(Ed) 2006. Energy policies for sustainable development in South Africa

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Executive summary The purpose of this publication is to present a profile of energy in South Africa, assess trends and analyse some options for the future. It is divided into two parts – Part I presents a profile of energy and sustainable development in South Africa, while Part II uses modelling tools and indicators to assess future policy options for the country. Part I: Energy for sustainable development – a profile of South Africa The initial two chapters introduce the concept of energy for sustainable development and sketch the context of energy policy for South Africa. The next two chapters outline the current situation and future outlook for both energy demand (Chapter 3) and supply (Chapter 4), identifying critical issues for sustainable development for the scenario modelling undertaken in Part II. Chapters 5 to 7 consider the social, economic and environmental dimensions. South Africa’s profile of energy demand, characterised by relatively high energy intensity, makes the more efficient use of energy particularly important. Important energy policy initiatives are already underway with respect to energy efficiency and renewable energy. Many interventions have been proposed and studied in detail and these suggest that it makes economic sense to promote end-use energy efficiency and demand-side management. A key policy question, which is examined here, is why greater efficiency is not realised. Since most projections indicate that coal will continue to be used for some time to come, finding ways of using fossil fuels in a cleaner way is important during the transition to different energy systems. It is suggested that cross-cutting policy instruments, such as energy-environmental taxes, could play an important role in this regard. The excess electricity capacity, which characterised South Africa’s energy profile in the past, has come to an end, and the country now needs to invest in new capacity. Coal-fired power plants provide baseload through some new pulverised fuel plants, and also through fluidised bed combustion. Options that depart from business-as-usual are domestic supply alternatives (various renewable energy technologies and nuclear power) and increased electricity imports (hydro-electricity, and gas for combined cycle gas turbines). In the liquid fuel sector, options examined are the extension of refinery capacity and introduction of biofuels, which raise important policy questions regarding energy for sustainable development. Part I concludes with three chapters, which consider each of the major dimensions of sustainable development in turn – social, economic and environmental. The environmental implications are both local and global. Given its coal-based energy economy, South African is one of the highest emitters of greenhouse gases when compared to other developing countries, whether this is measured in emissions per person or per unit of gross domestic product (GDP). Local air pollution is associated with negative impacts on respiratory health. A major social aspect is access to modern energy services as a key goal, and Chapter 5 outlines the challenge of making such access affordable for poorer households. Experience with the ‘poverty tariff’ (which provides 50 kWh per month of free basic electricity for households) raises important issues about the role of subsidies. viii
ENERGY POLICIES FOR SUSTAINABLE DEVELOPMENT IN SOUTH AFRICA: EXECUTIVE SUMMARY In Chapter 6, which examines the economic point of view, the building of local manufacturing capacity for added-value industries is identified as a way of changing existing patterns of investment in sectors that see their competitive advantage in cheap electricity. Changes in energy pricing deserve more attention in this regard. Overall, the issue of energy security and its relation to diversity of supply has implications for the economy as a whole. Another economic dimension concerns job losses in the coal mining and electricity sectors, which raises the need to identify new areas where jobs can be created in energy supply – or indeed in promoting the more efficient use of energy. Part II: Scenarios of future energy policies and indicators of sustainable development Part II presents possible energy futures for South Africa and demonstrates how indicators of sustainable development can be used to assess options. A range of energy policies for the period 2000-2025 were modelled and the results are evaluated against energy indicators. The model used – the Markal model framework – is a least-cost optimising tool, rich in technologies and capable of including environmental constraints. The method of using indicators of sustainable development provides a sound means for policymakers to identify synergies and trade-offs between options, and to evaluate their economic, social and environmental dimensions. Using Markal, the authors analysed both demand-side and supply-side policies for their contribution to energy objectives and also to broader sustainable development goals. On the demand side, the policy options modelled covered industry, commerce, residential and transport sectors; on the supply side, they covered electricity and liquid fuels. The types of policy instruments investigated include both economic and regulatory instruments. Part II is divided into five chapters: Chapter 8 identifies policy options for the scenario modelling, analysing in greater detail a selection of policies from Part I. Chapter 9 describes the modelling framework and the key drivers of the reference case, which is close to current government policy. The modelling results for each of the policy options are reported in Chapter 10, while Chapter 11 consolidates the assessment against indicators of sustainable development. Conclusions are presented in Chapter 12. The results show that