Integrated Analysis Energy Baseline Report

Trustees: EG Annecke, ADH Enthoven, EA Pieterse, G Goven, L Boya, R Shabodien

Trust Reg. No.: IT3011/99. Vat Reg. No: 4110198795 P O Box 162, Lynedoch, 7603. Tel: 021 881 3196. Fax: 021 881 3294

R310, Lynedoch, Stellenbosch, South Africa NPO reg no: 051-245-NPO

Integrated Analysis

Energy Baseline Report

Submitted by

The Sustainability Institute, Lynedoch, South Africa

E-Systems, Holland

under UNF-funded project,

“Integrated Resources Management for Urban Development”

(UNDP Project No. 00038512)

Integrated Analysis Energy Baseline Report: SI UNDP Cape Town Project v: Final Draft 18-Jul-07, p. i

Acknowledgements

Andrew Janisch from Sustainable Energy Africa for report compilation

Barry Coetzee from the City of Cape Town for information on policy and other legislative issues

Brian Jones from the City of Cape Town for information and workshop inputs

Shirene Rosenberg from the City of Cape Town for information, and report review

Wouter Roggen from the City of Cape Town for information, and report review

Craig Haskins from the City of Cape Town for information, and report review

Integrated Analysis Energy Baseline Report: SI UNDP Cape Town Project v: Final Draft 18-Jul-07, p. ii

ii

EXECUTIVE SUMMARY

This report has five areas of focus.

1. A listing of all the existing legislation, regulatory and institutional bodies, policies, strategies

and studies relating to energy and future energy planning.

The South African energy market is highly regulated. There are several Acts dealing with energy

issues, which are accompanied by relevant government bodies to uphold them. The three major

energy sources in South Africa – electricity, petrol and diesel - are regulated, along with paraffin which

is regulated and VAT free as a poverty alleviation measure. Nuclear energy and fuel and gas pipelines

are also regulated.

Both the City of Cape Town and the Western Cape provincial government have strategies in place to

move the city and province onto a more sustainable path. Some studies have been made to determine

the future of energy use in Cape Town and the Western Cape, and scenarios showing the benefits of

energy efficiency and renewable energy interventions have been developed.

Athough there are no tax incentives for energy efficiency and renewable energy, energy incentive

options such as subsidy schemes from Eskom and the Department of Minerals and Energy, and

carbon credits are available.

2. A baseline energy analysis of Cape Town, determining as accurately as possible the current

status quo of energy consumption in the City, and associated greenhouse gas emissions.

The results of this study showed that electricity (29%), petrol (28%) and diesel (18%) are Cape Town‟s

chief energy sources, with all remaining sources – paraffin (3%), jet fuel (9%), LPG (2%), HFO (3%),

coal (7%) and wood (1%) making up the last 25%. Due to the inefficiency of coal power stations,

electricity produces 59% of all the CO2 generated from Cape Towns energy use. The analysis also

looked at current user needs per sector, and determined their consumption figures in as

disaggregated a form as possible.

3. Determining what current power generation (fossil, nuclear and renewable) and energy

efficiency technologies are available, and what their potential impact could be on Cape Town in

the future.

The Western Cape has the potential to produce nearly 7500MW of renewable energy, the majority

being wind, solar thermal, pumped storage and ocean generated. Energy efficiency measures such as

Integrated Analysis Energy Baseline Report: SI UNDP Cape Town Project v: Final Draft 18-Jul-07, p. iii

iii

solar water heaters, efficient lighting, ceilings in low income houses and efficient use of HVAC can

create a cumulative saving of nearly 15 TWh in the next 20 years if targets set by the City of Cape

Town are met. A 10% modal shift in transport in the city from private to public modes by 2020 will

create a cumulative energy saving of 150 million GJ.

4. Establishing the financial picture behind the flow of energy in and out of Cape Town.

Getting detailed financial information out of Eskom and the local Caltex refinery was not possible.

They are not obliged for competitive reasons to disclose any details of their operations to the general

public. Only financial data coming from the regulation of petrol, diesel and paraffin could be

determined. Generalised information from Eskom‟s and SAPIA‟s annual reports assisted in getting a

clearer picture of overall profit margins. The City of Cape Town‟s electricity department provided all

the information requested, and a thorough breakdown of their operation was achieved.

5. Determining the challenges, constraints and future plans for energy development in the

Western Cape.

What is apparent from all the operations studied is that energy is big business, and a huge creator of

wealth and employment in Cape Town. Indications are that demand for all the major energy sources

is set to increase in the future, so the industry is unlikely to change its current unsustainable path of

using fossil fuels and enriched uranium for energy in the immediate future.

There is however a real opportunity for renewable energy to be developed in the Western Cape in the

next few years, and these opportunities should be supported in every way possible by government at

all levels. The greatest challenge for renewable energy is to develop on site energy storage solutions,

to make renewable energy compete with base load systems like coal and nuclear. The other challenge

is to make the cost of producing renewable energy comparable to those of traditional energy sources.

With increased expenses for new power stations which have to be built, Eskom is expected to raise

their tariffs steeply in the future, opening the door for a more competitive renewable energy market.

Integrated Analysis Energy Baseline Report: SI UNDP Cape Town Project v: Final Draft 18-Jul-07, p. 2

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Table of Contents

EXECUTIVE SUMMARY .......................................................................................................... II

1. INTRODUCTION .................................................................................................................. 5

2. POLICY AND KNOWLEDGE CONTEXT ............................................................................. 5

2.1 Relevant Documents, Studies, Legislation, Information ..................................................................................... 5 2.1.1 National Policy and Legislative Context ...................................................................................................................... 5 2.1.2 Provincial Government ................................................................................................................................................ 8 2.1.3 Local Government ....................................................................................................................................................... 8

2.2 Summary of Cape Town’s Energy System .............................................................................................................. 8 2.2.1 REDs .......................................................................................................................................................................... 10 2.2.2 The Western Cape Energy Crisis ............................................................................................................................... 10 2.2.3 The Unsustainability of Cape Town’s Energy System............................................................................................... 12

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 Institutions Governing Energy Regulation, Infrastructure Development and Distribution .............. 16

4. CAPE TOWN’S ENERGY SUPPLY AND DEMAND .......................................................... 19

4.1 Sources of Energy Supply in Cape Town .............................................................................................................. 19 4.1.1 Electricity ................................................................................................................................................................... 19 4.1.2 Liquid Fuels ............................................................................................................................................................... 22 4.1.3 Coal ............................................................................................................................................................................ 23 4.1.4 Wood .......................................................................................................................................................................... 23

4.2 Energy Demand ............................................................................................................................................................ 23 4.2.1 Residential.................................................................................................................................................................. 24 Source: CCT Electricity Dept, SAPIA, CTSOER 2003 ....................................................................................................... 24 4.2.2 Transport .................................................................................................................................................................... 24 4.2.3 Commerce and Industry ............................................................................................................................................. 25 4.2.4 Public Sector .............................................................................................................................................................. 25

4.3 Supply distribution ...................................................................................................................................................... 26 4.3.1 Electricity ................................................................................................................................................................... 26 4.3.2 Petrol and Diesel ........................................................................................................................................................ 27 4.3.3 Paraffin ....................................................................................................................................................................... 28 4.3.4 Liquified Petroleum Gas (LPG) ................................................................................................................................. 28 4.3.5 Jet Fuel ....................................................................................................................................................................... 28 4.3.6 Coal ............................................................................................................................................................................ 28 4.3.7 Wood .......................................................................................................................................................................... 29


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4.4 Nuclear Energy ............................................................................................................................................................. 29 4.4.1 PBMR ........................................................................................................................................................................ 29 4.4.2 PWR ........................................................................................................................................................................... 29 4.4.3 Koeberg’s Nuclear Waste Disposal Plan ................................................................................................................... 30

4.5 Users and Needs .......................................................................................................................................................... 31 4.5.1 Cape Town Summary................................................................................................................................................. 31 4.5.2 City of Cape Town Supply Area: ............................................................................................................................... 31 4.5.3 ESKOM Supply Area for CCT .................................................................................................................................. 33

4.6 Average household consumption ............................................................................................................................ 34

4.7 Average Non Residential Consumption ................................................................................................................. 36

4.8 Seasonal and daily load profiles .............................................................................................................................. 37

4.9 GHG Emissions in CT ................................................................................................................................................. 41

4.10 Demand Side Management ...................................................................................................................................... 42

5. TECHNOLOGICAL INTERVENTIONS ............................................................................... 43

5.1 Existing supply and generation technologies ...................................................................................................... 43

5.2 Current research on alternatives in W Cape and Energy Saving Potential .................................................. 43

5.3 Actual savings from EE interventions - key technologies ................................................................................ 44 5.3.1Solar water heaters (SWH) ......................................................................................................................................... 45 5.3.2 Efficient Lighting ....................................................................................................................................................... 45 5.3.3 Ceilings on Houses .................................................................................................................................................... 46 5.3.4Efficient HVAC .......................................................................................................................................................... 46 5.3.5 Transport Modal Shift ................................................................................................................................................ 47 5.3.6 Total Savings ............................................................................................................................................................. 47

Source: SEA:2007 ............................................................................................................................................................... 48

5.4 Feed in tariffs ................................................................................................................................................................ 48

5.5 Overview of environmental impacts of current technologies .......................................................................... 49

6. FINANCIAL ASPECTS ....................................................................................................... 50

