Powering Africa – SAPP Strategies www.sapp.co.zw Powering Africa – SAPP Strategies By Eng. Musara Beta SAPP Chief Market Analyst Zimbabwe Mining & Infrastructure Indaba 2014 9 October 2014 Meikles Hotel, Harare, ZIMBABWE

CONTENTS INTRODUCTION TO THE SAPP POWER SUPPLY CHALLENGES IN THE SAPP SAPP STRATEGIES TO MEET DEMAND SAPP COMPETITIVE MARKET CONCLUSIONS

1. INTRODUCTION TO THE SAPP 1.1 Key Facts DR Congo Tanzania Zambia Angola Malawi Zimbabwe Mozambique Botswana Namibia South Africa Lesotho Swaziland 12 Countries 280 Million people Installed Generation Capacity - 58 GW Available Generation Capacity - 51 GW Peak Demand - 54 GW Consumption - 400TWh

1.2 SAPP Membership OP: Operating NP: Non-Operating ITC: Independent Transmission Company OB: Observer IPP: Independent Power Producer

POWER SUPPLY CHALLENGES IN SAPP As at Aug 2014, total SAPP installed capacity was 58.6 GW

POWER SUPPLY CHALLENGES IN SAPP Demand for power in Southern African has been increasing at an average rate of 3% per annum. In 2007, demand growth for South Africa was 4.9% and for the whole region 4.6%. In the last 10 years demand in the SAPP increased by more than 32% which is equivalent to 13,000 MW (from 41,000 MW in 2004 to 54,000MW in 2013). Unfortunately, there has been no corresponding investments in generation and transmission infrastructure, (11,469MW generation added from 2004 to 2013) resulting in the current supply deficit that the region is experiencing.

Why has the SAPP run into supply deficit ? Economic Growth of more than 5% in most of the SADC member countries resulting in unprecedented growth in electricity consumption and demand. Increase in demand for base metals resulting in high metal prices on the World Market with new mining companies being established in the SADC region in the last few years. Inadequate Investments in generation and transmission infrastructure over the last 20-years. Electrification Programmes have partly contributed to the increased consumption and demand. The challenge was identified and communicated but not adequately mitigated.

SAPP STRATEGIES TO MEET DEMAND The SAPP has proposed the following measures: Demand Management based on others experiences: Power Conservation Programme (PCP) Study and understand the concept of PCP Formulate and adopt PCP for SADC Demand Side Management (DSM) Mechanism to provide financial support for development and implementation of DSM in the SADC Develop local manufacturing capability to support DSM initiatives. SADC Policy for efficient use of electrical energy Incandescent versus CFLs Minimum energy efficiency standards for new connections

DSM- SAPP VIRTUAL POWER STATION – WHERE IS THE SAPP? 4,500 MW saving and Virtual Power Station established

Impact of DSM On Load Management[2009 – 2015] If no load management options implemented, the deficit could have been worse Situation improves and is better after load management.

Creating an Enabling Environment Create an enabling environment for power sector investment: Policy and Legal framework Regulatory framework SAPP Governance documents revised from 2006 to accommodate other players such as IPPs, Large Users etc in the structures of SAPP Implement cost reflective and time of use tariffs in SADC member countries.

Supply Side Measures Supply Side Measures Maximize utilization of all installed supply option Re-capitalization of power utilities Short and Medium-term generation projects Ensure projects are properly prepared for financing Governments to prioritize funding of power projects Create an enabling environment for renewable energy Develop a structure for the implementation of a least-cost SAPP generating facility Provide Investment incentives to all Investors in the power sector, both local and foreign. Address policy issues relating to legal & regulatory frameworks, i.e. enabling environment. Allow for VAT and tax exemptions for import of power equipment and machinery for a defined period.

Commissioned Generation Capacity

Generation Projects Planned for 2014 - 2018

Demand and Supply Situation 2013-2018

2020: MOZAMBIQUE BACKBONE -RSA 2018: Botswana Strengthening Transmission Integration Projects DRC 2015 -2018: ZIZABONA -220/330 kV Tanzania 2018: Mozambique Malawi 2018: Zambia - Tanzania - 400 kV Angola Malawi Zambia 2018:DRC - Angola – 400 kV Zimbabwe Namibia 2020: MOZAMBIQUE BACKBONE -RSA Mozambique Botswana 2015-2025: 765 kV Strengthening Swaziland 2017: RSA Strengthening South Africa Lesotho 2018: Botswana Strengthening

SAPP COMPETITIVE MARKET SAPP Developed and started operating the Day Ahead Market (DAM) IN December 2009 SAPP is currently developing following markets for operation mid 2015 Month Ahead Market (MAM) Trading will be done for a month ahead (for delivery in the next month) Week Ahead Market (WAM) Trading will be done a week ahead (for delivery the following week) Intra Day Market (IDM) Trading will be done an hour ahead (for delivery in the next hour in a day)

Trading in the various timeframes after NTP MW IDM trading DAM TRADING Weekly forward trading Monthly Forward trading Bilateral contracts Own production 24 hours

Market Performance Highlights – Market Share Average Competitive Market share was almost 16% Market share increased significantly from April 2014 through to August 2014.

A Master Plan for the regional power market is vital as it: CONCLUSIONS Projects Packaging is critical for projects to attract funding and be implemented SAPP CC plays a critical role in mobilising grant funding and project coordination A Master Plan for the regional power market is vital as it: Helps to reduce capital costs by implementing least- cost projects for the benefit of the region. Reduces excess capacity from the pool. In the SAPP, SAPP Pool Plan noted that a saving of over US$48 billion could be realized if projects are implemented in a coordinated fashion.

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