IPP’s AND ELECTRICITY MARKET REFORM – THE CONTEXT, TRENDS AND LESSONS [ Promethium Carbon’s presentation of a research project: Licensing Process for IPPs in Southern Africa] PRESENTED BY SISA NJIKELANA - CHAIRPERSON, SA INDEPENDENT POWER PRODUCERS ASSOCIATION VENUE: THE JSE, ONE EXCHANGE SQUARE, GWEN LANE, SANDOWN., JOHANNESBRG DATE: 31 ST MARCH 2016 1
CONTENT OF THE PRESENTATION • INTRODUCTION • BREIFLY ON SAIPPA • BRIEFLY ON THE EVOLUTION OF THE ELECTRICITY MARKET • 1998 ENERGY POLICY AND ITS IMPACT ON ELECTRICITY MARKET REFORM • CURRENT CHANGES – ARE THEY INDUCED OR THROUGH OWN VOLITION? • TRENDS, PATTERNS AND CHALLENGES IN MARKET REFORM – WHAT LESSONS CAN WE DRAW? • THE STOCK EXCHANGE – DOES IT MIRROR THE REFORM? • WHITHER TO FROM HERE? • CONCLUSION 2
BRIEFLY ON SAIPPA • AIMS TO PROMOTE THE COLLECTIVE INTERESTS OF IPP’S IN SOUTH AFRICA/SADC & ASSIST WITH PUBLIC POLICY FORMATION AND IMPLEMENTATION • Primary focus is on: INFORMATION FACILITATION SERVICES LOBBYING AND ADVOCACY EMPOWERMENT PROGRAMMES NETWORKING • Absence of private sector in power generation = EXXARO initiate SAIPPA to influence policy and regulation. • SAIPPA was part of the team that drafted the IRP 2010 • SAIPPA engaged with DoE/National Treasury regarding REIPPP • SAIPPA lobbied for power cogeneration • Strong focus on grid access for IPP’s 3
INTRODUCTION • Significance of presenting research project report at the JSE Stock Exchange • The research project: Considers changes in SADC regulatory and market frameworks in electricity sector. Aims at providing insight in potential pathways to market reform in SADC – will assist in unlocking the region’s energy potential. • Focus will be primarily on SA and less on SADC 4
BRIEFLY ON THE EVOLUTION OF THE ESI Market Structure - 2012 data ELECTRICITY MARKET: 5
BRIEFLY ON THE EVOLUTION OF THE ELECTRICITY MARKET • ANCHOR OF POWER GENERATION = ACCESS, ADEQUACY, ACCESSIBILITY IN A SUSTAINABLE MANNER • Government policy as manifest in IRP 2010-2030 plus reviewals • This is what will shape the future of power sources. • Major thrust by government to be inclusive • Ownership to follow pattern i.e. IPP = private & base load bulk (nuclear) = government owned • Promotion of short and mid-term agile technologies: cogeneration, embedded generation, hybridisation, power storage, gas – LPG, LNG, Waste-to-Energy 6
BRIEFLY ON THE EVOLUTION OF THE ELECTRICITY MARKET The ESI in South Africa is a complex interaction of institutional and regulatory frameworks, the development of which has been partly shaped by political power relations and competing interests over the decades. 7
1998 ENERGY POLICY AND ITS IMPACT ON ELECTRICITY MARKET REFORM Energy White Paper - success of the electricity supply industry to be: Affording customers the right to choose supplier Introduction of competition especially generation sector Access to the transmission network Private sector participation in the industry 8
1998 ENERGY POLICY AND ITS IMPACT ON ELECTRICITY MARKET REFORM: SHORT-TERM POLICY PRIORITIES • Objective 1 - Increasing access to affordable energy services • Objective 2 - Improving energy governance • Objective 3 - Stimulating economic development • Objective 4 - Managing energy-related environmental impacts • Objective 5 - Securing supply through diversity 9
CURRENT CHANGES – ARE THEY INDUCED OR THROUGH OWN VOLITION? • Power industry in SA highly regulated • Market reforms have been largely induced by government initiatives – REIPPPP! • The extent to which the market can develop on its own volition – how far? • NOTE: Probable increasing role of municipalities 10
TRENDS, PATTERNS AND CHALLENGES IN MARKET REFORM – WHAT LESSONS CAN WE DRAW? • Some of the developments not yet realised • Significant strides on introduction of private sector • Opening up of the transmission network • Introduction of competition sector will be “kick-started” through following allocations: 2500MW from conventional coal sources 800MW from co-generation 3126MW from various gas sources Round 5 and beyond 11