6.1 Quantification and Analysis of electricity flow in financial terms ................................................................... 50 6.1.1 City of Cape Town Electricity Energy and Cash Flow (2006-2007) ......................................................................... 50 6.1.2 Eskom Controlled Electricity Energy and Cash Flow (2006-2007) ........................................................................... 53

6.2 Quantification of liquid fuel flow in financial terms ............................................................................................ 53 6.2.1 Petrol .......................................................................................................................................................................... 55 Source: SAPIA Annual Report 20056.2.2 Diesel ................................................................................................................ 55 6.2.2 Diesel ......................................................................................................................................................................... 56 6.2.3 Paraffin ....................................................................................................................................................................... 56 6.2.4 Jet Fuel ....................................................................................................................................................................... 57 6.2.5 LPG + HFO ................................................................................................................................................................ 57

6.3 Billing systems used by Eskom & municipality ................................................................................................... 58


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6.3.1 City of Cape Town Billing System ............................................................................................................................ 58 6.3.2 Eskom Billing System ................................................................................................................................................ 60 6.3.3 Comparison of Eskom and CCT tariffs based on average consumption figures: ....................................................... 61

6.4 Analysis of margins made by municipality and Eskom ..................................................................................... 62 6.4.1 City of Cape Town ..................................................................................................................................................... 62 6.4.2 Eskom ........................................................................................................................................................................ 62

6.5 Capital Budgets ............................................................................................................................................................ 63 6.5.1 CCT Capital Budget ................................................................................................................................................... 63 6.5.2 Eskom Capital Budget ............................................................................................................................................... 63

6.6 Breakdown of operating and maintenance ........................................................................................................... 64 6.6.1 CCT ............................................................................................................................................................................ 64 6.6.2 Eskom ........................................................................................................................................................................ 66

6.7 Aggregate of all flows of energy payments ........................................................................................................... 67 6.7.1 Electricity (June 2006- July 2007) ............................................................................................................................. 67 6.7.2 Liquid Fuels (2006) .................................................................................................................................................... 68

7. CHALLENGES, CONSTRAINTS AND FUTURE PLANS .................................................. 68

7.1 Ten year outlook – constraints and opportunities .............................................................................................. 68 7.1.1 Electricity ................................................................................................................................................................... 68 7.1.2 Liquid Fuels ............................................................................................................................................................... 69 7.1.3 Coal ............................................................................................................................................................................ 70

7.2 What future plans are envisaged, and how are they likely to shape sustainable outcomes positively or negatively ......................................................................................................................................................................... 70

7.2.1 Electricity ................................................................................................................................................................... 70 7.2.2 Liquid Fuels ............................................................................................................................................................... 71

8. CONCLUSION .................................................................................................................... 71

BIBLIOGRAPHY .................................................................................................................... 73


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1. Introduction This report is an effort to better understand the flow of energy within Cape Town and the financial

interactions which occur in parallel with this. The focus has mainly fallen on electricity supply and

distribution and liquid fuels supply and distribution. While other energy sources such as coal and wood

are considered, detailed and well sourced data is difficult to obtain in these areas.

By understanding the status quo of Cape Town‟s energy picture and its accompanying financial side, it

is envisaged that it will empower planners to make more informed decisions about future sustainable

interventions in the city.

Energy will be considered from the supply side right through to the end user where possible, giving a

baseline energy summary Cape Town at present. Further insight will given into the electricity crisis in

the Western Cape and the current progress of the Regional Electricity Distributers (REDs), as well as

to why Cape Town‟s current energy profile is unsustainable.

An analysis will be made of currently available renewable energy and energy efficiency technologies

and the impact they could have on future energy use in Cape Town.

The financial aspect of the Cape Town‟s current energy flow will then be captured at all levels of

payment where possible from supply to end user.

Lastly a brief analysis of future energy plans for Cape Town will be made, and conclusions drawn.

2. Policy and knowledge context

2.1 Relevant Documents, Studies, Legislation, Information

2.1.1 National Policy and Legislative Context

Before 1994, as a response by the National Party Government to sanctions imposed by the

international community, the Energy Policy of South Africa was driven by social security, self-

sufficiency and secrecy. This resulted in an over-reliance on dirty, inefficient fuels, and inadequate

supply of affordable and safe fuels to millions of poor households. The current policy and regulatory

environment represents a significant change in direction, with substantial focus on improving access to


6

energy and participation in energy sector operation by previously disadvantaged sectors of society.

While the environmental sustainability theme clearly has greater focus than previously, it still is far

from a central priority.

Energy White Paper of 1998

The Energy White Paper of 1998 aims to increase access to affordable energy services, improve

energy governance, manage energy-related environmental impacts, and secure supply through

diversity. Amongst the overarching objectives are: Increasing access to affordable energy services;

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; reregulation in the liquid fuels industry to allow unrestricted market

access; and managing energy-related environmental impacts. In general, the policy enforces a move

to opening markets, promoting export industries, restructuring government assets, and re-regulating

the energy industry.

Integrated Resource Planning

The White Paper advocates use of the Integrated Resource Planning (IRP) tool to guide strategic

decision making for all substantial new investments in energy infrastructure. Among its main functions,

IRP supports demand-side needs and options being considered as well as supply-side options and

includes social and environmental factors and externalities in the assessment of the way forward. In

the case of Cape Town, the Electricity Department has produced a local IRP for the electricity sector

in the metro area, which has been approved by Council.

Municipal Systems Act No 32 of 2000

Section 23 of the Municipal Systems Act No 32 of 2000 requires municipalities to produce integrated

development plans for the medium-term development of their municipal areas to meet the needs of

their communities. The Act directs municipalities to provide sustainable services to their communities,

promoting 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 open the market to

opportunities for renewable production. In a recently released draft White Paper on „Renewable

Energy and Clean Energy Development‟, government recognises the important role of renewables in

the long-term sustainability of South Africa‟s energy profile, and sets a ten-year target of increasing

the use of renewable energy in final energy consumption. The purpose of the policy “is to set out


7

Governments‟ principles, goals, and objectives for renewable energy. It furthermore commits

Government to a number of actions to ensure that renewable energy becomes a significant part of its

energy portfolio over the next 10 years.” However, in spite of the clear and promising purpose

statement, the draft document provides little specific direction on promoting different renewables

sources, and as it stands may be of limited help in 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 version of the policy document is expected soon, and hopefully will provide clearer

guidance of how the very sound „purpose statement‟ is to be translated into reality.

National Energy Regulator Act of 2004

This Act mandates NERSA to regulate South Africa's electricity, piped gas and petroleum industries

and to collect levies from people holding title to gas and petroleum. The idea behind a single regulator

for the three industries was to improve efficiency and cut costs. It is also expected to boost private

sector participation in the energy sector.

As an economic regulator, NERSA will ensure a level playing field and prevent abuse by monopolies.

While legislation exists 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.

Petroleum Products Amendment Act 2003, Act 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; and

Creates employment opportunities and small businesses in the petroleum sector.

Gas Act of 2001

Provides a regulatory framework for storage, transmission, distribution and trading of gas. Key issues

in the Gas Bill are the establishment of a regulator and access to transmission by third parties.

Central Energy Fund, 1977 (Act No. 38 of 1977), as amended

Empowerment Charter of November 2000


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2.1.2 Provincial Government

Sustainable Energy Strategy for the Western Cape, May 2007

A document which highlights areas where sustainable interventions are possible in the Western Cape,

and which develops action plans around how to achieve them.

Renewable Energy Plan of Action for the Western Cape, 2007

A detailed analysis of the potential for renewable energy use in the Western Cape. Several scenarios

from conservative to aggressive renewable use are considered, and a renewable energy strategy is

suggested.

2.1.3 Local Government

State of Energy Report for Cape Town, 2003

A comprehensive baseline summary of energy supply and demand per sector in Cape Town. This

report is currently being updated, and should be available in July 2007.

City of Cape Town (2005) Cape Town Energy and Climate Change Strategy

Developing from the State of Energy report, this document sets sustainable goals on the supply side

and per sector on the demand side, and lists short term and long term measures to be taken in order

to achieve these goals. It then sets targets in order to achieve these

Cape Town Energy Futures Report, January 2005

A study which establishes a demand baseline for the city and projects Cape Town‟s energy

consumption for the future, based on certain policies.

City of Cape Town Draft Solar Water Heater Bylaw, June 2007

An effort by the CCT to introduce legislation requiring all new houses above 100m2 to be fitted with

solar water heaters.

2.2 Summary of Cape Town’s Energy System

Cape Town, like all South African cities has a complex and intense energy picture. It is impossible to

place an energy „fence‟ around Cape Town and analyse the city in isolation. This is due to the fact that

most of the city‟s energy supply comes from external sources. The energy flow is therefore not city

based, but national (in the case of electricity, coal and liquid fuels supply) and international (liquid

fuels, enriched uranium).


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Cape Town‟s energy use profile for 2006 shows that electricity (29%), petrol (28%) and diesel (18%)

are the chief energy sources, with all remaining sources – paraffin, jet fuel, LPG, HFO, coal and wood

making up 25%. While good data exists for electricity and liquid fuels, it is very difficult to determine

fuel use in the unregulated coal market, as well as the use of biomass, which in Cape Town is

predominantly wood1.

