Energy City of Cape Town Integrated Analysis Baseline Report - The Sustainability Institute
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Energy
City of Cape Town
Integrated Analysis
Baseline Report
Submitted by
The Sustainability Institute, South Africa
and E-Systems, Holland
under the UNF-funded project
Integrated Resources Management for Urban Development
(UNDP Project No. 00038512)
Sustainability Institute
Stellenbosch
2007
Compiled by Sustainable Energy Africa, Cape Town.
1Acknowledgements
Professor Mark Swilling, Sustainability Institute - project management
Lisa Thompson-Smeddle, Sustainability Institute - project coordination
Andrew Janisch, Sustainable Energy Africa - report compilation
Osman Asmal, City of Cape Town (CCT) - project overview
Shirene Rosenberg, CCT - information and report review
Wouter Roggen, CCT - information and report review
Barry Coetzee, CCT - information on policy and legislative issues
Brian Jones, CCT - information and workshop inputs
Craig Haskins, CCT - information and report review
Integrated Analysis Baseline Summary and Reports: SI UNDP Cape Town Project v: Final Draft 09-Jan-10, p. iSUMMARY
1. Existing legislation, policies and regulatory bodies
The South African energy industry is highly regulated by various Acts and government agencies. All of
South Africa’s major energy sources - electricity, petrol and diesel are regulated, along with gas and
nuclear energy. Paraffin, used predominately by low-income households, is also regulated, and is
VAT-free, as a poverty alleviation measure.
Western Cape Provincial Government and the City of Cape Town (CCT) have signaled their intent to
pursue more sustainable energy options in their policy and strategy documents. Several studies
predicting future energy demands have been conducted and various supply scenarios have identified
the benefits of energy efficiency and renewable energy options. There are no tax incentives for energy
efficiency or renewable energy at present. However, Eskom and the Department of Minerals and
Energy (DME) do offer subsidies, and credits are available via the international carbon credit trading
system.
2. Baseline analysis of energy consumption and greenhouse gas emissions in Cape Town
CCT’s major energy sources are electricity (29%), petrol (28%), and diesel (18%), with the remaining
25% from paraffin (3%), jet fuel (9%), LPG (2%), HFO (3%), coal (7%) and wood (1%). The supply,
demand and distribution of energy sources are discussed and per sector energy consumption figures
are provided.
CCT currently produces very little of its own energy and is reliant on Eskom and others to provide for
its energy needs. Electricity, CCT’s largest energy source and a significant contributor to municipal
income, is purchased from Eskom and sold on to consumers. Eskom’s power generation capacity has
come under serve pressure in recent time, resulting in load shedding when demand exceeds supply.
The drive to keep up with energy demand has resulted in negative impacts on the environment, with
59% of all CO2 emissions from CCT’s energy use resulting from ‘dirty’ power generated by inefficient
ESKOM coal power stations.
3. Potential renewable energy and energy efficiency technologies for Cape Town
The pressure on existing energy generation capacity may open the door for the use of renewable
energy and energy efficiency measures in Cape Town. The Western Cape has the potential to
produce 7 500MegaWatts of renewable energy from wind, solar, pumped storage and the oceans.
Energy efficiency measures such as solar water heaters, efficient lighting, ceilings in low-income
iihouses and efficient heating, ventilation and air conditioning could save nearly 15 Terawatt hours over
the next 20 years, if CCT targets are met. A 10% shift from private to public transport by 2020 could
save 50 million Gigajoules.
4. The financial picture of energy flows in Cape Town
It was not possible to get detailed financial information from Eskom and the local Caltex refinery,
which are not obliged, for competitive reasons, to disclose details of their operations. Only financial
data on the regulation of petrol, diesel and paraffin could be obtained. Information in Eskom and
SAPIA annual reports did, however, provide an indication of their overall profit margins. The CCT
Electricity Department provided all the requested information, and a thorough breakdown of their
operations is given.
5. Challenges, constraints and energy development plans
It was apparent from all the operations studied that energy is big business, with huge capital
investment and operational costs. Furthermore, the energy sector is a major generator of wealth and
employment in the Western Cape.
All indications are that demand for all major forms of energy will continue to increase, exerting more
pressure on existing energy sources. In the light of this, the energy industry is unlikely to change its
current unsustainable energy generation strategy of using fossil fuels and enriched uranium as
primary energy sources in the short to medium-term.
However, there are real opportunities to develop renewable energy and energy efficiency measures,
given the support of national and provincial government. The greatest challenge for renewable energy
is to develop onsite energy storage solutions, if renewable energy is to compete with base load
generation systems like coal and nuclear. The other challenge is to reduce the costs of renewable
energy, to make these comparable to the costs of non-renewable sources.
