2. OUTLINE RE Programme Objectives Integrated Resource Plan
Market Sounding Outcome
Tariffs and Affordability issues
Key Considerations in the Design of the RSA Programme
Concerns Raised by Segments of Industry
Legal opinion
Tariff determination
Implications
Our position
Way forward

3. RE PROGRAMME OBJECTIVES
Job creation
Localization of technologies
Skills development
Energy security
Mitigation of adverse climate change due to energy

4. Policy-Adjusted IRP Solar PV Wind CSP Coal Nuclear Hydro Gas 17,8
Additional new capacity (without committed) in GW
Coal
9,8
0,0
1,0
35,9
1,8
2,1
2,4
Wind
CSP
Nuclear
Hydro
Gas
17,8
8,4
Solar PV
Committed
new builds
Existing fleet (2010)

5. COSTS OF VARIOUS TECHNOLOGIES

6. RE MARKET SOUNDING OUTCOME
Wind power – 30% of responses; 70 % of total capacity RFI.
Solar PV - 30% of responses;15 % of proposed capacity
Concentrated solar power -5 % of responses ;nearly 10 % of proposed capacity.
The remainder biomass projects; some hydro, landfill gas and biogas.
20 responses to the RFI for Co-generation totalling 4 GW of capacity.
Approximately 20 GW of REFIT technologies and 4 GW of cogeneration technologies identified

7. TARIFFS AND FINANCIAL VIABILITY ISSUES
Feed-in tariffs are relatively expensive, compared to average wholesale tariff, due to subsidy requirements
Wind: R1.25/kWh
Photovoltaic R3.94/kWh
Return on equity for either??????
To avoid Spanish mistake, funding is from tariffs rather than fiscal support
To avoid Indian mistake, bid price cannot be the only determinant of preferred developers
In South Africa, the multi-year-price- determination determines extent to which we can pay for RE
Circa R12bn available in current MYPD allocation

8. CONCERNS RAISED BY SEGMENT OF INDUSTRY
Keep the tariffs at the 2009 level, no price competition
Investors will walk if we move away from predetermined tariffs
Government needs to intervene in relation to NERSA discussion paper on REFIT
NERSA had raised the possibility of reducing the levels by up to 40% in some instances
Financial models indicate returns well above what is viable
Threat of legal challenge
Legal opinion sought in this regard
Confirms that a bidding process is also sound

9. BALANCING ACT REQUIRED
Successful investment
programme
Profiteering

10. KEY CONSIDERATIONS IN THE DESIGN OF OUR PROGRAMME
Our objectives
IRP
Legal
Financial
Economic development issues
Procurement requirements
Need for a sustainable programme extending beyond the 1025MW in the first phase (affordability)
Procurement legislation (Constitution, PFMA,PPPFA, ER Act)
Impact of national revenue fund
COP 17

11. WAY FORWARD
Two stage procurement evaluation process will address risks of “Indian experience” simultaneously as “Spanish experience”
First ensure qualifying criteria are met, based on economic development requirements (jobs, localization, skills)
Then only evaluate price
Multiple phases of bidding, as opposed to once-off 1025MW, in order to accommodate the lessons from the previous phase

12. WAY FORWARD
The procurement process is due to be launched in June 2011 and its all systems go
Minister will make an announcement next week
The risks that have been identified (legal challenge, successful outcome etc.) have been mitigated

13. Thank You