Summary of Cape Town’s Energy Consumption (2006)

User Group

Electricity Petrol Diesel Heavy

Furnace Oil

Paraffin Jet Fuel LPG Coal Wood Total Total %

GJ GJ GJ GJ GJ GJ GJ GJ GJ GJ %

Households 17969125 - - - 2586691 - 546992 43400 359100 21505308 14%

Industry & Commerce

24755476 - 13160174 4696351 443648 - 2718138 10788000 561317 57123104 38%

Local Authority

1747292 118729 234394 - - - - - - 2100415 1%

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, a mix of coal, nuclear, hydro and gas

turbine power stations. The City of Cape Town provides some electricity from its Steenbras pumped

storage scheme. An independent power producer (IPP), the Darling Wind Farm will shortly be selling

electricity to Cape Town from its wind driven power station in Darling.

Liquid fuels (petrol, diesel, HFO, Jet Fuel, Paraffin, LPG) are largely supplied by the only refinery in

Cape Town – Calref2. Cape Town‟s current average demand for refined liquid fuels stands at 46213

barrels per day3. Calref has the capacity to process 100000 barrels per day4. The balance of refined

product is distributed around the province, and extra product (mostly diesel) is exported.

Very little data exists on coal and wood consumption. Coal sold to industry is monitored by the CCT

but no figures are available for domestic consumption. Although studies conducted are by no means

1 State of Energy Report for Cape Town, SEA 2003

2 State of Energy Report for Cape Town, SEA 2003

3 SAPIA fuel sales data for 2006, SAPIA 2007

4 SAPIA Annual Report 2005


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comprehensive, the indication is that the contribution of wood and coal in households to Cape Town‟s

energy picture is minimal in comparison to the other energy sources5.

2.2.1 REDs6

The distribution of electricity in South Africa is currently receiving national attention. The electricity

distribution industry is presently highly fragmented. This has resulted in inefficiencies, disparities in

tariffs, unequal treatment of customers, inadequate maintenance of networks, the inability to capitalize

on economies of scale and limited ability to introduce competition.

The government has called for the electricity distribution industry to be consolidated, with Eskom

distribution and 187 municipal electricity utilities being amalgamated into six Regional Electricity

Distributors (REDs). However, prior to this decision (taken by cabinet in October 2006), the plan was

that the RED system would be metro based. To this end RED1 was formed in Cape Town in July

2005, with the mandate to be the electricity service provider for the entire jurisdictional municipal area

served by the City of Cape Town and the entire jurisdictional municipal area served by Eskom.

The cabinet decision calling for the „wall to wall‟ REDs went beyond the mandate of RED1, and the

City of Cape Town requested that NERSA revoke RED1‟s distribution licence, and that the status quo

prior to RED1 be re-established. This was granted and RED1 was closed down. The process of

establishing the six „wall-to-wall‟ REDs is currently being undertaken, and is being managed by EDI

Holdings (Pty) Limited, a company set up by the Department of Minerals and Energy.

The process has received some resistance from municipalities, as they have argued that electricity

distribution is one of their key functions in terms of the constitution. However, the Municipal Systems

Act of 2000 does provide that the distribution function may be through an internal or external

mechanism. Electricity is also a large source of income for municipalities, and they are not eager to

lose this revenue stream.

2.2.2 The Western Cape Energy Crisis

Problems do occur in any electricity generation, transmission and distribution network. These need to

be managed in such a way that the supply to the customer is as unaffected as possible. Worldwide

5 Cape Town Energy Futures Report, 2005

6 Details taken from the Report to the minerals and energy portfolio committee, Wednesday 28 February

2007


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accepted reserve margins to accommodate supply problems stand between 15-30%. This means that

a 4300MW peak load system like the Western Cape‟s should ideally have a supply capacity 4950MW

or greater to ensure an uninterruptible supply.

Current 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 5139MW

Sources: Eskom, CCT Electricity Dept, Andrew Kenny Presentation (Mar 2006)

This capacity shows a reserve margin of just under 15%. However, the Western Cape supply is

handicapped by the size of Koeberg‟s reactor units. Each unit (900MW) constitutes 18% of the total

generation capacity for the Western Cape. Should one of its units be shut down, the supply to the

Western Cape will fall below peak demand requirements, and load shedding will most likely have to

occur to avoid a system overload.

This vulnerability in the supply system was the cause of the blackouts and load shedding that occurred

in 2005 and 2006. Whether the transmission lines trip (11 November 2005), or a Koeberg unit needs

to be shut down (16 November 2005, 23 November 2005, 25 December 2005, 18-19 February 2006,

28 February 2006)7 the Western Cape to a greater or lesser degree will be affected. Eskom Demand

Side Management (DSM) has pursued an aggressive interventions approach to reduce the amount of

electricity consumed as well as to reduce the peak load levels. 5.3 million CFLs and 140 thousand

geyser blankets were distributed, resulting in a 500-700MW saving in the winter of 20068.

Although the situation is currently vulnerable, the introduction of an extra 1050MW in the form of 2

Open cycle gas turbines in June will do much to avert crises like those that occurred in 2005 and

2006, for the time being.

7 National Nuclear Regulator Annual Report 2005/2006

8 Eskom DSM website, 2007


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2.2.3 The Unsustainability of Cape Town’s Energy System

Electricity supply system

The vast majority of Cape Town‟s electricity supply is a combination of „dirty‟ power from Eskom‟s

fossil fuel burning power stations, and from the nuclear facility at Koeberg. Coal and liquid fuels are

dwindling resources, and their use in power stations is a major contributer to South Africa‟s

greenhouse gas emissions. Nuclear power, while being marketed as „green‟ power is far from it.

Uranium is not a renewable resource, and current estimates predict that high-grade lower-cost

uranium supplies will be exhausted by 2050, and that is not taking into account the rapid expansion of

nuclear power currently being embarked on worldwide9. Besides this, a substantial amount of energy

is used and CO2 produced in the mining, extraction and production of enriched uranium10 (although

these CO2 levels are some 25-30 times less per energy unit generated by a coal power station).

There is also the uncomfortable issue of taking responsibility of a waste product that will be highly

radioactive for at least 20000 years. The Department of Public Enterprises has identified that nuclear

power will play a big role in the electricity supply of the future. Eskom is looking to construct further

nuclear capacity in the form of Pebble Bed reactors in the vicinity of Koeberg in the short term.

Construction of the first one is planned for 2009. In the medium term, a further pressurized water

reactor (PWR) nuclear power station like Koeberg is also planned for the Western Cape.

While the electricity system is essential to the functioning of Cape Town, the sustainable challenges

are

i) to improve energy efficiency in all spheres of energy use.

ii) to reduce the amount of „dirty‟ coal generated power used

iii) increase the use of cleaner fuel power stations

iv) increase the contribution of renewable energies to the grid system.

There is a real opportunity to increase the renewable energy component of Cape Town‟s electricity

supply. Combinations of wind, solar and tidal technologies can contribute at least 10% to the city‟s

electricity mix11. This is reflected in the City of Cape Town‟s Energy and Climate Change Strategy.

Eskom does not seem to be taking these technologies too seriously and is pushing forward with plans

for more coal, gas and nuclear power stations in the future. The wind farm at Darling is currently the

9 Renewable City, Peter Droege 2006

10 Calculations using Uranium Calculator: World Information Service on Energy – Uranium Project (www.wise-

uranium.org) 11

CCT Draft Energy and Climate Change Strategy


13

only major contributer here. Photovoltaic (PV) panels are also used on a very small scale by

individuals and companies to reduce their use of grid electricity.

Liquid Fuel

Cape Town is, like all cities, heavily dependent on liquid fuel. This is used mainly for transport,

industrial heating and household cooking and heating. Liquid fuels currently make up 60% of all

energy used in Cape Town.

National figures have shown 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 has grown. Current

figures indicate that this trend looks set to continue into 2007. The highest increase in demand has

been for diesel (7.1% in 2006) and jet fuel (4.1% in 2006).12

Extract from SAPIA 2005 Annual Report showing national consumption of liquid fuel products. It is

assumed Cape Town’s consumption pattern is similar (but not exact) to the national picture.

Source: SAPIA Annual Report 2005

12

SAPIA Annual Report 2005, www.sapia.org.za


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Alternative and more sustainable sources of fuel are being investigated in an attempt to compensate

for this decline. Biodiesel is being pushed as the fuel of the future, but a strong argument against it is

that it will begin to compete with food crops, and may result in farmers choosing to feed into the

biodiesel market for better profits. This could potentially lead to increased food prices and food

shortages.

Solutions need to be found to reduce the amount of fuel use within a city. Huge changes in the

transport infrastructure will be required to achieve this, integrating and modernizing transport in such a

way that there will be a shift in Cape Town‟s transport mode use from private to public in the future.

Paraffin

Paraffin is currently widely used in poor households which have limited or no access to electricity13.

Paraffin poses health hazards by reducing indoor air quality, and by being a major contributer to fires

in poor areas. Paraffin is not subject to VAT, an effort by the government to make energy more

affordable to the poor. Safer and cleaner alternatives to paraffin are LPG and bioethanol gel. Efforts

have been made to change paraffin users over to safer LPG systems, but the barriers that need to be

overcome are the accessibility of gas suppliers, the initial high capital investment of a cylinder and gas

appliance and the perception that gas is not safe. Bioethanol is still a fledgeling 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 well priced as paraffin for it to grow in the low income market.

LPG

The Western Cape accounts for 25% of the country‟s LPG consumption. LPG is a cleaner and safer

technology than paraffin. The price of LPG is currently partially regulated by the 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 the price of using LPG cheaper than using paraffin or electricity, but

this has proved difficult with the substantial increases in the fuel price over the last year, and the fact

that paraffin is VAT free. Although LPG is a more sustainable alternative than electricity and paraffin,

low current reserve and pipeline capacity means that unless major infrastructure changes are brought

about, the industry will not grow significantly in the future.