The huge capital investment in new power stations by Eskom to meet demand will result in increased
tariffs, which will effectively open the door the for a more competitive renewable energy market, with
the potential to meet the CCT target of 10% renewable energy sources by 2020.
iiiContents
SUMMARY ...............................................................................................................................II
1. INTRODUCTION ..................................................................................................................5
2. POLICY AND KNOWLEDGE CONTEXT .............................................................................5
2.1 Relevant legislation and policy documents ....................................................................................................... 5
2.1.1 National policy and legislation .............................................................................................................................. 5
2.1.2 Provincial Government energy policy .................................................................................................................... 7
2.1.3 Local Government energy policy ........................................................................................................................... 8
2.2 Overview of Cape Town’s energy system .......................................................................................................... 8
2.2.1 REDs .................................................................................................................................................................. 10
2.2.2 The Western Cape energy crisis........................................................................................................................... 10
2.2.3 Cape Town’s energy system is not sustainable ..................................................................................................... 11
2.3 Relevant policy and planning frameworks ....................................................................................................... 14
2.3.1 Planning projections ............................................................................................................................................ 15
2.3.2 Renewable energy incentives ............................................................................................................................... 15
3. REGULATORY AND INSTITUTIONAL ENVIRONMENT ..................................................16
3.1 Overview ................................................................................................................................................................. 16
3.2 Key energy institutions ........................................................................................................................................ 16
4. ENERGY SUPPLY AND DEMAND IN CAPE TOWN.........................................................18
4.1 Sources of energy supply in Cape Town .......................................................................................................... 18
4.1.1 Electricity ........................................................................................................................................................... 18
4.1.2 Liquid fuels......................................................................................................................................................... 20
4.1.3 Coal .................................................................................................................................................................... 22
4.1.4 Wood .................................................................................................................................................................. 22
4.2 Energy demand ..................................................................................................................................................... 22
4.2.1 Residential .......................................................................................................................................................... 23
4.2.2 Transport ............................................................................................................................................................ 23
4.2.3 Commerce and Industry ...................................................................................................................................... 23
4.2.4 Public sector ....................................................................................................................................................... 24
4.3 Distribution............................................................................................................................................................. 25
4.3.1 Electricity ........................................................................................................................................................... 25
4.3.2 Petrol and diesel .................................................................................................................................................. 26
4.3.3 Paraffin ............................................................................................................................................................... 27
4.3.4 Liquefied Petroleum Gas (LPG) .......................................................................................................................... 27
4.3.5 Jet fuel ................................................................................................................................................................ 27
4.3.6 Coal .................................................................................................................................................................... 27
4.3.7 Wood .................................................................................................................................................................. 27
4.4 Nuclear energy ...................................................................................................................................................... 27
24.4.1 PBMR ................................................................................................................................................................ 28
4.4.2 PWR ................................................................................................................................................................... 28
4.5 Users and needs ................................................................................................................................................... 30
4.5.1 Cape Town electricity users ................................................................................................................................. 30
4.5.2 City of Cape Town supply area............................................................................................................................ 30
4.5.3 ESKOM supply area for CCT .............................................................................................................................. 32
4.6 Average household consumption ...................................................................................................................... 33
4.7 Average non-residential consumption .............................................................................................................. 35
4.8 Seasonal and daily load profiles ........................................................................................................................ 36
4.9 Cape Town energy use CO2 emissions ............................................................................................................ 38
4.10 Demand Side Management ............................................................................................................................... 39
5. TECHNOLOGICAL INTERVENTIONS ...............................................................................39
5.1 Existing supply and generation technologies ................................................................................................. 39
5.2 Current research on alternatives and energy saving potential .................................................................... 40
5.3 Savings from renewable energy technologies ................................................................................................ 41
5.3.1 Solar water heaters (SWH) .................................................................................................................................. 42
5.3.2 Efficient lighting ................................................................................................................................................. 42
5.3.3 Ceilings in houses ............................................................................................................................................... 43
5.3.4 Efficient heating, ventilation and air conditioning (HVAC) .................................................................................. 43
5.3.5 Transport mode shift ........................................................................................................................................... 44
5.3.6 Total savings....................................................................................................................................................... 44
5.4 Feed-in tariffs......................................................................................................................................................... 44
5.5 Overview of environmental impacts of current technologies ....................................................................... 45
6. FINANCIAL ASPECTS.......................................................................................................45
6.1 Financial quantification and analysis of electricity flows.............................................................................. 45
6.1.1 CCT electricity cash flow (2006-2007) ................................................................................................................ 45
6.1.2 Eskom electricity cash flow (2006-2007) ............................................................................................................. 49
6.2 Financial quantification of liquid fuel flows ..................................................................................................... 49
6.2.1 Petrol .................................................................................................................................................................. 50
6.2.2 Diesel ................................................................................................................................................................. 51
6.2.3 Paraffin ............................................................................................................................................................... 52
6.2.4 Jet fuel ................................................................................................................................................................ 52
6.2.5 LPG and HFO ..................................................................................................................................................... 53
6.3 Billing systems used by Eskom and CCT......................................................................................................... 53
6.3.1 CCT billing system ............................................................................................................................................. 53
6.3.2 Eskom billing system .......................................................................................................................................... 55
6.3.3 Comparison of Eskom and CCT tariffs ................................................................................................................ 56
6.4 Analysis of CCT and Eskom margins ................................................................................................................ 57
6.4.1 City of Cape Town .............................................................................................................................................. 57
36.4.2 Eskom................................................................................................................................................................. 57
6.5 Capital budgets ..................................................................................................................................................... 58
6.5.1 CCT capital budget ............................................................................................................................................. 58
6.5.2 Eskom capital budget .......................................................................................................................................... 58
6.6 Breakdown of O&M costs .................................................................................................................................... 59
6.6.1 CCT O&M costs ................................................................................................................................................. 59
6.6.2 Eskom O&M costs .............................................................................................................................................. 61
6.7 Aggregate of all energy flow payments ............................................................................................................ 62
6.7.1 Electricity (June 2006- July 2007) ....................................................................................................................... 62
6.7.2 Liquid fuels (2006).............................................................................................................................................. 63
7. CHALLENGES, CONSTRAINTS AND FUTURE PLANS ..................................................63
7.1 Ten-year outlook – Constraints and opportunities ......................................................................................... 63
7.1.1 Electricity ........................................................................................................................................................... 64
7.1.2 Liquid fuels......................................................................................................................................................... 65
7.1.3 Coal .................................................................................................................................................................... 65
7.2 Future plans and their likely impact on sustainable outcomes .................................................................... 65
7.2.1 Electricity ........................................................................................................................................................... 65
7.2.2 Liquid fuels......................................................................................................................................................... 66
8. CONCLUSION ....................................................................................................................66
9. ACRONYMS .......................................................................................................................67
10. REFERENCES .................................................................................................................68
41. Introduction
This report presents the results of a study of energy flows in Cape Town, and the related financial
flows. It focuses mainly on electricity and liquid fuel supply and distribution. While other energy
sources such as coal and wood are considered, it was difficult to obtain adequate data on these, and
they are not major sources. Understanding of the city’s energy situation and energy finances should
enable planners to make more informed decisions regarding sustainable energy interventions.
