Resource Plan increases uncertainty on pricing and investment decisions

Progress on outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Develop and implement a Gas Infrastructure Master Plan In progress. The draft Gas Utilization Master Plan compiled and submitted as part of the Energy Master Plan – addresses short term gas issues including the LNG option and regional natural gas – includes shale gas exploitation in the medium term. The draft Gas Utilization Master Plan compiled – addresses short term gas issues including the LPG/LNG option and regional natural gas – includes shale gas exploitation in the medium term. RFI for gas issued as precursor to RFP for gas to power programme. Submission will be made with updated IRP in Q1 2016/17 The draft Gas Utilization Master Plan compiled – addresses short term gas issues including the LPG/LNG option and regional natural gas – includes shale gas exploitation in the medium term The first stage of the procurement of Gas to Power programme to be launched in August 2016 through a project information memorandum Legislative amendments proposed to the Gas Act to facilitate the development of pipeline and other infrastructure Good Progress towards realization of increased gas utilisation as part of overall energy mix

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Reform of the electricity supply industry to introduce IPPs in support of electricity security of supply The procurement process for Base load Coal fired power generation has been started and RFP issued Extension of existing Short-term power producer contracts is done As at 31 December 2014, a total of 1 795 MW of energy from IPPS was connected to the national grid – 1 182,62 (from BW1) and 339 MWs (from BW2). This from a total of 4 122 MW procured in BWs 1, 2 and 3. To date, 6 327 MW from RE IPPS was procured. 4000MW additional allocation s has been determined for IPP’s(coal, gas, and renewables) Evaluation for coal bids underway. Renewables (Window 6) bidding will commence by June 2016 Gas: bidding will commence by June 2016 To date, 6 327 MW from REIPPS was procured. 4000MW additional allocations has been determined for IPP’s(coal, gas, and renewables) Evaluation for coal bids completed. Significant Progress, however this is at risk of being undermined

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Refine, update and implement the Integrated Resource Plan (IRP) Public consultations concluded. The IRP is being refined internally for submission to the Cluster and subsequently to Cabinet for approval. Interdepartmental consultations on IRP Update underway. The draft IRP is being refined internally for submission to the Cluster and subsequently to Cabinet for approval. The draft IRP is being refined internally for submission to the Cluster and subsequently to Cabinet for approval Progress has been slow and delays continue to create uncertainty

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Develop Southern Africa’s hydro-electric resources and enhance inter-regional electricity trade The pre-feasibility study for the Mphanda Nkuwa Project, wherein Eskom is to have an interest and be the major off taker is expected to commence by the end of 2014 Inga Project treaty signed September 2014 and ratified by Parliament in November 2014. Consultations with DRC counterparts are on-going Inga Project treaty signed September 2014, ratified by Parliament in November 2014 and entered into force on 20 March 2015. The DRC intends to negotiate the off take agreements with RSA from Jan 2016. A determination for the Mozambique hydro project technology from Minister of Energy has been issued which accommodates the Mozambique The DRC intends to negotiate the off-take agreements with RSA from Jan 2016. DRC has commenced the bidding process and RSA finalising the transmission solution in consultation with DRC, Zambia, Zimbabwe and Botswana. In this regard, an inter-governmental MOU has been proposed under the facilitation of the SADC Energy Ministers with the support of the utilities in the respective countries A determination for the Mozambique hydro project technology from Minister of Energy has been issued which accommodates the Mozambique Progress continues to move slow at a steady pace

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Ring-fence the electricity- distribution businesses of the 12 largest municipalities and resolve their maintenance and refurbishment backlogs The Approach to Distribution Asset Management (ADAM) framework has been revised and implementation and funding model being developed A stakeholder platform has been created and a meeting scheduled for Q1 FY2016/17. A collaboration framework has been negotiated with Municipal Infrastructure Support Agency. Norms and Standards for infrastructure management are being developed in consultation with NERSA. A funding model based on electricity tariffs has been presented to NERSA Some progress and there is a likelihood that MTSF target of 12 municipalities’ distribution issues could be resolved by 2019. Maintenance of electricity distribution remains a challenge

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Review bulk electrical infrastructure required for universal access to electricity, prepare an implementation plan, and implement By the end of the 4th Quarter the final draft of the new electrification master plan will be completed. Mini ADAM has managed to complete 4 distribution projects out of the 9. The remaining 5 are progressing well. DoE is finalising the electrification Master Plan. Slow progress is noted as the finalization of the electrification Master plan has been delayed since 2014/15 FY

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Improve demand-side management, including through smarter management of electricity grids Funding being made available to pilot smart grids ongoing Agreement already signed with municipalities for implementation The War room has been exploring energy saving options that could be implemented in the short term, with 495 MW saving have been achieved by Eskom. DOE and DPW need to finalise the partnership on the government energy saving programme and provide report to the Cluster in the next quarter. Smart meter pilot project in buildings, municipalities ongoing. DOE, DEA and DPW to finalise the partnership on the government energy saving programme and provide report to the Cluster in the next quarter. RFI for demand side options issued and expedited procurement process being developed. 0.8 Terra watt hours (0,5%) of savings have been independently verified to date. DOE and DCS have entered into an MOU regarding Energy Efficiency improvements in correctional facilities Good Progress with the MTSF target of over 800MW is likely to be met