2.3 Relevant Policy and Planning Frameworks

City of Cape Town’s Draft Energy and Climate Change Strategy, 2005

13

Cowan & Mohlakoana (2004); (Simmonds & Mammon (1996: 75)


15

Developing from the State of Energy report, this document sets sustainable goals on the supply side

and per sector on the demand side, and lists short term and long term measures to be taken in order

to achieve these goals. It then sets targets in order to achieve this.

Sustainable Energy Strategy and Plan of Action for the Western Cape, 2007

This document lays out a strategy with targets and action plans, with the aim to achieve a more

sustainable province in the next 10 to 15 years.

Renewable Energy Plan of Action for the Western Cape, 2007

A detailed study of the potential for renewable energy projects in the Western Cape. It considers five

potential scenarios ranging from very conservative to very aggressive and lays out the sustainable

implications of each.

2.3.1 Planning projections

The City of Cape Town‟s 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 the 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. The challenge

facing these departments is to regenerate areas where sprawl has occurred and to optimize the

spatial development of Cape Town. To this end the city has developed a draft Metropolitan Spatial

Development Framework. However this has not been formally adopted yet.

2.3.2 Renewable Energy Incentives

There are currently very few incentives for renewable energy developers. REFSO, a body set up by

the DME offers funding of R250 per kW of generation potential for renewable energy projects

undertaken. This is not going to make a great impact on renewable development, but it does create

the message that the DME supports renewable energy initiatives.


16

Eskom through its Demand Side Management (DSM) branch has created an incentive scheme for

people who wish to install a solar water heater. The incentive ranges from R2000 – R4000 per system,

and will amount to roughly a 15% subsidy. This may not be sufficient to swing people over to solar

water heater use, but it is considered a positive step in the right direction.

Projects which can be proved to be carbon savers are in line 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 sustainable agenda, or through the more

formal Cleaner Development Mechanism.

3. Regulatory and Institutional Environment

3.1 Overview

Only certain areas of the energy sector are regulated by government. These are electricity, petrol,

diesel, paraffin, fuel pipelines and nuclear.

The National Energy Regulator (NERSA) awards licenses for the generation, transmission and

distribution of electricity in South Africa. It also regulates gas and fuel pipelines throughout the country.

The National Nuclear Regulator grants licenses for the construction of any nuclear installation or

vessel in the country.

The prices of petrol, diesel and paraffin are regulated by the Department of Minerals and Energy

(DME) based on a formula determined by the basic fuel price (BFP). These prices are recalculated

and adjusted monthly. Petrol is regulated to retail price, while diesel and paraffin are regulated to

wholesale price. Paraffin is further regulated in that it is VAT exempt.

No regulation currently exists with regards to LPG, jet fuel, heavy fuel oil, coal or wood.

3.2 Key Institutions Governing Energy Regulation, Infrastructure Development and Distribution

National Energy Regulator of South Africa

The National Energy Regulator Act of 2004 (Act No. 40 of 2004), mandates NERSA (National

Energy Regulator of South Africa) to undertake the functions of the Gas Regulator as set out in the


17

Gas Act of 2001, the Petroleum Pipelines Regulatory Authority as set out in the Petroleum Pipelines

Act of 2003 and the National Electricity Regulator as set out in the Electricity Act of 1987 as

amended.

The idea behind a single regulator for the three industries was to improve efficiency and cut costs. It is

also expected to boost private sector participation in the energy sector. As an economic regulator,

NERSA works to ensure a level playing field and prevent abuse by monopolies. While legislation

exists 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.

NERSA‟s mandate is further derived from written government policies as well as Regulations issued

by the Minister of Minerals and Energy. NERSA is expected to proactively take necessary regulatory

actions in anticipation of and in response to the changing circumstances in the energy industry.

National Nuclear Regulator (NNR)14

The NNR is the national institution established by the National Nuclear Regulator Act, Act No 47 of

1999, for the protection of the public, property and environment against nuclear damage. The

Regulator is governed and controlled in accordance to this Act by a Board of Directors and is operated

by an Executive comprising the Chief Executive Officer (CEO) and the staff of the NNR. The Minister

of Minerals and Energy is the Executive Authority responsible for the NNR and appoints the NNR

Board. The Board consists of up to thirteen directors which include a representative from organized

labour, organized business, one person representing communities that might be affected by nuclear

activities, an official of the Department of Minerals and Energy, and the Department of Environment

Affairs and Tourism; and no more than seven other Directors. The Minister may appoint two Directors

to serve as alternates in the absence of Directors representing the Department of Minerals and Energy

and the Department of Environmental Affairs and Tourism. The Chief Executive Officer (CEO) is a

member of the Board. The Directors of the Board of the NNR are appointed on a part-time basis.

The Minister appoints the CEO after consultation with the Board and the CEO is responsible for

appointing the staff of the NNR as directed by the Board of Directors. In order to carry out the mandate

of the NNR as it is set out in the NNR Act, the NNR staff is structured into the following five divisions:

the Power Reactor Division; the Nuclear Technology and Natural Sources Division; the Assessment

Group; the Regulatory Strategy Development Division; and Corporate Support Services. Within these

14

NNR Annual Report 2005/6


18

divisions, staff of the NNR carries out technical assessment, authorization and compliance assurance

functions and provide the necessary infrastructural support for the effective regulation of safety,

including nuclear, waste, radiation and transport safety.

Department of Minerals and Energy

The Department of Minerals and Energy (DME) is responsible for the administration of laws and

government policies. Under the apartheid government the involvement of state-owned institutions in

the liquid fuels sector was strong for security reasons. In recent years, the regulatory and policy

environment has been substantially reformed and these institutions have been rationalised and

redirected according to the current priorities of government.

PetroSA

Petroleum Oil and Gas Corporation of South Africa (PetroSA), a new state oil company, was formed

largely from a merger with Soekor and Mossgas. It owns and operates all of South Africa's

government-owned oil and gas holdings and is mandated to explore and develop South Africa's

natural resources of oil and gas 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 the sub-Saharan African region.

This includes oil, gas, electrical power, solar energy, low-smoke fuels, biomass, wind and renewable

energy sources. The CEF also manages the operation and development of the oil and gas assets and

operations of the South African government.

The CEF, through its integrated oil company subsidiary, PetroSA, is involved in the exploration for oil

and gas onshore and offshore in South Africa and the rest of Africa. It is also involved in the

production of environmentally friendly petroleum fuels and petrochemical products from gas and

condensate at its synfuels refinery outside Mossel Bay and the management of oil-storage facilities.

The Strategic Fuel Fund manages South Africa's strategic crude oil reserves.

Oil Pollution Control SA, a CEF subsidiary company, provides oil prevention, control and clean-up

services, mainly in South African ports and coastal areas, in terms of South Africa's National

Environmental Management Act 1998, Act 107 of 1998.

Through its subsidiary, the Petroleum Agency of South Africa (PASA), the CEF manages the

promotion and licensing of oil and gas exploration, development and production in South Africa and

the coastal areas offshore, as part of creating a viable upstream oil industry in the country.

http://www.cef.org.za/


19

CEF subsidiary iGas acts as the official agent of the government for the development of the

hydrocarbon gas industry, comprising liquefied natural gas and LPG in South Africa.

Industry associations

The South African Petroleum Industries Association (SAPIA) was formed to promote 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 the black oil companies – the

African Mineral and Energy Forum (AMEF).

The Paraffin Safety Association of South Africa (PASASA) is an oil company funded organisation

which aims to promote the safety of paraffin use in households.

The Liquified Petroleum Gas Association of South Africa (LPGSA) provides training and

accreditation around LPG safety issues, undertakes LPG marketing, and represents the LPG industry

to government where necessary.

Black Economic Empowerment

Greater black participation in the South African oil industry is an important factor for the new

government of national unity. The liquid fuels sub-sector has had specific policy guidance in this

respect. The Energy Policy White Paper sets a goal of 25% participation by black groups in all facets

of the industry. In November 2000, all oil companies signed an Empowerment Charter, which defines

how the 25% participation is to be measured. Many companies have already made significant

progress in this regard.

4. Cape Town’s Energy Supply and Demand

4.1 Sources of Energy Supply in Cape Town

4.1.1 Electricity

Eskom

Eskom provides the majority of Cape Town with electricity sourced directly off the national grid. Eskom

controls the generation and transmission of its electricity, but shares the distribution of electricity with

the City of Cape Town. Eskom generation plants in the vicinity of Cape Town include Koeberg nuclear

power station (1800MW net capacity), emergency gas turbines at Acacia (171MW capacity), and the

Palmiet pumped storage scheme for national grid load management (400MW capacity). Electricity

from the national grid comes in the form of a 400kV line which can deliver a maximum of 2600MW to

the Western Cape. Although in theory Koeberg could meet almost all of CCT‟s electricity demand, in

http://www.cef.org.za/Group/igas.htm


20

reality it is merely one of a mix of generation plants feeding into the national electricity grid. Also,

Koeberg comprises 2x900MW units, one of which is often down for maintenance or other routine

reasons. Koeberg has 18 years of economic life left. Two open cycle gas turbine plants, with a total

capacity of approximately 1050MW capacity are being built at a cost of R3.5bn, in Atlantis and Mossel

Bay. These are liquid-fuel plants which are primarily designed for peaking capacity. Current schedule

indicates that they will be completed before the winter of 2007.

Eskom is currently evaluating the potential of power generation from wind at the Klipheuwel wind farm,

but no major wind farm developments are planned for in the short term.