Energy flows are determined from the supply side to end users, to give a current energy baseline. The
report also deals with the electricity crisis in the Western Cape, progress in implementing Regional
Electricity Distributors (REDs), and why Cape Town’s current energy profile is unsustainable.
Renewable energy and energy efficiency technologies and their potential impact in Cape Town are
analysed. The financial aspect of the city’s energy flow is captured in terms of all transactions from
supplier to end user, in so far as was possible. Finally, a brief analysis of future energy plans for Cape
Town is made, and conclusions are drawn.
2. Policy and Knowledge Context
2.1 Relevant legislation and policy documents
2.1.1 National policy and legislation
Before 1994, as a response by the National Party Government to international sanctions, South
African energy policy was driven by considerations of national security, self-sufficiency and secrecy.
This resulted in an over-reliance on dirty, inefficient fuels, and an inadequate supply of affordable and
safe fuels to millions of poor households. Current energy legislation and policy embody a significant
shift towards improving access to energy, and participation in the sector by the previously
disadvantaged. While environmental sustainability is given greater emphasis, it is not yet a central
priority.
The Energy White Paper, 1998
The Energy White Paper of 1998 aimed to increase access to affordable energy services, improve
energy governance, manage energy-related environmental impacts, and secure supply through
diversity. Its key objectives are:
increased access to affordable energy services
5 stimulating economic development, including encouraging energy sector actors to facilitate
economic empowerment through the creation of SMMEs and by assisting previously
disadvantaged people to gain entry to the energy sector
re-regulation of the liquid fuels industry to allow unrestricted market access
managing energy-related environmental impacts.
In general, the policy enforces a shift to opening markets, promoting export industries, restructuring
government assets and re-regulating the energy industry.
The White Paper also advocates Integrated Resource Planning (IRP) to guide strategic decision-
making for all substantial new investments in energy infrastructure. IRP considers demand-side needs
and options as well as supply-side options, and includes an assessment of social and environmental
factors and externalities. The CCT Electricity Department has developed a local IRP for the electricity
sector in the metro area, which has been approved by Council.
The Municipal Systems Act
Section 23 of the Municipal Systems Act, No. 32 of 2000 requires municipalities to produce integrated
development plans for medium-term development to meet community needs. The Act directs
municipalities to provide sustainable services to communities, and promotes increased community
involvement in the provision of energy services.
White Paper on Renewable Energy and Clean Energy Development (Draft 2002)
Deregulation and restructuring of the electricity supply industry is intended to create market
opportunities for renewable energy production. The draft White Paper Renewable Energy and Clean
Energy Development recognises the importance of renewable energy in the long-term sustainability of
SA’s energy profile, and sets a ten-year target for increasing renewable energy production. The policy
sets out Government’s principles, goals and objectives for renewable energy, and commits
Government to actions to ensure that renewable energy becomes a significant part of its energy
portfolio over the next ten years.
However, despite its clear statement of purpose, the draft document provides little specific direction on
promoting renewable sources or moving to a more sustainable mix. In particular, two economically
and environmentally sound options - solar water heating and passive solar building design - are not
adequately stressed, given their proven track record, financial feasibility and potential impact. The next
6version of the policy document is expected soon, and will hopefully provide clearer guidance on how
its sound intent is to be translated into reality.
National Energy Regulator Act of 2004
This Act mandates the National Energy Regulator in SA (NERSA) to regulate the electricity, piped gas
and petroleum industries, and to collect levies from those holding title to gas and petroleum. The
single regulator for the three industries is intended to improve efficiency, cut costs and boost private
sector participation in the energy sector.
As an economic regulator, NERSA should ensure a level playing field and prevent abuse by
monopolies. While legislation existed to govern the gas and petroleum pipeline industries, they were
previously not subject to control by a regulatory body. The regulator is important as it will encourage
greater access and competition in a sector dominated by single major players - Eskom in electricity,
Petronet in petroleum and Sasol in gas.
The Petroleum Products Amendment Act 2003
The Petroleum Products Amendment Act, No. 58 of 2003:
promotes an efficient manufacturing, wholesaling and retailing petroleum industry
facilitates an environment conducive to efficient and commercially justifiable investment
promotes the advancement of historically disadvantaged individuals
promotes employment opportunities and small businesses in the petroleum sector.