TRENDS, PATTERNS AND CHALLENGES IN MARKET REFORM – WHAT LESSONS CAN WE DRAW? DoE briefing to Portfolio Committee on Energy 27-Feb-13 on ISMO Bill: IPP’s not been forthcoming in significant volumes due to: • Perceptions of conflict of interests in vertically integrated Eskom • Perceptions that government is not serious about reforming the industry • Perceptions about long-term viability of (ESI) structure • Lack of clear policy specifically aimed at IPP’s • Lack of enabling legal/ regulatory framework to facilitate IPP’s. 12
TRENDS, PATTERNS AND CHALLENGES IN MARKET REFORM – WHAT LESSONS CAN WE DRAW? OWNERSHIP PATTERNS AND IMPLICATIONS THEREOF • Difficult to predict likely ownership structure outside political debate • Probable following proportions of state vs. Private ownership: Renewables (10:90) Coal (70:30) Gas (50:50) Nuclear (100:0) NOTE: PBMR not included! Any alternative option? • Largely informed by: 1. Scale, 2. Lead times and 3. Capital requirements of the projects • Opposite arguments true for private investors 13
TRENDS, PATTERNS AND CHALLENGES IN MARKET REFORM – WHAT LESSONS CAN WE DRAW? REGIONAL DEVELOPMENT • Regional market reforms lag global trends albeit on a slower and uneven pace excl. SA • Uneven development of SADC markets - requisite attention = power generation to Enable regional integration and Industrialisation programmes • Research Report: existence policies, legislation and regulations to support reforms at early stages of development. • SAPP objectives = good cause for integration of IPP’s Provide a forum for the development of an interconnected electrical system, Co-ordinate & enforce common regional standards of Quality of Supply Increase power accessibility in rural communities, • Inclusion of CEC in SAPP - indication and encouragement for participation 14
THE STOCK EXCHANGE – DOES IT MIRROR THE MARKET REFORM? EXTENT OF LISTING? • 23 DECEMBER 2014 - Donna Oosthuyse – JSE: • South Africa wants to triple its clean power generation through an initiative valued at US$12 billion. • This will put the JSE in a favourable position to generate interest from renewable energy firms. • Possible interest on listing in renewables space • Companies & advisors approaches – energy equity investors exit through listing/raise additional capital • 9 June 2015: Alternative Energy RENERGEN became first SPAC from SA to list on the JSE GREEN BONDS • First green bond to be issued on the JSE by IFC - 10 December 2015 • Listing raises R1 billion ($71 million) targeted towards renewable energy projects • Builds on JSE’s commitment to supporting green financing for sustainable development 15
WHITHER TO FROM HERE? A CASE FOR OVERALL RESTRUCTURING OF THE ELECTRICITY SECTOR Recommendation from PCE-2011/12 BRRR* incl. “Restructuring of the electricity industry” Potential impact of restructuring on energy efficiency, socio-economic well-being of SA Regionalisation through SAPP in keeping SADC regional integration drive COLLECTIVE APPROACH IN GUIDING THE MARKET REFORM PROCESS EXPLORE REGIONAL FRAMEWORK SUBJECT TO DOMESTICATION STRONG FOCUS ON TEETHING PROBLEMS ACCELERATION OF POLICY, LEGISLATIVE & EGULATORY REFINEMENT 16
CONCLUSION • Market reform a reality influenced by various stakeholders • IPP industry = power generation model - exclude FULL value chain • Evolution of electricity market: public driven to hybrid model inevitable • Logic to dictate stakeholders – both public and private – to manage the evolution • Policy, legislative and regulatory lags developments in market reforms • NOTE: 130MW of embedded power generated without regulations disconcerting 17
CONCLUSION • SAPP to include IPP’s in a structured manner • Promethium Carbon report An indicator of SADC potential A call for concerted public-private effort to provide power ensuring guided market reform WE NEED TO MAINTAIN A HIGH STANDARD IN FACILITATING THE MARKET REFORM 18
NGIYABONGA NANRI SHALOM NAMASTE SHUKRAAN NAMASKARE ENKOSI THANK YOU NDAA 19
SAIPPA CONTACT DETAILS • TEL: +27 11 061 5000 • FAX: +27(0)86 688 7005 • EMAIL: saippaservices@vdw.co.za • WEBSITE: www.saippa.org.za • TWITTER: @saippa_ipp • LINKEDIN • FACEBOOK • Physical Address: 4 Karen Street, Bryanston West, Johannesburg • CHAIRPERSON’s CONTACTS: • CELLNO: +27 72 474 9611 • EMAIL: chair@saippa.org.za or sisanjikelana@gmail.com 20
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