Average unit retail price:

To distributer: 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 City of Cape Town (CCT) generates very little of its own energy - the vast majority is purchased

from Eskom.

Steenbras Pumped Storage Plant

CCT owns a 160MW pumped storage plant at Steenbras, which pumps water to the Steenbras Dam in

off-peak (cheap electricity) periods, and generates electricity from running the water down again in

peak periods (i.e. hydro generation). Steenbras is used for load management rather than being 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 a net of 20GWh into the Cape Town grid over the last financial year15.

Emergency Gas Turbines

Two gas turbines (40MW capacity each) situated at Roggebaai and Athlone respectively are currently

requiring maintenance and are not in use. The CCT only plans to use these for emergency duty, as

they have a very high running cost16.

Average CCT unit retail price: See table in 5.1 later in report

15

CCT Electricity Sent to System Spreadsheet, 2006 16

Wouter Roggen, CCT, Personal Communications, 17 May 2007


21

Independent Power Producers

Darling Wind Farm

The Darling Wind Farm (DWF) is the first independent wind farm to be built in South Africa. An

expected annual 13.2 GigaWatt hours of Green Electricity from DWF will be generated by four 1.3MW

wind turbines and injected onto the national grid managed by Eskom. From there it will be “wheeled”

through the national grid to a substation at Atlantis where it will be introduced onto the City‟s electrical

network and then sold onward to willing buyers at an additional premium of 25c per kWh (ex VAT)17 .

Darling Wind Farm plans to later add another six wind turbines to the wind farm, followed by another

ten in the longer term, adding that global demand for the wind turbines is so high that the earliest

additional wind turbines would be available only by 2008.

Average unit retail price:

CCT rates + 25c/kWh

Solar Water Heaters

Solar water heaters use the energy of the sun to heat potable water in the domestic and commercial

sector. As such they can be seen as an offset on the city‟s electricity load requirements. There are

estimated to be 10 000 solar water heaters in Cape Town (SEA 2007). Assuming an average collector

size of 2.8 square meters, the average annual power generated from Cape Town‟s current solar water

heating installations is approximately 4.2MW th18.

Average unit retail price: 38c/kWh (Capital cost of R15000 expected to offset 2600kWh/year over

lifespan of 15 years )

PV

No figure exists on the amount of photovoltaic panels currently installed in Cape Town. The figure is

assumed to be low although indications are that the level of public interest in using them is rising.

There is a very high initial capital cost after which they should perform for 15 to 35 years (depending

on the system) with very little maintenance. Indications are that the costs are dropping, making the

technology more affordable.

17

CCT Electricity Tariff tables 18 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%).


22

Average unit retail price: 193c/kWh (Based on R130000 2.5kW system, 5 hours of peak wattage per

day, 15% wire and inverter losses, lifespan of 25 years)

4.1.2 Liquid Fuels

Oil is South Africa‟s second largest primary energy source. The majority is imported, primarily in the

form of crude oil. South Africa has 5 crude oil refineries, of which Calref, the Chevron-owned refinery,

is located in Cape Town. Calref is a complex refinery with a distillation capacity of 100 000 barrels per

day and has a current replacement cost of about $1-billion19. Calref provides Cape Town with the

majority of its liquid fuel. It is unlikely that any more oil refineries will be built in South Africa. Currently

if demand exceeds the refinery‟s capacity, extra refined fuel is imported from refineries in Singapore

and Bahrain. The amount of refined fuel imported is expected to grow in the future as South Africa‟s

demand for fuel exceeds its ability to refine20. Calref produces petrol, diesel, paraffin, jet fuel and LPG.

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

Table showing anticipated future shortfalls in liquid fuel refining capacity in SA


Table showing SA’s Source of Oil over 10 years

19

State of Energy Report for Cape Town, 2003 20

SAPIA Annual Report, 2005


23

Country 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


4.1.3 Coal

Coal is transported directly from the coal mines to Cape Town, and is distributed to industry by 5

companies in Cape Town. Rail transport of coal is unreliable and slow (1 week delivery time), so

preference is shown by the distributers to transport their coal by road (2 days delivery time)21.

Coal currently wholesales around R700 per ton excluding VAT, depending on grade (usually B or C)

and transport costs22.

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

Electricity demand has been increasing steadily in the CCT distribution area.

21

Imibono Fuel, Personal Communication, June 2007 22

Imibono Fuel, Personal Communication, June 2007


24

Year Electricity into CCT

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

4.2.1 Residential

Table Showing Residential Demand in Cape Town (2006/7)

Electricity (CCT): 13,758,225GJ or

3,821,729,250kWh (CCT)

Electricity (Eskom)

4,210,899GJ or

1,169,694,244kWh

Paraffin: 2586691 GJ

LPG: 546992 GJ

Coal: 43400 GJ

Wood: 359100 GJ

Source: CCT Electricity Dept, SAPIA, CTSOER 2003

4.2.2 Transport

Only liquid fuel consumption was considered for transport

Table Showing Transport Consumption in Cape Town (2006)

Petrol Diesel Jet Fuel

Public Transport (non

local Auth's) 82,185 27,620,542

Retail - garages 1,201,510,715 257,908,310

Road Haulage 1,294,982 62,366,370

Transnet 0 8,655,650 178,566,542

Total (l) 1,202,887,882 356,550,872 178,566,542

Energy (GJ) 41,138,766 13,762,864 6,892,669

Source: SAPIA


25

4.2.3 Commerce and Industry

Table Showing Commerce and Industry Demand in Cape Town (2006/7)

Electricity (CoCT): 17,942,730 GJ or 4,984,091,805

kWh

Electricity (Eskom) 8,285,862 GJ or 2,301,628,250

kWh

Liquid Fuel 32,655,261 GJ (See

disaggregated table below)

Coal 10,788,000 GJ

Source: SAPIA, CCT Electricity Dept, CTSOER 2003, Imibino Fuels

Liquid Fuel Consumption in Commerce and Industry (2006)

User Petrol Diesel Jet Fuel HFO Paraffin LPG

Agricultural Co-ops 1012213 3942092 349491

Construction 340081 15257262 577692 76869

Farmers 1089435 5118021 1222300

General Dealers 17514691 132249231 36475959 20439539

Local marine fishing

342168 51026382 222256 29925777 1143358

Mining 1729582 54232911 226294 7246834

Remainder of General Trade

11640689 79111257 230922960 85225597 31390888 105764106

Total (l) 33668859 340937156 231371510 116951366 76683399 126203645

Energy (GJ) 1151475 13160174 7635260 4642969 2821949 3243434

Source: SAPIA consumption figures 2006/2007

4.2.4 Public Sector

Table Showing Public Sector Demand in Cape Town (2006/7)

Electricity (CCT): 383,107,193 kWh

Liquid Fuels: 9,852,136 GJ (see disaggregated table below)

Source: CCT Electricity Dept, SAPIA


26

Liquid Fuel Consumption in the Public Sector (2006)

User Petrol Diesel Jet Fuel

Government 111,876 14,868,801 231,120,516

Local

Authorities 3,471,618 6,072,372

Total (l) 3,583,494 20,941,173 231,120,516

Energy (GJ) 122,555 808,329 8,921,252

Source: SAPIA

4.3 Supply distribution

4.3.1 Electricity

Eskom sells electricity in bulk to the City of Cape Town, who then distributes it. This accounts for

approximately 72.5% of electricity sold in the metro23. The remaining 27.5% is supplied and distributed

by Eskom. It is noteworthy that in terms of domestic users, the split between CCT and Eskom is 60%

to 40%, indicating that Eskom provides electricity to mostly low income and low energy users.

23

Data Collected for State of Energy of SA Cities, SEA, 2006


27

Source: CCT: Request for proposals: Athlone Power Station: Independent Power Project, 2004

Both Eskom and the City of Cape Town have different tariff structures depending on the end user and

its needs. Both supply electricity to the residential, commercial and industrial sectors. These will be

dealt with in more detail in a later section of this report.

4.3.2 Petrol and Diesel

Petrol and diesel are marketed by oil companies. In Cape Town refined petrol and diesel is bought

from the refinery by the oil companies. Most petrol (97%) is sold by service stations in Cape Town

while most diesel (64%) is sold in bulk24. Road tankers transport petrol and diesel from the oil

company‟s holding facility to service stations. Oil companies are increasingly outsourcing distribution

functions as well as being engaged in affirmative procurement programmes25.

Government intervention prevents oil companies from owning service stations (prohibition of vertical

integration). However, conditions linked to supply agreements require service station businesses to

keep to relatively demanding signage and service standards, which maintains oil company control.

Local authorities impose further stringent land zoning and safety requirements. It is thus financially

demanding to establish such a station.26

24

SAPIA consumption figures 2006/7 25

State of Energy Report for Cape Town, SEA, 2003 26

State of Energy Report for Cape Town, SEA, 2003


28

4.3.3 Paraffin

Paraffin is distributed from the refineries to oil company-owned bulk depots largely by road. Small

transport companies take it from the depots to the numerous medium and small outlets in urban areas.

In some areas service stations also sell paraffin.

The government regulates paraffin prices up to the retail level, specifying the maximum amount it can

be sold for. It has also made paraffin VAT exempt to ease the burden on poor households. This is

seen as an effective means of „subsidising‟ such households, as a very high proportion of all paraffin

sold is used by this income group. Paraffin supply chains reach into all urban areas. A study

undertaken in 1997 indicates that supply chains are not excessively long, and that price mark-ups are

usually not overly high27.