The Gas Act of 2001
The Gas Act of 2001 provides a regulatory framework for the storage, transmission, distribution and
trading of gas. The Act establishes a Regulator and regulates transmission by third parties.
2.1.2 Provincial Government energy policy
Sustainable Energy Strategy for the Western Cape, May 2007
This document highlights areas where sustainable interventions are possible in the Western Cape,
and outlines action plans to achieve them.
Renewable Energy Plan of Action for the Western Cape, 2007
This document provides a detailed analysis of the potential for renewable energy in the Western Cape.
Several scenarios from conservative to aggressive renewable use are considered, and a renewable
energy strategy is suggested.
72.1.3 Local Government energy policy
State of Energy Report for Cape Town, 2003
This comprehensive baseline summary of energy supply and demand per sector in Cape Town is
being updated, and should be available in July 2007.
Cape Town Energy and Climate Change Strategy, 2005
Based on the State of Energy Report, this CCT document sets sustainable goals on the supply side,
and per sector on the demand side. It lists short and long-term measures to achieve these goals, and
sets specific targets.
Cape Town Energy Futures Report, January 2005
This study established a demand baseline for the city and projects future energy consumption, based
on certain policies.
City of Cape Town Draft Solar Water Heater By-law, June 2007
This draft by-law requires that new houses above 100m2 be fitted with solar water heaters.
2.2 Overview of Cape Town’s energy system
Cape Town, like all South African cities, has a complex energy situation. It is impossible to ‘energy
ring-fence’ and analyse the city in isolation, as most of its energy comes from external sources, both
national (electricity, coal and liquid fuels) and international (liquid fuels and enriched uranium).
Cape Town’s energy use profile for 2006 shows electricity (29%), petrol (28%) and diesel (18%) as the
chief energy sources, with paraffin, jet fuel, LPG, HFO, coal and wood making up the remaining 25%.
While good data exists for electricity and liquid fuels, it is very difficult to determine fuel use in the
unregulated coal market, or the use of biomass (in Cape Town, mostly wood1).
1
State of Energy Report for Cape Town, SEA 2003
8Summary of Cape Town energy consumption (2006)
Heavy
User
Electricity Petrol Diesel Furnace Paraffin Jet Fuel LPG Coal Wood Total Total %
Group
Oil
GJ GJ GJ GJ GJ GJ GJ GJ GJ GJ %
Households 17969125 - - - 2586691 - 546992 43400 359100 21505308 14%
Industry &
24755476 - 13160174 4696351 443648 - 2718138 10788000 561317 57123104 38%
Commerce
Local
1747292 118729 234394 - - - - - - 2100415 1%
Authority
Transport 42294067 14336799 - - 13615542 - - - 70246408 47%
Total 44471893 42412796 27731367 4696351 3030339 13615542 3265130 10831400 920417 150975235 100%
Total % 29% 28% 18% 3% 2% 9% 2% 7% 1% 100%
Sources: Fuel: SAPIA; Electricity: City of Cape Town Electricity Dept, CT State of Energy Report 2003, SA State
of Cities Report (SEA 2006), CT Energy Futures Report (2005), Household Numbers in Cape Town-Discussion
Document (CCT, Aug 2006); Coal: Imibono Fuels Personal Discussion, CT State of Energy Report 2003; Wood:
CTSOER 2003
Most of Cape Town’s electricity is provided by the Eskom grid, from a mix of coal, nuclear, hydro and
gas turbine power stations. CCT provides some electricity from its Steenbras pumped storage
scheme, and an independent power producer (IPP), the Darling Wind Farm, will soon be selling
electricity to Cape Town.
Liquid fuels (petrol, diesel, HFO, Jet Fuel, Paraffin, LPG) are largely supplied by the only local refinery
– Calref2. Cape Town’s current average demand for refined liquid fuels is 46 213 barrels/day3, while
Calref has the capacity to produce 100 000 barrels per day4. The balance is distributed around the
province, or is exported (mostly diesel).
Very little data exists on coal and wood consumption. Coal sold to industry is monitored by CCT but no
figures are available for domestic consumption. Although studies are by no means comprehensive,
they indicate that wood and coal use in households is minimal compared to other energy sources5.
2
State of Energy Report for Cape Town, SEA 2003
3
SAPIA fuel sales data for 2006, SAPIA 2007
4
SAPIA Annual Report 2005
5
Cape Town Energy Futures Report, 2005
92.2.1 REDs6
The distribution of electricity in South Africa is currently receiving national attention, as it is at present
highly fragmented. This has resulted in inefficiencies, disparities in tariffs, unequal treatment of
customers, inadequate maintenance of networks, inability to capitalize on economies of scale and
limited ability to introduce competition.
Government plans to consolidate electricity distribution by amalgamating Eskom distribution and 187
municipal electricity utilities into six Regional Electricity Distributors (REDs). However, prior to this
decision (by cabinet in October 2006), the plan was that the RED system would be metro-based. CCT
thus formed RED 1 in July 2005 to provide electricity services to the entire municipal area.
The cabinet decision calling for the ‘wall to wall’ REDs went beyond the mandate of RED1, and CCT
requested that NERSA revoke RED1’s distribution license, and re-establish the prior status quo. This
was granted and RED1 was closed down. The process of establishing the six ‘wall-to-wall’ REDs is
currently being managed by EDI Holdings (Pty) Limited, a company set up by DME.