the tools used in this analysis – a modelling framework combined with indicators of sustainable development – provide researchers and policymakers with a useful way of examining trade-offs, while at the same time providing scope for compromise. The reference case The base reference case (‘current development trends’) is close to the government’s Integrated Energy Plan (DME 2003a). For electricity, the second National Integrated Resource Plan (NIRP) (NER 2004a) was used. On the demand-side, fuel consumption in industry and transport dominates, with transport growing most rapidly among sectors. On the supply-side, the energy sources used to generate electricity consist of existing and new sources of coal, supplemented by gas turbines and new fluidised bed combustion using discard coal. Smaller contributions come from existing hydroelectric schemes and bagasse (sugar cane husks), electricity imports, existing and new pumped storage and interruptible supply. The supply of liquid fuel is met mostly from some expansion to existing refineries, together with a small proportion of imports of finished petroleum products. ix
Page 1: Energy policies for sustainable dev
Page 4 and 5: Contents Acknowledgements Executive
Page 6 and 7: 6 Energy and economic development 7
Page 8 and 9: 9.2.5 Discounting costs 152 9.2.6 E
Page 12 and 13: ENERGY POLICIES FOR SUSTAINABLE DEV
Page 14 and 15: ENERGY POLICIES FOR SUSTAINABLE DEV
Page 16 and 17: Abbreviations and acronyms used ADM
Page 19 and 20: Part I ENERGY FOR SUSTAINABLE DEVEL
Page 21 and 22: ENERGY FOR SUSTAINABLE DEVELOPMENT:
Page 23 and 24: ENERGY POLICY 5 Gas consumption pla
Page 25 and 26: ENERGY POLICY 7 2.2.3.1 Accelerated
Page 27 and 28: ENERGY POLICY 9 are privately owned
Page 29 and 30: ENERGY POLICY 11 The 2003 Petroleum
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Page 37 and 38: ENERGY POLICY 19 global environment
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ENERGY FOR SUSTAINABLE DEVELOPMENT:
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4 Energy supply in South Africa And
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ENERGY SUPPLY IN SOUTH AFRICA 47 Ta
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ENERGY SUPPLY IN SOUTH AFRICA 49 pr
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ENERGY SUPPLY IN SOUTH AFRICA 51 Fi
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ENERGY SUPPLY IN SOUTH AFRICA 53 Fi
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ENERGY SUPPLY IN SOUTH AFRICA 55 an
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ENERGY SUPPLY IN SOUTH AFRICA 57 in
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ENERGY SUPPLY IN SOUTH AFRICA 59 co
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5 Social issues Gisela Prasad Contr
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SOCIAL ISSUES 63 Type of area Popul
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SOCIAL ISSUES 65 that the number of
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SOCIAL ISSUES 67 Income group Elect
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SOCIAL ISSUES 69 5.2.2 Subsidies Si
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SOCIAL ISSUES 71 Energia News Octob
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SOCIAL ISSUES 73 Community organisa
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SOCIAL ISSUES 75 Sasol and a high l
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6 Energy and economic development J
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ENERGY AND ECONOMIC DEVELOPMENT 79
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ENERGY AND THE ENVIRONMENT 89 The A
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ENERGY AND THE ENVIRONMENT 91 trail
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ENERGY AND THE ENVIRONMENT 93 preci
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ENERGY AND THE ENVIRONMENT 95 the u
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ENERGY AND THE ENVIRONMENT 97 known
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ENERGY AND THE ENVIRONMENT 99 7.3.1
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ENERGY AND THE ENVIRONMENT 101 GHG
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ENERGY AND THE ENVIRONMENT 103 ther
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IDENTIFYING AND MODELLING POLICY OP
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9 Modelling framework and drivers M
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MODELLING FRAMEWORK AND DRIVERS 149
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MODELLING FRAMEWORK AND DRIVERS 151
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10 Results of scenario modelling Th
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RESULTS OF SCENARIO MODELLING 155 T
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RESULTS OF SCENARIO MODELLING 157 F
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RESULTS OF SCENARIO MODELLING 159 d
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RESULTS OF SCENARIO MODELLING 161 i
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RESULTS OF SCENARIO MODELLING 167 T
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RESULTS OF SCENARIO MODELLING 169 c
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RESULTS OF SCENARIO MODELLING 171 A
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11 Energy indicators of sustainable
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ENERGY INDICATORS OF SUSTAINABLE DE
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12 Conclusions Harald Winkler T his
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CONCLUSIONS 189 costs (Spalding-Fec
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Appendix Environment CO 2 emissions
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SOUTH AFRICAN ENERGY POLICIES FOR S
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