SPRI. NERSA, The National Energy Regulator South Africa

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  • PRESENTATION TO BASQUE MINISTERIAL ENERGY SEMINAR

    24 May 2016 Presented by Sibusiso Zungu

  • NERSA MANDATE

    WHITE PAPER ON RENEWABLE ENERGY POLICY

    RENEWABLE ENERGY POLICY IMPLEMENTATION

    RENEWABLE ENERGY FEED- IN TARRIFS (REFITs)

    NEW GENERATION CAPACITY REGULATIONS

    INTEGRATED RESOURCE PLAN 2010-2030

    MINISTERIAL DETERMINATION

    POLICY ADJUSTED IRP 2010-2030

    NET NEW CAPACITY (2030)

    DoE RENEWABLE ENERGY IPP PROCUREMENT

    CURRENT CAPACITY ALLOCATIONS

    TARIFF COMPARISONS

    OPERATIONAL INSTALLED CAPACITY UNDER RE IPPP

    CONCLUDING REMARKS

    PRESENTATION OUTLINE

    2

  • NERSA MANDATE (1)

    NERSAs mandate is anchored in:

    4 Primary Acts:

    National Energy Regulator Act, 2004 (Act No. 40 of 2004)

    Electricity Regulation Act, 2006 (Act No. 4 of 2006)

    Gas Act, 2001 (Act No. 48 of 2001)

    Petroleum Pipelines Act, 2003 (Act No. 60 of 2003)

    3 Levies Acts:

    Gas Regulator Levies Act, 2002 (Act No. 75 of 2002)

    Petroleum Pipelines Levies Act, 2004 (Act No. 28 of 2004)

    Section 5B of the Electricity Act, 1987 (Act No. 41 of 1987)

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    Electricity Regulation Act No.4 of 2006:

    Objectives of this Act include the following:

    i. To Achieve the efficient, effective, sustainable and orderly development

    and operation of electricity supply infrastructure in South Africa,

    ii. To Promote the use of diverse energy sources and energy efficiency,

    iii. To Promote competitiveness, customer and end-user choice

    iv. To facilitate a fair balance between the interests of customers and end

    users, licensees, investors in the electricity supply industry and the public

    NERSA MANDATE (2)

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    White Paper on Renewable Energy Policy of the Republic of South Africa

    of November 2003:

    A target of 10,000 GWh renewable energy contribution to final energy

    consumption by 2013, to be produced mainly from biomass, wind, solar

    and small-scale hydro.

    This policy document is being reviewed to assess progress after the

    first 5yrs of policy implementation and also propose medium to long

    terms RE targets.

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    NERSA RESPONSE:

    Prepared Renewable Energy Feed-In-Tariffs (REFITs)

    Held Public hearings and stakeholder workshops on REFITs

    Prepared the PPA for Renewable Energy Purchases under REFITs

    Assisted in the preparation of the DoE RE IPP commercial agreements

    Made allowance in the Eskoms Multi Year Price Determination (MYPD) in terms

    of revenue for IPP purchases

    Approved the Grid Code for Wind Generation

    Approved the Transmission and Distribution Use of System framework

    Granted licences to the DoE RE IPP programme successful Bidders

  • NERSA introduced a REFIT framework in two phases.

    A REFIT is a pre-approved tariff for a specific Renewable Energy

    generation technology e.g. wind

    By nature REFITs include a premium above tariffs for conventional

    generation to attract investors and developers

    REFIT was only for those selling to the Buyer so that the price is diluted

    to end user

    REFITs did not apply to bilateral agreements.

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  • 8

    Phase I tariffs approved in March 2009:

    Technology Tariff (R/kWh)

    CSP trough (6hrs storage) 2.10

    Wind 1.25

    Small Hydro 0.94

    Landfill gas 0.90

  • 9

    Technology Tariff (R/kWh

    CSP trough (no storage) 3.14

    CSP tower (6 hrs storage) 2.31

    Biomass Solid 1.18

    Biogas 0.96

    Landfill gas 0.90

    Large scale grid-connected PV ( 1MW) 3.94

    Phase II tariffs approved in October 2009:

  • New Generation Capacity Regulations were gazetted on 5 August 2009

    for procurement of generation capacity and the role of the Government

    institutions

    Regulations were later reviewed and gazetted on 4 May 2011.

    In revised regulations, DoE is responsible for planning and procurement

    of new generation capacity. Public Finance Management Act requires

    procurement to be done through a competitive bidding process.

    Competitive Bidding chosen over REFITs, however, NERSAs

    experience with REFIT was carried across into the process i.e. PPA

    term, Eskom as Buyer, RE technologies.