The process has met some resistance from municipalities, who argue that electricity distribution is a
municipal function in terms of the Constitution. However, the Municipal Systems Act of 2000 provides
for distribution via an internal or external mechanism. Electricity is also a significant income source for
municipalities, which they are not eager to lose.
2.2.2 The Western Cape energy crisis
Problems occur in any electricity generation, transmission and distribution network, and need to be
managed to minimize their effect on the supply to customers. Worldwide accepted reserve margins to
accommodate supply problems are between 15-30%. This means that the Western Cape’s 4 300MW
peak load system should have a supply capacity of 4 950MW or more, to ensure an uninterruptible
supply.
6
Based on the Report to the Minerals and Energy Portfolio Committee, Wednesday 28 February 2007
10Current Western Cape supply limitations
Transmission Lines from Eskom Network +/- 2600MW
Koeberg Unit 1 900MW
Koeberg Unit 2 900MW
Palmiet Pumped Storage (Peak) 400MW
Steenbras Pumped Storage (Peak) 168MW
Acacia Gas Turbine 171MW
Total generation capacity 5 139MW
Sources: Eskom, CCT Electricity Dept, Andrew Kenny Presentation (Mar 2006)
This capacity gives a reserve margin of just under 15%. However, the Western Cape supply is
handicapped by the size of Koeberg’s two 900MW reactor units, which each constitute 18% of the
total generation capacity for the Western Cape. If one unit is shut down, the supply falls below peak
demand requirements, and load shedding can become necessary to avoid system overload.
This vulnerability in the supply system was the cause of the blackouts and load shedding in 2005 and
2006. When transmission lines trip, or a Koeberg unit is shut down for maintenance, the Western
Cape is affected to a greater or lesser degree. Eskom Demand Side Management (DSM) has pursued
aggressive interventions to reduce electricity consumption and peak load levels. For example, 5.3
million compact florescent light bulbs (CFLs) and 140 000 geyser blankets were distributed, resulting
in a 500-700MW saving in the winter of 20067.
Although the situation is currently vulnerable, the introduction of an extra 1 050MW from two open-
cycle gas turbines in June 2007 will do much to avert crises like those that occurred in 2005 and 2006,
for the time being.
2.2.3 Cape Town’s energy system is not sustainable
Electricity supply system
The vast majority of Cape Town’s electricity supply is from a combination of ‘dirty’ power from Eskom
coal power stations and the nuclear facility at Koeberg. Coal and liquid fuels are diminishing
resources, and their use in power stations is a major contributor to SA greenhouse gas emissions.
7
Eskom DSM website, 2007
11Nuclear power, though marketed as ‘green’ power, is far from it. Uranium is not a renewable resource,
and estimates predict that high-grade low-cost uranium supplies will be exhausted by 2050, and that
does not take into account the current rapid worldwide expansion of nuclear power8. Besides this, a
substantial amount of energy is used and CO2 produced in mining, extracting and producing enriched
uranium9 (though these CO2 levels are 25-30 times less per energy unit than those from a coal power
station).
In spite of the problem of taking responsibility for waste that will be highly radioactive for at least
20 000 years, the Department of Public Enterprises has decided that nuclear power will play a major
role in future electricity supply. Eskom intends to construct a Pebble Bed Reactor near Koeberg in
2009, and in the medium term, another Pressurized Water Reactor (PWR) like Koeberg, also in the
Western Cape.
Electricity is essential to the functioning of Cape Town, but sustainability challenges are to:
improve energy efficiency in all spheres of use
reduce the amount of ‘dirty’ coal-generated power used
increase the use of cleaner fuel power stations
increase the contribution of renewable energies.
There are real opportunities to increase the renewable energy component of Cape Town’s electricity
supply. Wind, solar and tidal technologies can contribute at least 10% to the city’s electricity mix 10.
This is reflected in CCT’s Energy and Climate Change Strategy, but Eskom does not seem to be
taking these technologies seriously, and is planning more coal, gas and nuclear power stations. The
wind farm at Darling is currently the only major renewable energy source. Solar water heaters are still
only used on a small scale by individuals and companies to reduce their use of grid electricity.
Liquid fuel
Cape Town, like all cities, is heavily dependent on liquid fuel, used mainly for transport, industrial
heating and household cooking and heating. Liquid fuels currently make up 60% of all energy used in
Cape Town.
8
Renewable City, Peter Droege 2006
9
Calculations using Uranium Calculator: World Information Service on Energy – Uranium Project (www.wise-
uranium.org)
10
CCT Draft Energy and Climate Change Strategy
12National figures show an increase of 3.5% in refined product sold between 2005 and 2006, with 2006
being the sixth consecutive year that aggregate sales of petroleum product have grown. This trend is
likely to continue in 2007. The highest increase in demand has been for diesel (7.1% in 2006) and jet
fuel (4.1% in 2006).11
Liquid fuel consumption
The table below from the SAPIA 2005 Annual Report shows national consumption of liquid fuel
products. It is assumed that Cape Town’s consumption pattern is similar.
Source: SAPIA Annual Report 2005
Alternative and more sustainable sources of fuel are being investigated. Biodiesel is being pushed as
the fuel of the future, but a strong argument against it is that it will compete with food crops, and may
result in farmers growing for the biodiesel market to increase their profits. This could lead to increased
food prices and food shortages.
