Transcript Document

Presentation to Select Committee on Economic
Development
NERSA CEO: Smunda Mokoena
24 August 2010
1
AGENDA
Mandate of the Energy Regulator
Current structure of the ESI
Objects of the Electricity Regulation Act
Extract from the RE white paper of 2003
REFITs I and II
Facilitators
Conclusion
2
MANDATE
1.
2.
3.
NERSA was established in terms of the National
Energy Regulator Act, 2004 (Act No. 40 of 2004)
Mandated by the Electricity Regulation Act, 2006(Act
No. 4 of 2006) (“the Act”) to regulate the Electricity
Supply industry in South Africa.
s4 (a) (iv) of the Act states “The Regulator must issue
rules
designed
to
implement
the
national
government’s electricity policy framework, the
integrated resource plan and this Act.”
3
Current structure of the ESI
IPPs
Eskom Generation
Imports /
Exports
Eskom Transmission
Municipal Generators
Eskom Distribution
D1
Large Power Users
Customers a
D2
D3
Customers b
Dn
Local Authority
Distributors
Customers n
4
Objects of the Act
These are listed in s2 of the Act and the relevant ones for
this presentation are to:
(c) facilitate investment in the Electricity Supply Industry
(e) promote the use of diverse energy sources and energy
efficiency
5
Renewable Energy Policy
The RENEWABLE ENERGY WHITE PAPER of 2003 states:
In order to meet the long-term goal of a sustainable renewable energy
industry, Government has set the following 10-year target for renewable
energy:
10 000 GWh (0.8 Mtoe) renewable energy contribution to final energy
consumption by 2013, to be produced mainly from biomass, wind, solar
and small-scale hydro. The renewable energy is to be utilised for power
generation and non-electric technologies such as solar water heating and
bio-fuels. This is approximately 4% (1667 MW) of the estimated electricity
demand (41539 MW) by 2013.
6
Renewable Feed-In Tariffs (REFITs)
1. Based on the above requirements NERSA introduced a
REFIT framework in two phases.
2. A REFIT is a pre-approved tariff for a specific
Renewable Energy generation technology eg., wind
3. By nature REFITs include a premium above tariffs for
conventional generation mainly to attract investors and
developers
7
REFIT FINANCIAL ASSUMPTIONS
Financial parameter
Unit
IPP REFIT
Debt
%
70
Equity
%
30
Nominal cost of debt
%
14.9
Inflation
%
8
Real cost of debt after tax
%
6.39
Tax rate
%
29
Real return on Equity ROE after tax
%
17
Weighted Average Cost of Capital
(WACC)
%
12
8
REFIT PHASE I


Renewable Energy Feed – in Tariffs approved March 2009
This is largely aligned with the technologies mentioned in the REWP of
2003.
9
REFIT PHASE II

Renewable Energy Feed – in Tariffs approved October 2009
10
Important features of the REFIT

The REFITs will be escalated by CPI annually.

A full tariff review will take place every year for the first five year period of
implementation and every three years thereafter.

The term of the Power Purchase Agreement (PPA) is twenty (20) years.

The carbon revenue from the Clean Development Mechanism (CDM) was
not included in the REFIT.

Independent Power Producers (IPPs) may apply for CDM revenues
separately.
11
Way Forward
1. The NewGen regulations of 5 August 2009 require that NERSA
issues rules on selection criteria for the REFIT programme.
2. NERSA is currently finalising the rules and the standard REFIT
PPA after a lengthy public consultation process
3. Once the rules are finalised they will be forwarded to the System
Operator or the Buyer.
4. The Buyer will then kick start the process by issuing a Request for
Qualification (RfQ) and a Request for Proposals (RfP).
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FACILITATORS
13
Rules for Power Purchase Cost Recovery
1. Regulation 10 of the NewGen regulations requires that NERSA
passes rules for the purpose of cost recovery by the system
operator and the buyer.
2. In response to this NERSA gazetted rules on Power Purchase
Cost Recovery (CRM) after a public consultation process.
3. The CRM basically addresses:
1.
2.
3.
4.
Check of whether the proposed IPP will be affordable
The allocation of risk between the buyer and the IPP
Process to be followed by the buyer in seeking approval of pass through costs
A list of recoverable/pass through costs
14
Kusile
DoE OCGT IPP
Ingula
MTPPP
REFIT Wind
REFIT Other
Sere
Other capacity and
Decommissioning
Net new capacity
Total capacity
Demand Forecast original MYPD
DSM
Net peak demand (after DSM), MW
Annual energy net sent out
DSM
YEAR
2009
2010
2011
2012
2013
Medupi
gazetted on 29 January 2010
MW
772
683
404
0
0
MW
0
0
0
0
723
MW
0
0
1020
0
0
MW
0
0
0
0
666
MW
0
168
168
84
0
MW
0
0
200
200
0
MW
0
175
150
0
300
MW
0
100
0
0
0
MW
0
30
55
0
0
MW
772
1419
2355
1146
2127
MW
44157
46393
47380
48082
50809
MW
37845
39432
40914
42373
44238
MW
432
923
1343
2118
3056
MW
37413
38509
39571
40255
41182
GWh
248517
258706
267771
276705
288066
GWh
426
1864
3453
6561
10642
Annual energy net sent out after DSM
Integrated Resource Plan 1 (IRP 1)
GWh
248091
256842
264318
270144
277424
15
Multi-Year Price Determination 2 (MYPD 2)
SUMMARY OF ALLOWED REVENUE
Eskom’s own primary energy cost
2010/11
2011/12
2012/13
R’m
R’m
R’m
36 464
40 486
45 351
2 304
4 299
5 819
32 611
34 727
36 847
Depreciation
9 356
12 812
17 880
Return on assets
3 039
15 936
33 163
Demand Side Management
1 406
1 688
2 351
85 180
109 948
141 411
IPP and Co-generation
Operating Expenditure
16
In Conclusion
1. The Energy Regulator believes that:
–
all perceived regulatory risks have been mitigated.
–
once the rules on selection criteria for the REFIT
Programme have been finalised the Buyer will be in
a position to invite interested parties to bid before
the end of 2010.
17
THANK YOU
www.nersa.org.za
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