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Cablegate: Energy Efficiency: South Africa Ready to Plug

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 PRETORIA 004921

SIPDIS

DEPT FOR OES/PCI/GTHOMPSON; OES/PCI/ESHAW; AF/S/MTABLER-
STONE; AF/EPS

E.O. 12958: N/A
TAGS: SENV ENRG ECON SF
SUBJECT: ENERGY EFFICIENCY: SOUTH AFRICA READY TO PLUG
INTO CSD MATRIX

1. SUMMARY. Following highly successful presentations
by Griff Thompson, Sr. Energy Advisor, the South Africa
government (SAG) and Eskom, South Africa's electrical
power giant, agreed to follow a process leading to the
May 2006 meeting of the Commission on Sustainable
Development Meeting (CSD 14) that would emphasize
implementation and project development, rather than a
mere review of technologies and policies. Eskom
committed to researching its data base for feasible
regional projects, although it would not commit to
having such a project ready by CSD 14. The SAG
concurred that specific projects linked to potential
avenues for financing would be a far more productive
path. SAG agreed to advise the embassy of upcoming
meetings at which the Department could present the
matrix being developed by the CSD Secretariat and to
assist in contributing case studies and best practices
to the matrix. Several useful additions to the matrix
were offered, including adding measurement criteria.
END SUMMARY.

--------------------------------------------- ---------
US ADVOCATES CSD SECRETARIAT'S MATRIX
--------------------------------------------- ---------
2. Griff Thompson, Sr. Energy Advisor, Department of
State, briefed several major players in the South
Africa energy arena during his visit after the joint SA
Department of Science and Technology (DST) and
Organization for Economic Cooperation and Development
(OECD) Energy Workshop, held November 21- 22, 2005.
His brief relied upon the following key points: The
CSD is more than just 2 weeks in NYC; work needs to
begin now to make CSD14 more than simply a review
session. There are no great mysteries to be reviewed.
Those in the field know what the issues are, the
technologies and the barriers. Spending a year
reviewing what is already known wastes important
opportunities.

3. The U.S. has supported the CSD Secretariat in its
work to develop a matrix that can used to maximize
CSD14/15. The matrix will collect case studies and
projects that can then be replicated in other countries
and regions. In this context, the U.S. views energy
efficiency as the critical element. $16 trillion is
needed between now and 2030 to adequately respond to
the growing global energy demand, so financing of these
projects is the key. A properly constructed matrix can
be used to identify champions who will broker
relationships and partnerships. The U.S. aims to be
pro-active in assisting in seeking the necessary
support from donors, and to helping form strong
partnerships with the World Bank and other entities.
Sequencing is another critical element. Energy
efficiency measures require a continuum of financing.
If the right measures are chosen, then projects can
move from the grant stage to the market-based stage and
be self-supporting. Finally, the U.S. views energy
efficiency as a fundamental developing country priority
because it bridges the development and environmental
agenda by directly responding to the issues of air
pollution, while alleviating poverty. Access to energy
services is a necessary catalyst to economic and
political development.

--------------------------------------------- ---------
ESKOM WILL WALK THE PATH IF FUNDING COMMITMENTS ARE
MADE
--------------------------------------------- ---------
4. Thompson's first meeting was with Wendy Poulton,
Eskom General Manager - Corporate Sustainability and
Rochelle Chetty, Chair of Eskom's Business Action for
Energy (BAE). Eskom, a SA state-owned entity, is a
vertically integrated utility that generates transmits
and distributes electricity. It supplies approximately
95% of the country's electricity and 60% of the total
electricity consumed on the African continent. Compared
with other international utilities, Eskom is the
eleventh in terms of generating capacity and ninth in
terms of sales, and boasting the world's largest dry-
cooling power station. Eskom sells directly to
approximately 6 000 industrial, 18 000 commercial, 70
000 agricultural and 3 million residential customers.
Eskom also supplies electricity to some 284
municipalities which then distribute to their clients.
Eskom owns and operates 13 coal-fired, 2 gas-fired, 2
hydro and 2 pumped storage power stations, as well as
one nuclear power station. Eskom transmission lines
span the entire country and extend into most Southern
African Development Community (SADC) countries. Its
distribution teams connect an average of 1 000 new
homes every day. The majority of sales are in South
Africa, with only small percentage elsewhere in the
Southern African region.