Solutions need to be found to reduce fuel use in the city, such as the integration and modernization of
public transport infrastructure to achieve a significant shift from private to public modes of transport.
11
SAPIA Annual Report 2005, www.sapia.org.za
13Paraffin
Paraffin is widely used in poor households with limited or no access to electricity12. Paraffin poses
health hazards by reducing indoor air quality, and by being a major contributor to fires in poor areas.
Paraffin is not subject to VAT, as an effort by the government to make energy more affordable for the
poor. Safer and cleaner alternatives to paraffin are LPG and bioethanol gel. Efforts have been made to
change paraffin users to safer LPG systems, but barriers that need to be overcome are accessibility of
gas suppliers, the initial high investment in a gas cylinder and appliance, and the perception that gas
is not safe.
Bioethanol is still a fledgling industry, and does not have the capacity to take over the large paraffin
market. The product still has to be proved to be as effective, easy to access and as cost-efficient as
paraffin, for use to increase in the low-income market.
Liquefied Petroleum Gas (LPG)
The Western Cape accounts for 25% of LPG consumption in SA. LPG is a cleaner and safer
technology than paraffin. The price of LPG is currently partially regulated by the Department of
Minerals and Energy (DME), in that refineries have to sell it to marketing companies at a monthly
adjusted price driven by the Basic Fuel Price (BFP). Efforts have been made to keep LPG cheaper
than paraffin or electricity, but this has proved difficult with substantial increases in fuel prices over the
last few years, and the fact that paraffin is VAT free. Although LPG is a more sustainable alternative
than electricity or paraffin, low reserve and pipeline capacity means that without major infrastructure
development, the industry will not grow significantly in future.
2.3 Relevant policy and planning frameworks
City of Cape Town Draft Energy and Climate Change Strategy, 2005
Building on the CCT State of Energy Report, this document sets sustainable goals on the supply side
and per sector on the demand side, and lists short and long-term measures and targets towards
achieving these goals.
Sustainable Energy Strategy and Plan of Action for the Western Cape, 2007
12
Cowan & Mohlakoana (2004); (Simmonds & Mammon (1996: 75)
14This document outlines a strategy with targets and action plans to achieve a more sustainable
province in energy terms in the next 10 to 15 years.
Renewable Energy Plan of Action for the Western Cape, 2007
This detailed study of the potential for renewable energy projects in the Western Cape considers five
potential scenarios, ranging from very conservative to very progressive, and lays out the sustainability
implications of each.
2.3.1 Planning projections
The CCT State of Cape Town Report predicts that:
the city’s population growth will slow dramatically over the next 15 years, with an expected
increase in population of 300 000 by 2021. The report also states that there is a housing
backlog of between 265 000 and 300 000 units.
manufacturing is on the decline, as is employment in government, while increases have
occurred in the services and real estate sectors.
GGP has remained at 4.5% over the last 4 years, and short-term predictions are that growth
will remain around 4%.
The city has two planning departments, Land Use Planning and Spatial Planning. Their challenge is to
regenerate areas where urban sprawl has occurred and to optimise spatial development, based on the
CCT’s draft Metropolitan Spatial Development Framework.
2.3.2 Renewable energy incentives
There are currently very few incentives for renewable energy developers. REFSO, a body set up by
DME, offers funding of R250 per kW of generation potential to renewable energy projects. This will not
make a great impact on renewable development, but signals DME support for renewable energy
initiatives.
Eskom’s Demand Side Management (DSM) branch offers an incentive for solar water heater
installation, ranging from R2 000 to R4 000 per system, or roughly 15% of the cost. This may not be
sufficient to motivate people to invest in solar water heaters, but is a positive step in the right direction.
Projects which can be proven to reduce or compensate for carbon emissions are eligible for
international funding via the carbon credits system. Subsidisation of renewable projects can occur
either through the informal route of selling carbon credits to international companies with a
sustainability agenda, or through the formal Cleaner Development Mechanism.
153. Regulatory and Institutional Environment
3.1 Overview
Most areas of the energy sector in SA are regulated by government - electricity, petrol, diesel, paraffin
and nuclear. The National Energy Regulator (NERSA) awards licenses for the generation,
transmission and distribution of electricity, and regulates all gas and fuel pipelines. NERSA also grants
licenses for the construction of any nuclear installation.
The prices of petrol, diesel and paraffin are regulated by DME, based on a formula determined by the
Basic Fuel Price (BFP). Prices are recalculated and adjusted monthly. The retail price of petrol, and
the wholesale price of diesel and paraffin are regulated. Paraffin is further regulated in that it is VAT
exempt. LPG, jet fuel, heavy fuel oil, coal and wood are currently unregulated.
3.2 Key energy institutions
The following are key institutions in SA governing energy regulation, infrastructure development and
distribution.
National Energy Regulator of South Africa (NERSA)
The National Energy Regulator Act, No. 40 of 2004 mandated NERSA to take over the functions of the
Gas Regulator (the Gas Act of 2001), the Petroleum Pipelines Regulatory Authority (the Petroleum
Pipelines Act of 2003) and the National Electricity Regulator (the Electricity Act of 1987, as amended).
NERSA as a single regulator for the three industries aims to improve efficiency, cut costs and boost
private sector participation in the energy sector. As an economic regulator, NERSA works to ensure a
level playing field, prevent abuse by monopolies and encourage greater access and competition in a
sector dominated by single major players - Eskom in electricity, Petronet in petroleum and Sasol in
gas. NERSA is expected to take proactive regulatory action in anticipation of and in response to
changing circumstances in the energy industry.
