South African Government (Pretoria)
25 January 2008
press release
The following statement and background notes were issued by the government after discussions by the South African Cabinet this week. They were presented at a media briefing by Public Enterprises Minister Alec Erwin and Minerals and Energy Minister Buyelwa Sonjica.
Cabinet received detailed reports on the current electricity situation and the steps that we need to take to redress the situation. It is the view of Cabinet that the unprecedented unplanned power outages must now be treated as a national electricity emergency that has to be addressed with the urgent, vigorous and coordinated actions commensurate with such an emergency situation. It is imperative that we all become a national movement to conserve electricity in all our areas whilst ensuring that key functions, safety and security are not compromised.
Government is very confident that we can do this and the response we have had from organized business and large users makes it clear that all stakeholders are committed to cooperating in this emergency campaign. The previous experience we had in the Western Cape further increases our confidence that we can quickly begin to manage the most disruptive aspects of the shortage of electricity supply.
The proposals that we outline today are designed to rapidly try and minimize the disruptive unplanned outages. The proposals fast track many programmes to deal with increased energy efficiency, which is a necessity for our economy. All these proposals are designed to manage a short term challenge in a manner that will minimize the adverse impact on growth. There is no question of stopping contracted projects or freezing any new projects. What will happen is more systematic scheduling and evaluation of projects. It is also a reality that there will be further significant increases in electricity prices. However, such increases will be implemented so as to significantly lessen their impact on the poor. Despite such increases, South Africa will, however, remain the most competitive large energy system in the world. The background document available to you today provides more detail on these aspects.
However, stabilizing the situation and achieving these objectives will require the maximum co-operation between all of us in both voluntary and mandatory programmes that will now be implemented. We must stress that the successful implementation of these programmes will give us much more comfort within a two year period. It is also critical to stress that the growth of South Africa's economy at the current healthy levels can continue if we change our behaviour and become more energy efficient. This emergency must entrench energy efficiency and we will use the massive infrastructure build and the opportunities presented by the emergency to create new economic capacity and industries in the South African economy.
To understand the thrust of the proposed programme, particularly urgent short term actions, we need to look at the immediate causes of the current emergency.
The underlying problem is the very significant rise in demand, particularly over the past few years, resulting from an economy working at full capacity and the rising standards of living, with close on 3.5 million homes having access to electricity from 1994. In a sense we are the victims of our own success. You will see in the document to be distributed that until two years ago the reserve margin was above 16%. The decision to charge Eskom with the responsibility to embark on a large and urgent build programme in 2004 was in hindsight late. The President has accepted that this government got its timing wrong. We were working within a framework where the need for new capacity could be combined with the reform of the Electricity Supply and Distribution system as the Reserve Margin was then in excess of 20%. However, such a reform, both in South Africa and in other countries, has proved complex and slower than envisaged.
In 2004 the decision was taken to charge Eskom with the task of providing 70% of new capacity. However, rising demand meant that our reserve margin was under threat. To deal with this we had to put all our effort into pushing the build programme and then intensify new Energy Efficiency programmes. The detail of this is contained in the accompanying document and it is evident that significant new capacity does indeed come on stream in each year and we are looking at ways to increase that amount in the short term.
At the end of 2007, we took further decisions that would allow us to fast track Independent Power Producer (IPP) projects and Co-generation arrangements. Both of these are now receiving urgent attention and announcements will be made as we are able to provide certainty.
Our relative success over the winter may have lulled us into a false sense of comfort that we could manage our way through the challenge without more dramatic negative effects, such as the recent country wide load-shedding that has taken place over the last two weeks. Against the background of the tight supply and demand conditions, there are salient developments that have led to unacceptable disruption. It is clear that we are running our power system at utilization levels that are overstretching maintenance and if we do not stabilize this we could drive our systems into higher levels of stress – this we cannot do!
In addition we are now experiencing serious problems with coal quality and stocks. We are engaging the industry to change this situation and we need to make it clear that should there be no rapid improvement we will not hesitate to use emergency measures. Poor quality coal and events like the current heavy rain create too great a risk for the system.
This combination of factors has caused unprecedented levels of unplanned outages. This is too disruptive to ordinary households and the business community with those least able to adjust bearing the greatest brunt.
It is for the above reasons that the situation constitutes an emergency and we are taking emergency steps to move the system out of its current state of criticality. We are viewing the next two years as being critical. In this manner we plan to provide more room to manoeuvre both in this short term period and in the important year of 2010. I need to stress that the Cabinet was fully briefed on the electricity situation as it specifically relates to the World Cup and on general progress with the preparations for infrastructure for 2010. There is no threat to the successful holding of the event as plans to ensure electricity security in that period are well advanced.
Within Government an emergency task team is in place led by the Department of Minerals and Energy. Minister Sonjica will coordinate her colleagues and the Departments in regard to the overall demand management and efficiency campaign. The Minister of Public Enterprises will work with Eskom to address the current emergency and the supply conditions and interact with key users to implement a systematic voluntary demand reduction programme. All Departments of Government, at all levels, will be charged with making a major contribution to energy saving and coordination of communication will be strengthened between government and energy stakeholders.
Background Notes On National Electricity Emergency Programme
As you've heard from Minister Erwin, we are facing an emergency situation. However, we are mindful that this electricity emergency cannot be solved by government alone, but will have to be a collective effort by both ourselves and South Africans in general. Let's all put our shoulders to the wheel to deal with the situation we find ourselves in. We have received various suggestions from members of the public in terms of how we can save energy, which have been very useful and we are going to publish through various mediums.
During our deliberations in Cabinet, it became obvious that the interventions that will provide us with immediate relief will be on the demand side management and energy efficiency. It goes without saying that we therefore, all need to ensure that energy conservation is a way of life.
The immediate need for the country is to ensure that our electrical system is brought back into balance. We will need to restore a workable reserve margin in order to alleviate strain on the generation assets and the primary energy supply chain. We also need to create breathing space for maintenance to be done.
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