5. Eskom participates as a member of the BAE and the
International Chamber of Commerce (ICC), serving as
Chair of the Environment and Energy Committee of the
ICC. Eskom has been pushing for a stronger voice, more
opportunity for dialogue, and a bigger role in
partnership developments for the ICC. Eskom is
currently searching for a flagship regional project
that it can roll out on the grid. Eskom has identified
an infrastructure project and is involved in regional
initiative for that project. An informal meeting on the
project was held in Nairobi earlier this year. The SA
Minister of Minerals and Energy attended and wants to
hold another side meeting concerning the project at
Dubai. Eskom and the Minister hope to align the
project within the CSD process. UNEP has been helpful
in facilitating the meetings. The BAE would consider
other events at which it could piggyback these
meetings.

6. After listening to Thompson's presentation, Poulton
immediately turned to financing. Ms. Poulton plainly
stated that Eskom would be interested and would
participate in the Energy Efficiency Investment- Forum.
She noted that South Africa business and the Department
of Mines and Energy have recently signed an energy
efficiency accord that would be in line with the U.S.
proposal. But, in her opinion, financing of projects
remains the key element. It is vital to leverage
multilateral financing, and to provide developing
countries with credit/ benefits/ incentives (similar to
the CDM).

7. Poulton noted that it is easier to bundle projects
and that Eskom currently participates in the SA Power
Pool (SAPP). Although there have been discussions
within that organization about regional bundling and
projects, nothing formal has been proposed. Other
regional organizations in which Eskom participates
include the Power Institute of East and Southern Africa
(PIESA) (with members outside SADC - Uganda and Kenya)
which focuses on research, joint projects, standards
and distribution, and the Union of Producers and
Distributors of Africa (UPDIA) which also has broader
membership than SADC. In response to Thompson, Poulton
said that she would research what case studies Eskom
currently has on regional projects and would advise
him.

8. Ms. Poulton concluded by returning to the issue of
funding. She asked for more details regarding who
would provide the funding and who would be decide what
projects to fund. She noted that it is very
disheartening to do all the work necessary to prepare a
project and then get no funding. She concluded by
commenting that it was questionable if anything
regional could be developed in time for CSD 14.

--------------------------------------------- ---------
SAG UNFOLDS MATRIX - OFFERING SUGGESTIONS, REVISIONS
--------------------------------------------- ---------

9. Thompson then briefed a group of South African
government representatives, including Judy Beaumont,
Chief Director: Planning and Coordination, Department
of Environmental Affairs and Tourism (DEAT), Blessing
Manale, Director for Sustainable Development and
Coordination (DEAT) and Elsa Du Toit, Director for
Energy Efficiency and the Environment, Department of
Minerals and Energy (DME). He later briefed Peter
Lukey, DEAT's Chief Director: Air Quality Management
and Climate Change.

10. Beaumont first noted that the government of South
Africa does not like to fragment issues such as climate
change away from other environmental issues. However
SAG does agree that a major challenge would be making
certain that CSD 14 is robust, measurable, reviews good
practices and scopes out what is needed for CSD 15.
Beaumont also agreed that it was useful and important
to define priorities early with clear definitions and
interlinking between themes. Beaumont felt that the US
approach using energy as the "glue" holding everything
together was constructive. Whatever the final process/
approach, the primary goal for South Africa remained
obtaining specific commitments especially in financing,
technical support and capacity building. Thompson
responded that it is important to get beyond the broad
generalities of "capacity building" and "financing".
Everyone agrees that these two are critically needed,
but until countries begin to define specifically what
kind of capacity, for whom, for what; and similarly,
what kind of financing for what energy service and for
whom, they will continue to address the problem only
rhetorically. The framework provided by the proposed
matrix allows countries to begin to identify the
details of these various cross-cutting themes, and gets
everyone closer to tangible solutions.

