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Cablegate: Wwf Hosts New Electricity Supply Roudtable Discussions In

VZCZCXRO9436
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #2506/01 3411406
ZNR UUUUU ZZH
R 071406Z DEC 09
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 0490
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
INFO RUEHTN/AMCONSUL CAPE TOWN 7403
RUEHDU/AMCONSUL DURBAN 1471
RUEHJO/AMCONSUL JOHANNESBURG 9758

UNCLAS SECTION 01 OF 03 PRETORIA 002506

DEPT FOR OES/PCI, OES/EGC, AND AF/S
DEPT PASS EPA/OIA,

SIPDIS

E.O. 12958: N/A
TAGS: SENV ENRG EPET SOCI ETRD SF
SUBJECT: WWF HOSTS NEW ELECTRICITY SUPPLY ROUDTABLE DISCUSSIONS IN
JOHANNESBURG

REF: Pretoria 2498 and previous

PRETORIA 00002506 001.2 OF 003


-------
Summary
-------

1. (U) The World Wide Fund for Nature (WWF) in South Africa hosted a
one-day "National Roundtable on New Electricity Supply" on November
18 in Johannesburg. The meeting was a follow up to calls from
various stakeholders in the energy sector who attended the National
Climate Change Summit in March of this year. WWF convened the
meeting in light of Eskom's imminent decision on investment in
construction of the coal-based Medupi and Kusile power stations in
December 2009. Over 100 delegates from government, business, civil
society and academia attended the meeting to explore possible ways
to engage the public in the process of securing electricity supply.
Stakeholders raised concerns that South Africa's energy supply
imposed externalized costs that are carried by the ordinary folk,
while big companies benefited. Government said tariff hikes were
inescapable, but plans had to be made to ease the burden on the
poor. The absence of key government players weighted the discussion
somewhat toward the "green" perspective, generally critical of
Eskom, South Africa's power parastatal. Nonetheless, the WWF-hosted
roundtable discussion provided useful context to the debates
underway within South Africa on energy and environmental policy.
COSATU reported on its renewable energy resolution and the Energy
Research Center at the University of Cape Town presented a power
planning tool. End Summary.

2. (U) Background: State-owned Eskom is South Africa's sole and
largest supplier of electricity, generating over 95 percent of
electricity in the country. Dire electricity supply shortfalls,
which resulted in numerous power supply cuts in early 2008, prompted
the power utility to increase its capital expansion program. The
estimated value of the program in 2009 is R385 billion ($51.4
billion) over five years. Credit, equity, and tariff hikes would be
the major sources of funding. The bulk of the funding would go to
the Medupi power station in Limpopo province, valued at R100 billion
($13, 33 billion), and the Kusile power station in Mpumalanga
province, valued at R111 billion (14, 48 billion). Both coal-based
projects are expected to generate 4,800MW (total of 9,600MW). The
balance of the fund would go to numerous other projects located
around the country. They include the Ingula Pumped Storage Scheme
in Kwa-Zulu Natal, Gas Turbine Capacity in the Eastern Cape, and
Wind Farm Capacity in the Western Cape provinces. Eskom has been
struggling to find expansion funds as the global recession tightened
credit markets. Eskom lost both its CEO Jacob Maroga and Chairman
Bobby Godsell in early November (Reftel). The two have since been
replaced by acting CEO/Chairman Mpho Makwana, a board member since
2002.

---------------------------------------------
Eskom Claims to Aim for Low Carbon Emissions
---------------------------------------------

3. (U) Wendy Poulton of Eskom told delegates that Eskom's expansion
would be taken in the context of lowering carbon emissions. She
emphasized that Eskom was committed to addressing uncertainties in
electricity supply, arguing that there is a sufficient energy mix to
meet South Africa's electricity demand, and that the technology to
exploit it also exists. Poulton said that when taking investment
decisions, Eskom would strive to transform a non-commercially viable
Qdecisions, Eskom would strive to transform a non-commercially viable
scenario to a commercially viable one. She elaborated that the
power supplier would consider primary resources, skills,
manufacturing, land, water, independent power producers (IPP),
renewable energy feed-in tariffs (REFIT) and stakeholders' roles.
They would investigate trade-offs between the costs required and new
technology investments. Eskom would adopt the Integrated Energy
Plan approach, which implies broader consultation with interested
parties. Further aspirations are to look for alternatives to coal,
while key policy issues in 2009 were energy efficiency,
conservation, nuclear, climate change, IPP, and energy mix. Through
the guidance of the Energy Resource Development Strategy, they would
investigate locations for new generation, available water
infrastructure, transportation, funding tariff levels, the enabling
environment, socio-economic development, domestic markets and
exports, and allocation strategies.

------------------------
Tariff Hikes Inescapable
------------------------

4. (U) In what sounded like a defense of Eskom's proposed 45 percent
tariff hikes in each of the next three years (a proposal since
revised to 35 percent per year), the Deputy Minister of Science and
Technology Derek Hanekom said that it is a "good and necessary"

PRETORIA 00002506 002.2 OF 003


evil, because it would force people to make the right choices about
energy consumption. He said this was inescapable, but government is
also aware that such a measure would hit poor people the hardest.
Hanekom said there is a need for a funding model for poor
communities, including free basic electricity supply, because it is
a basic right of citizens to have access to energy. He said there
should be a cross-subsidy component, sliding scale tariffs and
differentiation in electricity pricing. The Deputy Minister added
that authorities should make accurate cost projections that cover
the potential value of jobs created or lost, as well as
health-related costs.

