South Africa supplies two-thirds of Africa's electricity and is one of the four cheapest electricity producers in the world. Almost 90 percent of South Africa's electricity is generated in coal-fired power stations. Koeberg, a large nuclear station near Cape Town, provides about 5 percent of capacity. A further 5 percent is provided by hydroelectric and pumped storage schemes. In South Africa there are few, if any, new economic hydro sites that could be developed to deliver significant amounts of power.
Generation is dominated by
Eskom, the national wholly state-owned utility, which also owns and operates the national electricity grid. Eskom supplies about 95 percent of South Africa's electricity. In global terms, the utility is among the top seven in generating capacity, among the top nine in terms of sales, and has one of the world's biggest dry-cooled power stations: Matimba Power Station.
Eskom was converted into a public company on 1 July 2002. It is financed by net financial market liabilities and assets as well as reserves.
While Eskom does not have exclusive generation rights, it has a practical monopoly on bulk electricity. It also operates the integrated national high-voltage transmission system and supplies electricity directly to large consumers such as mines, mineral beneficiators and other large industries.
In addition, it supplies electricity directly to commercial farmers and, through the
Integrated National Electrification Programme (INEP), to a large number of residential consumers. It sells in bulk to municipalities, which distribute to consumers within their boundaries.
Between January 2003 and January 2004, South Africa increased its electricity output by 7.1 percent, with a peak demand of 34 195MW on 13 July 2004, as opposed to the 31 928MW peak in 2003. Of the new capacity to be built, Eskom will target about 70 percent (in MW), with the balance from independent power producers (IPPs).
Due to a sharp increase in the demand for electricity, the Eskom Board of Directors took a final decision in 2003 for the return to service of the three power stations, Camden in Ermelo, Grootvlei in Balfour and Komati, between Middelburg and Bethal, that were mothballed in the late 1980s and early 1990s. Unit 6 at Camden Power Station was then identified as the first unit to be commissioned. Another two units will be commissioned in 2006, three units in 2007 and the last of the eight units in 2008.
Independent power producers
In 2003, Cabinet approved private-sector participation in the electricity industry and decided that future power generation capacity will be divided between Eskom (70 percent) and independent power producers, or IPPs (30 percent). The DME was mandated with the responsibility of ensuring private-sector participation in power generation through a competitive bidding process and that diversified primary energy sources be developed within the electricity sector without hindrance.
A power generation investment plan was drawn up to take into account this 30 percent private-sector participation in power generation. The planning and development of transmission systems will be undertaken by the transmission company, subject to the government's policy guidelines.
During 2003, Eskom implemented a revised business model to prepare for capacity requirements and the impending restructuring by splitting its business into regulated and non-regulated divisions. Eskom's core business, its strategic support businesses, and target markets were reviewed and agreed on.
The generation division will continue to be part of Eskom. In 2003, the power stations in the division were paired together to form clusters to prepare the generation sector for flexibility to accommodate different options in a changing electricity supply industry (ESI).
The transmission division takes responsibility for the electricity grid. Worldwide transmission is a natural monopoly. In South Africa, an efficient regulatory body must be established that will grant all players access to the grid. For example, customers could buy from sources other than Eskom, such as the Southern African Development Community (SADC) electricity pool or IPPs, but still use the same transmission infrastructure to have power delivered to them.
The government's policy on the electricity distribution industry (EDI) requires the division to be separated from Eskom and merged with the electricity departments of municipalities to form a number of financially viable regional electricity distributors (REDs). An interim body, called
EDI Holdings Company, is overseeing the transition period.
National Energy Regulator of South Africa (NERSA)
The National Electricity Regulator (NER) was the regulatory authority that presided over the electricity supply industry (ESI) in South Africa. In November 2005, the
National Energy Regulator of South Africa (NERSA) replaced the NER.
NERSA is responsible for regulating the price of pipeline gas and petroleum, reducing monopoly in the energy sector, improving competition and boosting economic growth.
NERSA, established in terms of the National Energy Regulator Act of 2004, is mandated to regulate South Africa's electricity, piped gas and petroleum industries and to collect levies from people holding title to gas and petroleum.