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Commission at least 7000 MW of renewable energy by 2020 Window 4 of the REIPP programme successful bidders have been announced by the Minister of Energy The construction of the 100 MW Sere Wind Farm is on track for full commissioning by end of March 2015. All 46 turbines have been installed. As at 20 January 2015 a total of 1 521,62 MW of energy from IPPS was connected to the national grid – 1 182,62 (from BW1) and 339 MWs (from BW2). This from a total of 4 122 MW procured in BWs 1, 2 and 3. BW 5 planned RFP Feb 2015, Bid Submission by August 2015, and to reach Financial Close by August 2016 The construction of the 100 MW Sere Wind Farm completed within schedule and budget. Evaluation of the Expedited Renewable Energy Bid Window to be concluded in August 2016. Significant progress, with the MTSF target likely to be achieved

Progress on Outcome 6 sub outcome 2: Reliable generation, transmission and distribution of energy ensured Indicator 4th Quarter 2014/15 4th Quarter 2015/16 1st Quarter 2016/17 DPME Comments Take a decision on expanding oil refining capacity Work has commenced and current progress is according to projected dates. Funding model is being developed. Financial model is being finalised Work has commenced and current progress is according to projected dates The initial MTSF target approval of proposals by June 2016 has passed. New plans with proposed dates required. Develop a funding mechanism for upgrading of existing refineries to ensure they meet new fuel- quality standards Work has commenced and IEP addresses the question of new refining capacity. The MTSF target of approval by June 2015 has passed. New plans with proposed dates required.

Department of Energy Commitment under Outcome 9 and 10 Focuses on the 2014 – 2019 MTSF period and as refined in 2015/16 FY Reflects all the outcomes, sub-outcomes, key actions, indicators and targets – as articulated in the MTSF – and not the whole of Department of Energy’s work Draws from PoA 2014/14 , 2015/16 and 2016/17 (1st quarter) progress reports for Outcome 10

MTSF Priorities under Outcome 9 Impact Indicator MTSF Target Progress as per Q1 2016/17 Members of society have sustainable and reliable access to basic services: 1.4 million additional House Holds (HHs) connected; Good progress is being made with electricity both grid and non-grid connections. 105 000 additional HHs connected

Progress on MTSF Priorities under Outcome 10 Action Indicator MTSF 2018 target Progress Analysis (2014/15, 2015/16 and 2016/17 1st quarter DPME Comments Strategic Policy/ Regulatory frameworks and programmes to promote a low carbon economy Percentage of new build that is renewable power generation 42% (or 17 800 MW) by 2030 for renewable energy No progress report to date Work done is reported at working Group 10 level Expand use of renewable energy through off-grid electrification Number of solar home systems (PV) installed 105 000 39 700 Significant progress made Increasing energy efficiency Percentage of energy efficiency improvement 12% by 2015 23.7% improvements achieved Target exceeded Annual Energy Balances Annual Energy Balances tables for SA published in accordance with International Energy Agency Guidelines (with two year lag) 5 Energy Balance Tables for 2012 published Target achieved Energy Balance tables for 2013 finalised for publishing Project behind schedule

Performance Assessment (1) The Department of Energy, in line with the Cabinet Lekgotla recommendations must submit the revised Integrated Energy Plan and the Integrated Resource Plan in the 2nd quarter 2016/17 Continues to create uncertainty in the energy market The development and implementation of a Gas Infrastructure Master Plan need to be fast tracked Slow progress on the gas to power initiative as well as the conversion of OCGT’s from diesel to gas must be accelerated and have clear timeframes in place National Coal Policy with regulations that will include a strategy to secure coal supply is lagging behind, there is a need for the Department to fast track policy development. The Coal base-load IPP rollout continues to be delayed. Overall private sector participation is critical and will be an important contribution towards meeting electricity demand

Performance Assessment (2) A funding model for upgrading existing refineries is behind the MTSF target Funding for key infrastructure projects through the fiscus remain constrained under the current economic environment Development towards firmer commitments and clearer private sector participation proposals are required at least for key large infrastructure projects in the energy space Although DOE exceeded its target of 12% by 11.7% on percentage of energy efficiency improvement in 2015/16 FY, new commitments/ targets for the remainder of the MTSF is required Significant progress has been made by DoE in the installation of solar home systems (PVC). To date the department is sitting at 39 700 against a target of 105 000 by 2019 Progress on publishing energy balances for 2013 is lagging behind since the departments missed the March 2016 deadline. This might impact on the timeous publications of subsequent energy balances to come.

Performance Assessment (3) Some of the MTSF indicators such as establishment of an independent system operator and an indicator to improve governmental support for combating illegal use of electricity has been removed from the reporting template making it difficult to monitor progress as per the MTSF Continue to commend the department on the successful implementation of the Renewable Independent Power Producers (REIPP) More than R13bn of funding supported by the IDC for the REIPP Attracted just under R200bn foreign direct investment in the REIPP programme Resulting in 6 327 MW of renewable energy procured thus far

Recommendations It is recommended that the department produce a recovery plan for the indicators where target dates have passed Proper channels for refining the MTSF indicators were opened but the department never refined their MTSF target. It is therefore recommended that the department adheres to the Cabinet processes. Including aligning the MTSF and the Nine Point Plan, particularly on the Solar Water Heater commitments The department should highlight when submitting the quarterly reports to the Cabinet, any blockages hindering or delaying progress and to act on the recommendations by Cabinet timeously In addressing poor attendance with regard to participation in the outcome 10 implementation forums; attendance is crucial for the coordination and collaboration of the sector’s efforts and work towards achieving the vision of the NDP on ensuring environmental sustainability

Ke ya leboga Ke a leboha Ke a leboga Ngiyabonga Ndiyabulela Ngiyathokoza Ngiyabonga Inkomu Ndi khou livhuha Thank you Dankie