4.3.4 Liquified Petroleum Gas (LPG)

LPG is transported from the refineries to large distributors and then to medium distributors. It is

generally bottled at the refinery, although depots with mini-bulk tanks are becoming more common.

LPG distribution is through most oil companies as well as Afrox. The distribution network of LPG is not

nearly as well developed as that for paraffin, for various reasons. For one, it is not easy for small

outlets to establish themselves. Prospective new retailers need to undergo training and their premises

need to comply with various safety requirements. Further, the necessary space for safe LPG storage

is often not available in dense low-income settlements. LPG bottles are also difficult to transport to and

from distant outlets, which imposes a cost on dealers. There is also limited demand as the poor

households cannot generally afford the necessary bottles and appliances.

4.3.5 Jet Fuel

Jet fuel is not regulated and is sold in bulk to airports, the military, and commercially. In Cape Town,

the largest consumer of jet fuel is Cape Town International Airport (CCIA). Jet fuel is sold from the

refinery to Shell who have storage facilities at the airport. Shell then distributes the fuel to aeroplane

companies as demand requires.

4.3.6 Coal

Coal is transported into Cape Town by road from coal mines in the north. Road is preferred over

freight train due to the industry‟s experience of Spoornet‟s slow and unreliable service

27

SEA, Shell Foundation: Market Analysis of the SME energy sector 2002


29

4.3.7 Wood

Most wood used in Cape Town is assumed to be obtained from trees which grow in Cape Town and

its surrounds. Very little information exists on wood supply and consumption in Cape Town

4.4 Nuclear Energy

South Africa‟s only nuclear facility, Koeberg is based in the Cape Town metro‟s boundaries. The

facility has 2 reactors, with a combined net output of 1800MW. Koeberg provided 11293GWh of

electricity in 200628 , lower than usual due to its several unscheduled shutdowns during the year.

Koeberg has an economic life of a further 18 years (2025).

As the Western Cape is not a coal producing area, Eskom‟s short to mid term plan is amongst other

options to expand nuclear capacity to cope with increasing demand. This will most likely be in the form

of Pebble Bed Modular Reactors (PBMR) and a Pressurized Water Reactor (PWR).

4.4.1 PBMR

Each reactor will have a capacity of 165MW. A demonstration reactor near Koeberg is scheduled to

start construction in 2009 and the first fuel is planned to be loaded four years later (2013).

Construction of the fist commercial PBMR modules are planned to start three years after the first fuel

has been loaded into the demonstration reactor (2016)29.

Since 2004, the South African government has allocated significant funding to the project, while the

Minister of Public Enterprises, Mr Alec Erwin, stated an intent to eventually produce 4000MW to

5000MW of power from pebble bed reactors in South Africa. This equates to between 20 and 30

PBMR reactors of 165MW each. In June 2004, the South African cabinet also approved a programme

to train nuclear scientists.

4.4.2 PWR

The Eskom board has approved the investigation of another 4000MW Pressurised Water Reactor (like

Koeberg) in the Western Cape. They have currently listed several potential sites for its location.30

28

Eskom Annual Report, 2006 29

PBMR website, www.pbmr.com 30

Cape Times, 29 May 2007


30

Within Cape Town there is a level of discomfort on expanding the nuclear presence in the metropolitan

area, and the City holds the position that residents need to have a say in this matter.

4.4.3 Koeberg’s Nuclear Waste Disposal Plan31

Koeberg power station produces radioactive waste. Depending on its level of radioactivity, waste is

divided into three groups - low-level waste, intermediate-level waste and spent fuel. Waste can be

either solid, liquid or gaseous.

Low Level Waste

Low level waste contains low traces of radioactive contamination, and typically consists of day-to-day

refuse such as paper, gloves, insulation material, plastics and disposable overalls. This waste is

generated in the controlled radiological areas of the power station. These items are compressed into

sealed, clearly marked steel drums and stored on site until they are moved by road to the designated

waste disposal site at Vaalputs. On average 500 steel drums are shipped to Vaalputs every year.

Vaalputs is the national nuclear waste disposal site for low and intermediate-level waste and is

situated approximately 600 km north of Cape Town.

Intermediate Level Waste

This waste consists of purification sludge, radioactive resins, spent filter cartridges and irradiated

scrap metal pieces from normal maintenance work. It is more radioactive than low-level waste but

less radioactive than spent fuel. It is mixed in a very specific way with a sand/cement mixture, which

is poured into sealed and appropriately marked concrete drums, which are also transported to the

waste disposal site at Vaalputs. On average 100 concrete drums are produced annually.

The nature of the concrete used is such that should a drum fall off a truck or break open the

radioactive materials inside could not harm the public due to it being sealed inside the concrete.

Spent Fuel

Spent fuel is fuel that has been used in the fission process. It contains high levels of radioactivity.

One of the characteristics that distinguish spent fuel from less active waste is its thermal power.

31

ESKOM website, www.eskom.co.za


31

At Koeberg Nuclear Power Station, the spent fuel assemblies are stored under water in storage racks

with sufficient capacity to contain these assemblies for the life of the station. Water cools the fuel rods

and serves as an effective shield to protect workers in the fuel storage building from radiation.

Radiation starts decreasing immediately after the fission reaction has stopped and within

approximately 10 years has decreased by more than 95%. However, spent fuel contains a mix of

radioactive isotopes, the most dangerous of which is plutonium, which has a half life of approximately

24000 years. Spent fuel will either be sent to a reprocessing facility when uranium extraction becomes

economically viable, or it will be disposed of at an approved repository. To date no approved

repository has been established.

A pressurised water reactor type power station like Koeberg generates approximately 32 tons of spent

fuel each year. Over a 40-year lifetime that adds up to 1 280 tons.

4.5 Users and Needs

4.5.1 Cape Town Summary

Population 3.2 million

Projected Growth Rate 2%

Households (2005) 846121 broken up into:

731541 formal households

114580 informal households (CCT)

Unelectrified households 16900 or 2% (CT Energy Futures Report,

2005)

Electrified households 828100

Source: Household Numbers in Cape Town-Discussion Document (CCT, Aug 2006), CT Energy

Futures Report

Cape Town‟s houses are largely electrified. Only 2% of houses in the metropole do not have

electricity32

4.5.2 City of Cape Town Supply Area:

Domestic Users

32

Cape Town Energy Futures Report, 2005


32

The majority of domestic users (72%) are on the prepaid system. The tariff structure is simply broken

into Domestic 1 which suits electricity users who use more than 600kWh per month and Domestic 2

which suits users who consume less than 600kWh per month. Users who utilize 450kWh or less per

month over a 12 month average will qualify for 50kWh per month of free basic electricity (FBE).

Table of Domestic Consumers in CCT Distribution Area (2006/7)

Consumers Ave kWh/month

Domestic 1 Credit 82871 1089

Domestic 2 Credit 44374 304

Domestic 2 Credit - No FBE 16077 456

Domestic 3-Phase 9 711

Domestic with Off Peak Combination 245 45541

Domestic Cluster with Off Peak 9 21980

Domestic Cluster 184 12223

Sub Total 143769

Domestic 1 Prepaid 106796 916

Domestic 2 Prepaid 206314 283

Domestic 2 Prepaid - No FBE 65921 486

Domestic 3-Phase 110 839

Sub Total 379141

TOTAL DOMESTIC 522910

Source: CCT Electricity Consumption Figures (2006/7)

Non-residential users

Table of Non Residential Users in CCT Distribution Area (2006/7)


Small Power 1 Credit 22523 3560

Small Power 2 Credit 3182 710

Small Power Users with Off Peak (>50kVA) 1791 18202

Small Power Users with Off Peak (Plant) 1 24174

Sub Total 27497

Small Power 1 Prepaid 187 2837

Small Power 2 Prepaid 1151 677

Sub Total 1338 979

TOTAL SMALL POWER 28835

Large Power LV 946 57871

Large Power MV 520 274866

Very Large Power 54 1992863

TOTAL LARGE POWER 1520

Off Peak Consumption (>50kVA) 3 5212

Off Peak Consumption (Dedicated Plant) 104 1565

Commercial Time Of Use 1 34835

TOTAL OFF PEAK 108

TOTAL NON-RESIDENTIAL 30463


Municipality

Table of Domestic Consumers in CCT Distribution Area (2006/7)


33


Domestic 1 (Municipal) 53 2406

Domestic 2 (Municipal) 391 504

Sub Total 444 731

Small Power 1 (Municipal) 1879 4385

Small Power 2 (Municipal) 54 1990

Small Power with Off Peak (Municipal) 2 21447

Sub Total 1935 4336

Large Power LV (Municipal) 467 4287

Large Power MV (Municipal) 26 287098

Sub Total 493 19202

Off Peak - Dedicated Plant (Municipal) 2 46296

Sub Total 2 46296

Street Lighting 1 10194676

Traffic Signals 1 1123436

TOTAL MUNICIPAL USERS 2874


4.5.3 ESKOM Supply Area for CCT

Domestic Users

Of the 828 100 electrified houses in Cape Town, the CCT supplies 522 910. This means that Eskom

distributes electricity to approximately 305 190 houses. The vast majority of areas serviced by Eskom

are low income. As Eskom has not been prepared to provide any up to date disaggregated user data,

the assumption has been made that roughly all houses are low income users in the Eskom controlled

distribution area.

2004 Consumption estimate (NER) 690390750 kWh

Domestic Users‟ electricity requirements 190kWh / month (approximately)

Source: NER 2004

These figures are approximately 80kWh per month lower than the CCT serviced low income areas. It

points towards being too low and is probably not a reliable source.

