There is a material misalignment between South Africa's inaugural integrated resources plan (IRP1) for power generation, which was approved by Cabinet on Wednesday, and a number of the proposals contained in State-owned power utility Eskom's revised tariff application, including disagreement about when the first unit of the R142-billion Kusile power project should come on stream.

Energy Minister Dipuo Peters released some of the details of the much-anticipated plan, which is, in effect, a capital project blueprint for the country up until 2013, on Thursday, a day after Cabinet met to consider the IRP and two days after Eskom published details of its revised application under the second multiyear tariff determination (MYPD2).

Central to Eskom's lower application for increases of 35% a year between April 1, 2010, and March 31, 2013 (its earlier request sought increases of 45% a year) was its decision to delay the introduction of Kusile by a year, to June 2014 rather than June 2013.

The utility also suggested that the 100-MW Sere wind project and the Department of Energy's (DoE's) gas-fired peaking plant be delayed by 12 months, while it scrapped the so-called 'Coal 3' project from its investment plans, with this capacity to arise from independent power producer (IPP) projects.

But IRP1 has sustained the initial 2013 deadline for the introduction of the first 723 MW arising from Kusile. It has also provided for the introduction of 1 020 MW of power arising from the DoE IPP open-cycle gas-turbine projects by 2011, as well as Eskom's Sere and concentrated solar power (CSP) projects.

Peters acknowledges the lack of alignment with the new Eskom plan, but said that the DoE believed that all the projects were necessary to "keep the lights on".

She added that: "We cannot stop planning [for security of supply] simply because there is no money. In my view, you have to plan and then look for the money base on the plan."

Acting DDG Ompie Aphane, who has overseen the drafting of the IRP, indicated that the National Energy Regulator of South Africa (Nersa), which will pronounce on Eskom's three-year tariff path on February 24, would use the IRP, rather than Eskom's proposals, to make its determination on the capital-project aspect of Eskom's application.

BIG ENERGY EFFICIENCY PUSH

However, he stressed that the IRP was a "living plan" and would be adjusted as variables changed, and that there was sufficient scope in the process to allow Nersa to approve a tariff path that might alter the timing of certain projects.

Central to any deviation from the IRP1 schedule, was the success or otherwise of demand-side management (DSM).

The DoE, like Eskom, had placed considerable emphasis on DSM funding, which it felt could lead to a reduction of demand of 3 056 MW by 2013. In its application, Eskom is seeking more than R6-billion to support its DSM efforts.

Aphane also stressed that the Sere and CSP projects would be MYPD2 neutral, as funding for these projects would be derived form development finance institutions, such as the World Bank.

Detailed work was currently in progress to ensure the release of the $500-million approved in October under the international Clean Technology Fund (CTF) for a portfolio of low-carbon energy projects in South Africa.

South Africa presented its investment plan at a meeting in Washington DC in late October, and has proposed that the CTF cofinance plans to ensure that 4% of the country's electricity requirements are generated using renewable energy by 2013 and to improve energy efficiency by 12% by 2015.

Aphane also indicated that, should the DSM project prove successful, it was quite possible that security of supply could be safeguarded, even if certain Eskom projects were delayed. However, he stressed that there would be no such flexibility for IPP projects, which had to be "hard wired" into the IRP.

SLIM IPP PICKINGS
However, there are relatively slim picking for IPPs in the IRP1, with only 1 100 MW set aside for renewable energy, cogenerated and conventional IPP power between 2010 and 2013.

However, Aphane stressed that power arising from IPPs post 2014 was likely to be far more material and would be set out in IRP2, which could be finalised by June 2010.

The IRP2 consultation process would also be far more broadly canvassed than was the case with the IRP 1, which involved limited consultation in a bid to close the policy void that existed in Nersa's MYPD2 deliberations.

In a move that would be applauded by potential IPP investors, Peters confirmed that an Independent System Operator (ISO), separated from Eskom, would be created.

The ISO would eventually have authority to sign power purchase agreements (PPAs) with private generators and would oversee the IRP. However, it was still embedded within Eskom and new legislation would be required to for the establishment of a new State-owned enterprise.

A two-stage process was, therefore, envisaged expediting the process of concluding PPAs. In the initial stage, which could be finalised within three months, the system operator would be ringfenced within Eskom, while the legislative process to separate it completely from the utility continued in parallel.

In the interim, it was expected that the ringfenced system operator would be empowered to sign PPAs for the 1 100 MW indicated in the plan.

No clarity was provided in IRP1 as to the role of electricity imports and projects such as the 1 200 MW Mmamabula, in Botswana, and the Moamba closed-cycle gas-turbine project, in Mozambique.

Peters indicated that her department was aware of 29 potential regional projects, all of which were premised on securing a PPA with Eskom and that the IRP2, which would have a 20-year horizon and which would be revised every second year, would take such projects into account.

The IRP2 consultation process would begin in January.

"The IRP1 is primarily about providing Nersa with the policy framework for all investments over the next three years," Aphane said, adding that it focused on adding renewables into the energy mix, incentivising energy efficiency and DSM schemes, and laying the basis for preparations around the next base-load plant, which could be either coal or nuclear.