National Nuclear Regulator (NNR)13
The NNR was established by the National Nuclear Regulator Act, No 47 of 1999 to protect the public,
property and environment against nuclear damage. The NNR is governed by a Board of Directors
13
NNR Annual Report 2005/6
16appointed by, and accountable to the Minister of Minerals and Energy. The Board consists of up to
thirteen directors, including representatives from DME, DEAT, labour, business and communities that
may be affected by nuclear activities.
The NNR has five divisions: Power Reactors, Nuclear Technology, Natural Sources Assessment,
Regulatory Strategy Development and Corporate Support Services, which are responsible for
technical assessments, authorization and compliance assurance, and infrastructural support for the
effective regulation of nuclear waste, radiation and transport safety.
Department of Minerals and Energy
DME administers energy laws and policies. Under the apartheid government, state institutions were
deeply involved in the liquid fuels sector for security reasons, but the regulatory and policy
environment has been reformed and institutions have been rationalised and redirected according to
the current priorities of government.
PetroSA
The Petroleum Oil and Gas Corporation of South Africa (PetroSA), a new state oil company, was
formed by a merger of Soekor and Mossgas. It owns and operates all government-owned oil and gas
holdings, and explores and develops SA’s natural oil and gas resources in a competitive manner.
Central Energy Fund (CEF)
The CEF is involved in the search for appropriate energy solutions to meet the future energy needs of
South Africa, the Southern African Development Community and sub-Saharan Africa. This includes
oil, gas, electrical power, solar energy, low-smoke fuels, biomass, wind and renewable energy
sources.
Through its subsidiary PetroSA, the CEF is involved in on- and offshore exploration for oil and gas in
SA and Africa. It is also produces environmentally friendly petroleum fuels and petrochemical products
at its Mossel Bay synfuels refinery, and manages oil-storage facilities. The Strategic Fuel Fund
manages South Africa's strategic crude oil reserves.
Oil Pollution Control SA, a CEF subsidiary, provides oil pollution prevention, control and clean-up
services, mainly in SA ports and coastal areas, in terms of the National Environmental Management
Act, 107 of 1998.
17The Petroleum Agency of South Africa (PASA), a CEF subsidiary, promotes and licenses oil and
gas exploration, development and production in SA and offshore, towards creating a viable upstream
oil industry. CEF subsidiary iGas develops the hydrocarbon gas industry, comprising liquefied natural
gas and LPG.
Industry associations
The South African Petroleum Industries Association (SAPIA) promotes the interests of the refining
and distribution operations of the original, white-owned, companies. Recently an alternative
association has been established to represent the interests of black oil companies – the African
Mineral and Energy Forum (AMEF). The Paraffin Safety Association of South Africa (PASASA)
is a funded organisation that promotes the safe use of paraffin in households. The Liquefied
Petroleum Gas Association of South Africa (LPGSA) provides training and accreditation on LPG
safety issues, markets LPG, and represents the LPG industry to government when necessary.
Black Economic Empowerment
Greater black participation in the SA oil industry is important for the new government. The Energy
Policy White Paper sets a goal of 25% participation by black groups in all facets of the liquid fuels
industry. In November 2000, all oil companies signed an Empowerment Charter defining how the 25%
participation is to be measured, and many companies have made significant progress in this regard.
4. Energy Supply and Demand in Cape Town
4.1 Sources of energy supply in Cape Town
4.1.1 Electricity
Eskom
Eskom provides the bulk of electricity from its national grid, and controls generation and transmission,
but shares distribution with the CCT. Eskom generation plants near Cape Town are Koeberg nuclear
power station (1 800MW net capacity), emergency gas turbines at Acacia (171MW capacity), and the
Palmiet pumped storage scheme for national grid load management (400MW capacity).
The national grid also provides electricity via a 400kV line which can deliver a maximum of 2 600MW
to the Western Cape. In theory Koeberg could meet Cape Town’s total electricity demand, but in
practice it is merely one of a mix of generation plants feeding into the national grid. One of Koeberg’s
18two 900MW units is often down for maintenance or other routine reasons. Koeberg has an 18 year
economic lifespan left. Two open cycle gas turbine plants with a total capacity of 1 050MW capacity
are being built at a cost of R3.5bn, in Atlantis and Mossel Bay. These liquid-fuel plants, designed
primarily to boost peak capacity, should be completed by mid 2007.
Eskom is currently evaluating the potential of power generation from wind at the Klipheuwel Wind
Farm, which has three turbines, but no major wind farm developments are planned in the short-term.
Average unit retail price
To distributor 16.13c/kWh
To residential 40.08c/kWh
To commercial 22.69c/kWh
To industrial 14.75c/kWh
(Source: Eskom 2006 annual report)
City of Cape Town
The CCT generates very little of its own energy, which is mostly purchased from Eskom.
Steenbras Pumped Storage Plant
CCT owns a 160MW pumped storage plant at Steenbras, which pumps water up to the Steenbras
Dam in off-peak (cheap electricity) periods, and generates electricity by running the water down again
in peak periods (i.e. hydro generation). Steenbras is used for load management and is not a base-load
generator. Depending on the amount of water flowing into upper Steenbras Dam, the pumped storage
plant can be either a net consumer or a net producer of electricity. Steenbras provided 20GWh into the
Cape Town grid over the last financial year14.