Other older data from Cape Town‟s State of Energy Report shows a higher consumption figure for

2000 than that obtained for 2004.

ESKOM AREAS WITHIN UNICITY (2000)

User No of Users Energy Consumed kWh/mth

Domestic – Conventional meters 45,000 460,000,000 851.9

Domestic – Energy dispensers 110,000 300,000,000 227.3

(Source CT State of Energy Report,2003)

These figures tie up better with the City of Cape Town users‟ needs, but the number of users (155000)

is old and this number has increased rapidly over the last 7 years with Eskom‟s electrification of Cape

Town‟s low income areas to 305190. If one makes the assumption that Eskom‟s distribution growth


34

since 2000 has all been predominantly low income, then the number of new low income users is

150190. An estimated energy use picture for the Eskom distribution area for the Cape Town would

then read as follows:-


User Type No of Users Energy Consumed (kWh) kWh/mth

Domestic – Conventional meters 45,000 460,000,000 851.9

Domestic – Energy dispensers 260,190 709,694,244 227.3

Total Domestic Users 305,190 1,169,694,244

Source: CTSOER 2003, Household Numbers in Cape Town-Discussion Document (CCT, Aug 2006),

CT Energy Futures Report

This can be considered the „best guess‟ estimate of this side of Cape Town‟s electricity consumption,

but these figures need to be verified with Eskom. The figures above, although not accurate, do

indicate the trend of increased electricity use in low income areas, and as such are a closer

approximation of reality than using older data.

Commercial and Industrial

Two consumption figures for this sector were sourced:-

2004 Consumption estimate (NER) = 2301628250 kWh

(Source: NER 2004)

ESKOM AREAS WITHIN UNICITY (2000) kWh/mth

Commercial – Small 1 & 2 3,500 480,000,000 11,428.6

Large & Very Large 1,700 1,300,000,000 63,725.5

(Source CT State of Energy Report,2003)

Without any better knowledge with regards to growth rates of commerce and industry in this area of

Cape Town, it is assumed that the 2004 figure is the best estimate available, and shall be used for this

report.

4.6 Average household consumption

Assumptions:

1. Due to that fact that Eskom will not release any information with regards to user base and

consumption figures, the assumption must be made that the average figures determined for

the City of Cape Town distribution area can be applied to the Eskom controlled users. The

estimated user figures for Eskom calculated above will not be used in this analysis.

2. All domestic users falling into the Free Basic Electricity category are low income households.


35

Based on the above the following data can be derived:

Average monthly electricity consumption of CCT Users divided by income category (2006/7)

Income

Category Users Ave kWh/m

Med-Hi 271665 837

Low 250688 286

Source: CCT Electricity Consumption Figures

These figures correlate closely with the Cape Town Energy Futures Report (CTEFR) (2005) of

774kWh for medium to high and 274kWh for low income. The CTEFR disaggregated these

consumption figures as such:

Electricity consumption for med- to high-income households by end use

End use Electricity consumption per end use

Lighting 108.3 kWh / month

Cooking 148.2 kWh/ month

Space heating 80.9 kWh/ month

Water heating 380.8 kWh/ month

Refrigeration 55.9 kWh/ month

Total 774.1 kWh/ month

Source: Cape Town Energy Futures Report (SEA et al. 2005)

Low income houses make use of a mix of electricity, paraffin and gas.


36

Energy used by electrified low-income households by end use

End use Electricity consumption per

end use

Other energy consumption

(units / month)

Lighting 32.3 kWh / month

Cooking 112.4 kWh/ month 3.3 litres paraffin /month

0.119 GJ

0.6kg LPG/month

Space heating 63.2 kWh/ month (3 months) 2.5 litres paraffin /month (3 months)

0.09 GJ

Water heating 20.3 kWh/ month 1.7 litre paraffin /month

0.06 GJ

Refrigeration 71.7 kWh/ month

Source: Cowan & Mohlakoana (2004); Simmonds & Mammon (1996: 75)

Very few households in Cape Town are unelectrified. The following table indicates the monthly

consumption of an average low income unelectrified house.

Energy used by unelectrified low-income households by end use

End use Paraffin (litres)/ month Number of Candles/month

Lighting 3 6

Cooking 9

Space heating 7 (3 months)

Water heating 4

Sources: Cowan & Mohlakoana (2004); (Simmonds & Mammon (1996: 75)

4.7 Average Non Residential Consumption

Assumptions

1. Due to that fact that Eskom will not release any information with regards to user base and

consumption figures, the assumption must be made that the average figures determined for

the City of Cape Town distribution area can be applied to the Eskom controlled users.


37

2. All small power clients in the CCT are Commercial clients, and all large power clients are

Industrial.

Table showing average non residential consumption in Cape Town (2006/7)

Sector Users Ave kWh/m

Commercial 28,835 4,036

Industrial 1,628 187,656

Municipal-Users 2,874 6,358

Municipal – Traffic Lights 1,123,436

Municipal – Street Lights 10,194,675

(Source: City of Cape Town Electricity Consumption Figures)

In the commercial sector, an „average‟ commercial building will have the following end use profile

End Use kWh/m

Lighting 1533

HVAC 1533

Other Electrical Appliances 970

(Source: Percentage breakdown based on Appendix B, CTEFR, 2005):

4.8 Seasonal and daily load profiles

Assumption:

Due to that fact that Eskom will not release any information with regards to user base and

consumption figures, the assumption must be made that the load profiles determined for the City of

Cape Town distribution area are of similar shape to those of the Eskom controlled domestic and

commercial users.

CCT Distribution Area Annual Energy Consumption Profile


38

Load Profie 2006 - Domestic

0

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CCT Daily Load Profile


39

The following set of graphs show the profiles for the various CCT controlled Municipalities on the

highest power demand day of the year in winter 2006. Peak demand reached 2290MW on this day.

BLAAUWBERG

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CAPE METROPOL LOAD MW

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4.9 GHG Emissions in CT

Electricity (59%) from Eskom‟s coal and nuclear powered grid is the largest source of CO2 emissions

in Cape Town.


42

Table Showing CO2 Emissions in CT (2006/7)

User Group

Electricity Petrol Diesel Heavy

Furnace Oil

Paraffin Jet Fuel LPG Coal Wood Total

CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) CO2 (t) %

Households 4362575 - - - 189346 30085 4080 4586085 24%

Industry & Commerce

6648614 - 968720 346309 32475 149498 1014072 9159688 47%

Local Authority

469273 8768 17254 - - - - - 495295 3%

Transport 3123417 1055332 - - 996658 - - - 5175406 27%

Total 11480462 3132185 2041306 346309 221821 996658 179582 1018152 0 19416474 100%

Total % 59% 16% 11% 2% 1% 5% 1% 5% 0% 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

4.10 Demand Side Management

In order to reduce the peak load levels experienced in the winter of 2006 in the Western Cape, Eskom

Demand Side Management (DSM) pursued an aggressive approach to implementing interventions.

This has resulted in33:

5.3 million CFLs being distributed (229MW saving)

180000 geyser blankets being installed (no saving figure available)

a gas exchange programme being established which replaced 40332 two plate stoves, 125

electrical hobs, 2708 electrical stoves and 1328 heaters with gas equivalents (22MW)

an extensive electricity conservation drive involving widespread advertising of energy saving

tips (estimates at 150MW saving if 20% of population respond)

an incentive scheme for backup diesel generators (63MW)

Eskom has recently stated that the peak reduction achieved through its demand side management

programme for the winter of 2006 was estimated to be between 500-700MW.

Eskom DSM plans to continue with many of these schemes in the future, as well as solar water

heating subsidization. All of these interventions are sustainably wise choices when considering the

33

Data collected from presentation by Andrew Etzinger 2007, Eskom DSM


43

current energy picture. They resulted in reduced electricity consumption, and some involved changing

over from electricity to cleaner fuels (LPG).

Eskom has stated that the cost of building new generation capacity is about R10 million per megawatt.

The equivalent DSM savings in this light were around R5 billion in offset capacity.

5. Technological Interventions

5.1 Existing supply and generation technologies

South Africa currently has the cheapest energy in the world. This is largely due to an abundance of

coal, and a well established and paid for network of coal fired power stations. Now with the growth in

energy demand in the country, Eskom has to start considering installing new base load capacity for

the first time in many years. In order for Eskom to cover construction costs (estimated at R10 million

per megawatt) electricity tariffs are expected to increase sharply. This will play into the hands of

renewable energy technologies, which to date have not been able to compete with Eskom‟s low tariffs.

The following table indicates how close the gap will become with regards to new generation energy

production costs.

South African Costs for New and Existing Generation (NER 2005, Banks and Schaffler,2006)

Generation Technology c/kWh

New Coal 28

New Nuclear (PWR – like Koeberg) 50

New Nuclear (PBMR) 30

New Wind 40

New Gas Turbines 250

New Solar Thermal 40

New Solar PV 193

Existing (Eskom 2006) 14

Existing Pumped Storage (CCT) 8.7

Source: NER 2005, Renewable Energy Plan of Action for the Western Cape, 2007, Eskom Annual Report 2006, CCT SOER 2003

5.2 Current research on alternatives in W Cape and Energy Saving Potential


44

The Western Cape government has set a target of 12% renewable power source by 2014. In their

recently released „Renewable Energy Plan of Action for the Western Cape‟, they propose several

renewable energy scenarios from conservative to aggressive which will come close to and supercede

this target. The plan proposes large scale governmental support in the form of facilitating renewable

energy initiatives.

