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:            
SUBJECT: WWF HOSTS NEW ELECTRICITY SUPPLY ROUDTABLE DISCUSSIONS IN 
JOHANNESBURG 
 
REF: Pretoria 2498 and previous 
 
PRETORIA 00002506  001.2 OF 003 
 
 
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Summary 
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 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. 
 
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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. 
 
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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. 
 
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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. 
 
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New Tool for Electricity Supply Projections 
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 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. 
 
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Comment 
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 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