Emergency Gas Turbines
Two 40MW gas turbines at Roggebaai and Athlone are only used for emergency duty, as they have
very high running costs15. For the average CCT unit retail price, see the table in section 5.1 of this
report.
Independent Power Producers (IPPs)
14
CCT Electricity Sent to System Spreadsheet, 2006
15
Wouter Roggen, CCT, Personal Communications, 17 May 2007
19Darling Wind Farm
The Darling Wind Farm (DWF) is the first independent wind farm in SA. An expected annual 13.2
GigaWatt hours of ‘green electricity’ will be generated by four 1.3MW wind turbines and injected into
the national grid. From Darling it will go to a substation at Atlantis and then into the city’s electrical
network, and be sold to willing buyers at an additional 25c per kWh (ex VAT)16 . DWF plans to add
another six turbines, followed by another ten in the longer-term. Demand for the wind turbines is so
high that the earliest additional wind turbines would be available only by 2008.
Solar Water Heaters (SWH)
SWH use the sun to heat domestic and commercial sector water, and can reduce the city’s electricity
requirements. There are an estimated 10 000 solar water heaters in Cape Town (SEA 2007).
Assuming an average collector size of 2.8 m², the average annual power saved by solar water heating
is approximately 4.2MW th17.
Average unit retail price: 38c/kWh (The average capital cost of R15 000 is offset by a 2 600kWh/year
saving over a lifespan of 15 years).
Photovoltaic (PV)
There is no information on the number of photovoltaic panels in Cape Town, but this is assumed to be
very low due to the very high initial capital cost. PV systems have a lifespan of 15 to 35 years, with
very little maintenance. Costs are likely to drop, making the technology more affordable.
Average unit retail price: 193c/kWh (Based on R130 000 for a 2.5kW system, giving 5 hours of peak
wattage per day, with15% wire and inverter losses and a lifespan of 25 years).
4.1.2 Liquid fuels
Oil is South Africa’s second largest primary energy source and most is imported as crude oil. SA has
five oil refineries, including Calref in Cape Town with a capacity of 100 000 barrels per day and a
current replacement cost of about $1-billion18. Calref provides Cape Town with most of its liquid fuel. If
demand exceeds supply, extra refined fuel is imported from Singapore and Bahrain. The amount of
refined fuel imported is expected to grow in the future as demand for fuel in SA exceeds refining
capacity19. Calref produces petrol, diesel, paraffin, jet fuel and LPG.
16
CCT Electricity Tariff tables
17
Each square meter produces 150W of thermal power on average over 1 year in CT (Cape Town area = 2 017
kWh m-2 year , Efficiency 65%).
18
State of Energy Report for Cape Town, 2003
19
SAPIA Annual Report, 2005
20Fuel prices, 2007
Current Price (May 2007)
Petrol (Retail) 677c/l
Diesel (Wholesale) 606.5c/l
Paraffin (Wholesale) 456.2c/l
LPG (Retail) R16/kg
Jet Fuel (Retail) 579c/l
Source: SAPIA, Eddlesgas, Private aeroplane company
Anticipated future shortfalls in liquid fuel refining capacity in SA
Source: SAPIA Annual Report 2005
SA’s Sources of Oil over 10 years
21Country of origin Thousands of metric tons
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Iran 11014 9301 9238 6757 5824 7414 5718 6239 7012 8166
Saudi Arabia 1114 384 1810 3346 8042 8545 7219 7364 9521 8137
South Africa - - 403 649 493 689 524 791 570 1482
Nigeria - - 971 287 1286 842 1246 3615 3450 1313
Angola 122 910 127 - 389 48 382 138 116 654
Yemen 353 299 216 354 - 140 475 62 179 338
Gabon - - - - - - 373 - - 191
UAE 520 765 387 897 300 758 734 70 106 109
Cameroon - - - - - - - - 271 106
Egypt 1024 1046 343 - - 292 - - 135 -
Kuwait 577 2863 2589 2094 833 858 431 342 - -
Russia - - 255 305 - - - 267 - -
Oman 120 131 91 313 71 - 610 8 - -
Iraq - - 943 413 137 - 343 - - -
Mexico - - 589 633 244 - - - - -
U.K. 1394 541 327 - 18 - - - - -
Qatar - - 137345 - 76130 - - -
Venezuela - - 127787 - - - - - -
Other 197186 - - - - - - - -
Total 16435 16426 18553 17180 17637 19662 18185 18896 21360 20496
Source: SAPIA Annual Report 2005
4.1.3 Coal
Coal is transported directly from coal mines in northern SA to Cape Town and then distributed by five
companies. Transporting coal by rail is unreliable and slow, (1 week delivery time) so distributors
prefer road transport (2 days delivery time)20. Coal currently wholesales around R700 per ton
excluding VAT, depending on the grade (B or C) and transport costs21.
4.1.4 Wood
Very little data is available on wood, but it is assumed that most wood is locally sourced.
4.2 Energy demand
Increased electricity demand (2002-07)
Electricity into CCT
Year System
02/03 9,114,271,393
03/04 9,489,275,805
04/05 9,767,333,152
05/06 9,972,008,301
06/07 10,000,000,000
Source: CCT Electricity Dept
Electricity demand has been increasing steadily in the CCT distribution area.
20
Imibono Fuel, Personal Communication, June 2007
21
Imibono Fuel, Personal Communication, June 2007
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