The idea behind a single regulator for the three industries was to improve efficiency and cut costs. It is also expected to boost private sector participation in the energy sector.
As an economic regulator, NERSA will ensure a level playing field and prevent abuse by monopolies. While legislation exists to govern the gas and petroleum pipeline industries, they were previously not subject to control by a regulatory body.
The regulator is important as it will encourage greater access and competition in a sector dominated by single major players: Eskom in electricity, Petronet in petroleum and Sasol in gas.
"We are confident that public-private partnerships in these projects will spur development of industries at the important industrial hubs," Deputy President Phumzile Mlambo-Ngcuka, the former energy minister, said at NERSA's launch in November 2005. "The petroleum pipeline and gas regulators will play an important role. The establishment of a single energy regulator is critical to the promotion of investment, diversification of sources of fuel and the need for central coordination of the energy industry."
For the full report, see southafrica.info.
NERSA's functions include issuing licences, setting and approving tariffs and charges, mediating disputes, gathering information pertaining to gas and petroleum pipelines, and promoting the optimal use of gas resources.
National and regional co-operation
The NER was elected as the first chair of the formalised African Forum for Utility Regulators. The NER was also the founding member of the
Regional Electricity Regulators' Association (RERA) and the South African Utility Regulators' Association (SAURA), which were launched in September and October 2002 respectively. The NER is the chair of SAURA and a chair of one of RERA's portfolio committees.
The main purpose of RERA is to provide a platform for co-operation between independent electricity regulators within the SADC region.
It has three strategic objectives:
- Capacity building and information sharing: Facilitate electricity regulatory capacity building among members at both a national and regional level through information sharing and skills training;
- Facilitation of electricity supply industry (ESI) policy, legislation and regulations: Facilitate harmonised ESI policy, legislation and regulations for cross-border trading, focusing on issues concerning access to transmission capacity and cross-border tariffs.
- Regional regulatory co-operation: Deliberate and make recommendations on issues that affect the economic efficiency of electricity interconnections and electricity trade among members that fall outside national jurisdiction, and to exercise such powers as may be conferred on RERA through the SADC Energy Protocol.
Visit the RERA website for more information.
Southern African Power Pool
The
SAPP, or Southern African Power Pool, is the first formal international power pool in Africa. It was created with the primary aim of providing reliable and economical electricity supply to the consumers of each of the SAPP members, consistent with the reasonable utilisation of natural resources and the effect on the environment.
SAPP has made it possible for members to delay capital expenditure on new plants due to the existence of interconnections and a power pool in the region. This is an important aspect in developing the economies of southern Africa.
The
objectives of the SAPP are to:
- Co-ordinate and co-operate in the planning and operation of electricity power systems to minimise costs, while maintaining reliability, autonomy and self-sufficiency;
- Increase interconnectivity between SADC countries to increase the reliability of power supplies;
- Harmonise relationships between member utilities and facilitation of cross-border electricity trading;
- Provide a forum for the development of a world-class, robust, safe, efficient, reliable and stable interconnected electrical system in the southern African region;
- Co-ordinate and enforce common regional standards of quality of supply, measurement and monitoring of systems performance;
- Facilitate the development of regional expertise through training programmes and research;
- Increase power accessibility in rural communities;
- Implement strategies in support of sustainable development priorities; and
- Recover costs of operations and equitably share benefits, including reductions in generating capacity and fuel costs, and improving use of hydroelectric energy.
The SAPP faces
major challenges such as:
- Lack of infrastucture to deliver electricity;
- Lack of maintenance of infrastructure;
- Limited funds fo finance new investments;
- Insufficient generation - running out of excess capacity by 2007; and
- High losses.
The following utilities are
SAPP members:
Visit the members section on the SAPP website for contact details.
The success of the SAPP can be measured by the changing volumes of energy traded by Eskom. At its inception in 1996, 4 648GWh were traded. This has increased steadily over the years to 9 977GWh a year since 2003.
It is now possible for SAPP members to delay capital expenditure on new plants due to the existence of interconnections and a power pool in the region. This is an important aspect in developing the economies of southern Africa.
Sources: South Africa Yearbook 2005/2006, Southern African Power Pool Annual Report 2004/2005 and
SouthAfrica.info