5. (U) Kevin Nassiep of the South African National Energy Research
Initiative (SANERI) said South Africa needs to localize the benefits
of research and development (R&D) in energy and alternative
energies. He said the country needs external technical assistance;
while there is potential for renewable energy development, South
Africa has been unable to reach its renewable targets. Nassiep said
there was no need to subsidize energy initiatives; they only needed
to be coordinated better. He said what is required are skills and
capacity to exploit existing opportunities and resources. In his
view, these can be acquired through proper primary and higher
education training. He called for the responsible use of fuels, and
for manufacturers of synthetic fuels like SASOL to adopt cleaner
technologies. Nassiep lauded South Africa's Carbon Capture and
Storage initiative as a step in the right direction in the fight
against climate change.

--------------------------------------
Lack of Potent Government Intervention
--------------------------------------

6. (U) A senior researcher at the Institute for Security Studies
(ISS), Trusha Reddy, argued that there is a lack of proper political
intervention on accountability in Eskom. She said there is a need
to revisit the corporate operations and activities of the energy
supplier against its government mandate. Reddy cautioned that
failure to address responsible governance could be perceived as
potential corruption. She noted that the separation of the
Departments of Energy and Mining was lauded by interested parties,
but so far this has not prompted better management in Eskom. Reddy
also noted that the Integrated Energy Plan published in 2004
revealed inadequate provision for stakeholder participation, and
shortcomings in the process and output. Eskom refused to review or
repeal contracts with big companies, which have been big
beneficiaries of cheap electricity. Reddy opined that government
should set boundaries for Eskom and the regulators. She argued
that government should establish independent structures for
oversight of institutional relations and plans.

------------------------
A case for Civil Society
------------------------

7. (U) Liz McDaid of the NGO Green Connection lamented that Eskom's
proposed rate increases would impact heavily on the poor. She said
that although alternatives were available, they were generally too
expensive for poor people if not subsidized. She added that funds
allocated for such subsidies has often been siphoned off or
misdirected, and this is a problem that needs prompt attention.
Meanwhile a representative of the Congress of South African Trade
Unions (COSATU) Jonas Mosia said that his organization had passed a
QUnions (COSATU) Jonas Mosia said that his organization had passed a
new resolution on climate change at their recent congress. He said
this demonstrated that COSATU understands the case for a low carbon
economy and renewable energy. Mosia added that stakeholders should
find synergy between energy sector development and the creation of
jobs.

8. (U) WWF representative Richard Worthington said it is already
costly to keep temperatures under 2 degrees Celsius to avoid runaway
climate change.. He said climate change costs the world up to half
a trillion dollars per annum. Worthington said that if effective
climate change action is not taken soon, after five years there will
be no hope of ever bringing it under control. According to the WWF,
a low carbon re-industrialization with effective government
involvement is the way of the future for South Africa. In
Worthington's view, the opportunities to be derived from taking a
low-carbon economy route far outweigh the costs of delay; South
Africa should also be taking a leading role in the region and
continent, considering the abundance of renewable energies in the
country.

9. (U) Participants in the roundtable called on the Cabinet to take
decisive action and to coordinate the already fragmented
responsibilities on energy affairs. Delegates argued for more
public debate on the energy mix. Jobs, technologies, poverty

PRETORIA 00002506 003.2 OF 003


alleviation and human capacity development should all be included in
the debate. The delegates called for a permanent forum for
stakeholders to be established, and for tariffs for rural and urban
areas to be different. Delegates asked that the role of the
Department of National Planning in the presidency to be clearly
defined on energy affairs and a"Port of Call" on energy planning to
be identified.

-------------------------------------------
New Tool for Electricity Supply Projections
-------------------------------------------

10. (U) The Energy Research Center of the University of Cape Town
presented an Excel spreadsheet program it has developed, called
Sustainable National Accessible Power Planning (SNAPP). SNAPP
provides technical rigor for users who wish to develop plausible
detailed future electricity scenarios. Developers of SNAPP said it
is very easy to use and convenient for planning purposes. For
example, it enables the user to specify future investment in the
electricity system and calculates the costs of investment and
requirements. The program allows the user to determine the probable
impact of the cost of energy generation, emission implications and
instantaneous results to queries about reliable electricity systems.
SNAPP was developed to improve on traditional electricity planning
systems that were based on complex models, but were difficult and
expensive to run. Unlike SNAPP, the old planning models covered a
small range of alternatives leaving many other options unexplored.
Presenters said SNAPP can be used by local and provincial
governments, as well as major industrial and manufacturing sectors
in planning their energy supply systems.

-------
Comment
-------

11. (U) The WWF's initiative to organize the electricity supply
roundtable was commended by all attendees. Unfortunately, the key
stakeholders of the South African Department of Energy and the
National Energy Regulator (Nersa) were conspicuously absent. The
two interested departments might well have benefited from
stakeholder comments and would have been able to share important
input, since they are responsible for policy-making and electricity
supply regulation, respectively. The participants called for
further meetings and the establishment of a permanent forum to
represent interested stakeholders in future policymaking debates.


Gips

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