    DoE/National Treasury assisted by NERSA were responsible for

    developing technology specific PPAs and Procurement Documents.

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    In terms of 2011 New Generation Capacity Regulations , The Minister may,

    in consultation with the Regulator determine that new generation capacity is

    needed to ensure the continued uninterrupted supply of electricity and

    determine the types of energy sources from which electricity must be

    generated, and the percentages of electricity that must be generated from

    such sources.

  • The Integrated Resource Plan (IRP) 2010-30 was promulgated

    in March 2011

    IRP is living plan which should be revised by the Department

    of Energy (DoE) every two years but is only in the process of

    being updated this year

    DOE initiated first iteration of IRP in January 2010

    IRP included scenarios, policy options and technology choices

    Publication participation conducted in June 2010

    Public consultation and subsequent independent international

    consultant input resulted in changes to the IRP modelling as

    well as new scenarios to test additional policy options process

    led to refinements, and to the approved Policy-Adjusted IRP

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    MINISTERIAL DETERMINATION

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  • The procurement document released on 3rd August 2011 provided for

    procurement of 3 725MW in five different bidding phases

    100MW of the 3 725MW were reserved for small-scale Renewable

    Energy programme i.e. capacity range of 1 5 MW.

    A hybrid procurement method (i.e. price competition within a prescribed

    ceiling price) was adopted by the DoE.

    Phase 1: On 7 December 2011, 28 preferred bidders were selected

    from a total of 53 bids. Energy Regulator approved 28 generation

    licenses on 26 April 2012

    Phase 2: On 21 May 2012, 19 preferred bidders were selected from a

    total of 79 bids. Energy Regulator approved 19 generation licenses

    in September 2012.

    Phase 3: On 04 November 2013, 17 preferred bidders selected from

    total of 93 bids. Energy Regulator approved 17 generation licences in

    March 2014. 17

  • 18

    To ensure integrity of the adjudication process international reviewers

    were used and strict process rules applied

    Government decided to get maximum leverage out of the process

    and imposed social and developmental requirements on the bidders

    These requirements included:

    Local Content

    Broad Based Black Economic Empowerment (BBBEE)

  • Price

    70 %

    30 %

    Economic Development

    Job creation

    Socio Economic

    Local content

    Project cost

    Rand/MW

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  • Technology

    Ministerial

    Determination

    MW

    First Bid

    Allocation

    MW

    Second Bid

    Allocation

    MW

    Third Bid Allocation

    MW

    Onshore wind 1 850 634 562.5 435

    Solar photovoltaic 1 450 631.5 417.1 787

    Concentrated solar

    power200 150 50 200

    Small hydro ( 10MW) 75 0 14.3 0

    Landfill gas 25 0 0 18

    Biomass 12.5 0 0 16

    Biogas 12.5 0 0 12

    Total 3 625 1 415.5 1 043.9 1 456

    Source: Department of Energy

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  • Source: Department of Energy

    21

  • Source: Department of Energy 22

    2,37

    1,56

    1,26

    0,77

    BW1 BW2 BW3 BW4

    Portfolio Price Trend R/kWh

    Prices stated in April 2015

    terms. Energy weighted

    average (R/kWh) considering

    average technology RFP

    submission price (published)

    per BW and projected,

    annual energy contribution

    per technology type.

  • Operational Installed Capacity under RE IPP Programme

    as at 31 December 2015

    7 191

    639

    1045

    1522

    1709

    1860

    2021 2021

    Q3 FY13/14 Q4 FY13/14 Q1 FY14/15 Q2 FY14/15 Q3 FY14/15 Q4 FY14/15 Q1 FY15/16 Q2 FY15/16 Q3 FY15/16

    RENEWABLE GENERATION:MW OPERATIONAL

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    REIPPs have

    consistently

    contributed new

    capacity to the

    network since the end

    of 2013. At December

    2015, 83% of IPPs

    scheduled to be

    operational have

    started commercial

    operations. The

    average lead time for

    these 40 projects to

    complete has been 1.7

    years.

  • Over 2021 MW of Renewable Energy is connected to the grid as of December

    2015

    Renewable Energy development requires sound policy and regulatory

    framework

    Government institutions and industry stakeholders need to cooperate in order to

    implement renewable energy policy successfully

    The competitive bidding process resulted in efficient prices

    Limiting new capacity has led to a manageable process

    It is expected that renewable energy will improve the socio-economic

    development of South Africa while contributing to of emission reduction.

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  • Thank You

    Tel: 012 401 4600

    Fax: 012 401 4700

    Website: www.nersa.org.za

    Physical Address:

    Kulawula House

    526 Madiba Street

    Arcadia,0083

    Pretoria

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    http://www.nersa.org.za/