11. Blessing commented that the mere establishment of
partnerships was not particularly meaningful. He noted
that there are over 300 partnerships now operating in
SA but no one in government has any real details on how
well these partnerships operate. No body, such as the
UN, monitors what is accomplished. He believes that
the energy invested in managing these partnerships
might be better invested into more realistic projects

12. Du Toit commented that she was an operational
person. . In her mind, reviewing is now complete and
it is time for implementation. As an operational
person, she commented that the matrix did not have any
measurement criteria. Outputs need to be defined and
measured.

13. Du Toit then noted that for many developing
countries, including South Africa, too much attention
is wasted on electrification. Electricity is still far
too expensive for many South Africans. What is needed
is an energy package that allows the consumer to choose
the most effective energy source, whether that source
be candles, gas stoves, solar or electricity.
Providing people with free candles and solar appliances
would be far better in her opinion than electrifying
the country. Government should be working to make the
fuel people do use cleaner, safer and more sustainable.
People must be brought up to a basic level before
advancing to what people cannot afford.

14. Du Toit concluded by advising that the African
Ministers of Energy and Hydropower Conference would be
held March 6-9 in Sandton. This would be an ideal venue
at which to seek additional support. She will keep the
embassy informed about details of the meeting as they
are made public. She also noted that it might be
helpful to attend the meetings of the Energy Ministers
of Africa (AFRIC). She will provide more information
on that organization as well.

15. Final comments from this group focused on the role
of civil society and labor. All SAG participants felt
that the participation of civil society, labor and
business within the CSD process was not as robust as it
needed to be. (FYI. This comment had been echoed in
an earlier conversation between EST Off and Eskom. End
FYI) Both business and labor see the UN process as not
accessible and less than transparent Noting the U.S.
was also not pleased by the lack of participation,
Thompson said that he had met with the Secretariat and
the Chair seeking ways to open the meetings and the
discussions. The U.S. hopes to make business, civil
society and labor authentic partners in the CSD
process.

16. Peter Lukey and Reginald Mabalane, Dir AQM,
described the role of DEAT in all multilateral
organizations. DEAT coordinates the SAG position. For
DEAT, the nexus between climate change and energy is a
major concern since climate change adversely affects
South Africa's ability to develop. CSD policies must
align with Kyoto. The objective for South Africa at CSD
remains the desire for a tangible outcome, measurable
impacts in SA, and technology transfers. None of this
has really happened yet and there have never been any
real commitments to make this happen. The proposed
matrix by the CSD Secretariat is a good start but it is
merely a "poetry basket" now. The matrix needs
tangible projects with cost/benefits analysis and
concrete programmatic items. The bottom line should be
a document with specific clear interventions having
clear impacts.

17. Lukey also noted that although South Africa has
huge coal reserves, the SAG has a strong commitment to
reduce coal usage. In this regard, SAG is in the
process of establishing a new National Energy
Efficiency Agency under DME. This entity will
coordinate public and private energy efficiency
investment. Currently electricity in South Africa is
the cheapest in the world. The government does not want
to raise prices as this would adversely impact
business, industry and transportation which would not
help development. DEAT is in partnership with DME to
reduce residential coal burning, using a grass roots
technique invented in the late 1800s by a SA housewife.
This top down coal burning reduces 80% of emissions and
20% of fuel usage. DEAT will shortly be rolling out a
new publicity campaign.

18. Lukey also noted that there were other ways the
government could increase energy efficiency including
the introduction of fees and tariffs similar to those
now used in the water sector. All residents receive a
basic water ration, usage above that rate is charged at
a flat fee until a certain luxury level is reached.
Then the luxury rate is charged. This is an important
incentive for water conservation and could work for
electricity as well.

--------------------------------------------- ---------
CONCLUSION: SOUTH AFRICA'S MAIN CONCERN: SHOW US THE
MONEY!
--------------------------------------------- ---------
19. Despite the initial hesitations from DEAT, by the
end of that conversation DEAT appeared willing to join
with the U.S. in following the matrix process at CSD
14. Eskom committed to participate as well. Both
entities, however, remain cautious. Unless specific
financing and commitments can be shown, neither SAG nor
Eskom will be willing to walk this path for long. They
are quite articulate and explicit about their
requirement for specific and concrete projects and
funding. If the U.S. cannot fulfill their commitment
to help, then it would be better to know that sooner
rather than later.


TEITELBAUM

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