Graph showing the potential mix of renewables in the W Cape energy picture of the future

Biomass Cogen

Hydro

Municipal Waste

Pumped Storage

Solar PV off grid

Solar PV grid con.

Solar Th Elec no st.

Solar Th Elec with st.

Ocean Energy

Wind High CF

Wind Medium CF

Imp Ren Energy

New Nuclear

New foss mid and pk

New Fossil Base

Exist mid and peak

Existing Base

Transformation Results: Capacity

Scenario: Prog Ren Ref Dem, Capacity: All Capacities

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035

Megaw

atts

9,500

9,000

8,500

8,000

7,500

7,000

6,500

6,000

5,500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

(Source: Renewable Energy Plan of Action for the Western Cape, 2007)

Table Showing Potential Power production from renewable sources – Western Cape

Wind 3000MW

Ocean 1000MW

Solar –PV 247MW

Hydro 15MW

Solar thermal 1400MW

Pumped Storage 1800MW

Total 7452MW

(Source: Renewable Energy Plan of Action for the Western Cape, 2007)

5.3 Actual savings from EE interventions - key technologies


45

Based on information generated by the LEAP modeling software the following interventions have been

modeled, based on the targets set by the City of Cape Town in their energy and climate change

strategy:

5.3.1Solar water heaters (SWH)

Target - Install SWH in 10% of Cape Town‟s houses by 2010 and 50% by 2024

Residential

Demand Results: Energy demand final units

Scenario: REF vs. RSWH, Fuel: All Fuels

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Cum

ula

tive G

igaw

att-H

ours

5,500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

(Source: SEA:2007)

Cumulative energy saving of 5700GWh over 20yrs

Final peak load reduction of 375MW (50% SWH installed)

5.3.2 Efficient Lighting

Target – Commercial + Local Authorities 100% saturation by 2010, Residential 30% by 2010 and 90%

by 2020

Commerce

Transport

Local Authority

Residential


Scenario: REF vs. CFLs - Res, Com and LA, Fuel: All Fuels

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Cum

ula

tive G

igaw

att-H

ours

7,500

7,000

6,500

6,000

5,500

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0


46

(Source: SEA:2007)

Cumulative energy saving of 7700GWh over 20yrs

Peak load reduction by 2024 of 290MW

5.3.3 Ceilings on Houses

CCT Target: Retrofit existing houses by 2020

Projected cumulative savings by 2024: 365 million kWh

(Assuming a 20% reduction in energy used for space heating)

(Source: SEA:2007)

5.3.4Efficient HVAC

Target: 20% reduction in energy used by HVAC by 2020, achieved through changing behavioural

patterns and installing more efficient systems.

Projected cumulative saving by 2024: 950 million kWh

Residential


Scenario: REF vs. Com, LA + Res HVAC, Fuel: All Fuels

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Cum

ula

tive M

illio

n K

ilow

att-H

ours

360

340

320

300

280

260

240

220

200

180

160

140

120

100

80

60

40

20

0


47

(Source: SEA:2007)

5.3.5 Transport Modal Shift

CCT Target: 10% transport modal shift from private to public by 2020

Projected cumulative saving by 2024: 150 million GJ

(Source: SEA:2007)

5.3.6 Total Savings

Solar Water Heaters 5700GWh

Efficient Lighting 7700GWh

Transport


Scenario: REF vs. Tmodal shift, Fuel: All Fuels

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Cum

ula

tive M

illio

n G

igajo

ule

s

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

Commerce

Local Authority


Scenario: REF vs. Com, LA + Res HVAC, Fuel: All Fuels

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Cum

ula

tive M

illio

n K

ilow

att-H

ours

950

900

850

800

750

700

650

600

550

500

450

400

350

300

250

200

150

100

50

0


48

Ceilings 365 GWh

Efficient HVAC 950GWh

Transport 150million GJ

Source: SEA:2007

5.4 Feed in tariffs

There has been talk of feed in tariffs of late, but it seems unlikely that anything of this nature will materialize in the short term. Unless regulations change Eskom will continue to produce its own power rather than buy in power generated by an independent power producer. Generation costs of current technologies show that renewable systems cannot compete cost wise with current coal and nuclear systems. This will change in the future as tariffs increase and come closer to renewable generation tariffs.


49

5.5 Overview of environmental impacts of current technologies

Coal fired power station 986g of CO2 per kWh

Nuclear Power Station: 30g of CO2 per kWh

Open Cycle Gas

Turbines:

710g of CO2 per kWh

Pumped Storage: 220g of CO2 per kWh

Hydro: 0

Wind: 0

Solar Water Heaters: 0

Solar Thermal: 0

Solar PV 0

Ocean 0

Source: State of Energy Report for Cape Town, 2003


50

6. Financial aspects

6.1 Quantification and Analysis of electricity flow in financial terms

6.1.1 City of Cape Town Electricity Energy and Cash Flow (2006-2007)

The table that follows is a comprehensive breakdown of the City of Cape Town‟s electricity distribution business. It includes all capital and operating expenditures for the department. This is to provide a broad overview of how these costs tie in with energy bought and sold in the City of Cape Town.

Financial Analysis of CCT Electricity Flow: July 2006-June 2007 (Last 3 months projected)

Energy (kWh) Expenditure Income

Ave

c/kWh

City of Cape Town Electricity

Employee Related Costs R 345,283,278

General Expenses R 94,599,901

Contracted Services R 33,898,952

Repairs & Maintenance (Primary) R 110,577,500

Repairs & Maintenance (Secondary) R 44,298,465

Repairs & Maintenance (Total) R 154,875,965

TOTAL CONTROLLABLE R 628,658,095

OTHER

Bulk Purchases (Eskom) -9,972,008,301 R 1,751,359,928 17.56

Collection Costs (Vendors Commission) R 30,180,000

Capital Charges R 177,564,007

Contributions

Bad Debts Provision/Working Capital

Reserve R 32,031,239

Housing Fund R 326,584

Grants and Donations (Capital Outlay) R 35,400,000

Medical Aid - Post Retirement R 15,638,123


51

Transfer to / from AFR

AFF - Capital projects funding R 123,105,255

Developers Contributions (BICL) R 21,000,000

TOTAL OTHER R 2,186,605,135

SECONDARY

Contribution to Rates R 296,896,666

Support Services R 133,399,468

Internal Utilities R 11,369,488

Insurance Department Premiums R 16,841,665

Activity Based Costs -R 66,967,895

Steenbras Pumped Storage -20,245,655 8.70

TOTAL SECONDARY R 391,539,393

Total Energy Input and Expenditure -9,992,253,956 R 3,206,802,623

Domestic

Domestic 1 Credit 1,082,662,547 R 383,175,485 35.39

Domestic 2 Credit 161,632,562 R 56,131,004 34.73

Domestic 2 Credit - No Free Basic

Electricity 87,964,138 R 35,758,767 40.65

Domestic 3-Phase 76,786 R 28,596 37.24

Domestic with Off Peak Combination 133,890,444 R 32,577,231 24.33

Domestic Cluster with Off Peak 2,373,823 R 580,797 24.47

Domestic Cluster 26,988,951 R 8,320,581 30.83

Sub Total 1,495,589,251 R 516,572,461 34.54

Domestic 1 Prepaid 1,173,502,471 R 422,357,770 35.99

Domestic 2 Prepaid 699,858,941 R 239,694,858 34.25

Domestic 2 Prepaid - No Free Basic

Electricity 384,588,575 R 158,048,964 41.10

Domestic 3-Phase 1,107,117 R 428,258 38.68

Sub Total 2,259,057,104 R 820,529,850 36.32

TOTAL DOMESTIC 3,754,646,355 R 1,337,102,311 35.61

Small Power (Commerce and

Industry)

Small Power 1 Credit 962,304,536 R 367,260,041 38.16


52

Small Power 2 Credit 27,112,095 R 14,268,484 52.63

Small Power Users with Off Peak

(>50kVA) 391,193,047 R 105,715,305 27.02

Small Power Users with Off Peak (Plant) 290,092 R 67,255 23.18

Sub Total 1,380,899,771 R 487,311,085 35.29

Small Power 1 Prepaid 6,365,326 R 2,412,714 37.90

Small Power 2 Prepaid 9,352,972 R 5,016,259 53.63

Sub Total 15,718,299 R 7,428,973 47.26

TOTAL SMALL POWER 1,396,618,069 R 494,740,058 35.42

Large Power (Commerce and

Industry)

Large Power LV 656,952,053 R 203,270,208 30.94

Large Power MV 1,715,162,800 R 458,356,007 26.72

Very Large Power 1,291,375,225 R 284,139,995 22.00

TOTAL LARGE POWER 3,663,490,079 R 945,766,209 25.82

Off Peak (Commerce and Industry)

Off Peak Consumption (>50kVA) 187,632 R 43,012 22.92

Off Peak Consumption (Dedicated

Plant) 1,953,513 R 316,325 16.19

Commercial Time Of Use 418,024 R 83,941 20.08

TOTAL OFF PEAK 2,559,170 R 443,278 17.32

Municipal

Domestic 1 (Municipal) 1,530,491 R 501,303 32.75

Domestic 2 (Municipal) 2,363,159 R 918,381 38.86

Sub Total 3,893,651 R 1,419,684 36.46

Small Power 1 (Municipal) 98,869,870 R 36,834,688 37.26

Small Power 2 (Municipal) 1,289,626 R 675,585 52.39

Small Power with Off Peak (Municipal) 514,720 R 135,807 26.38

Sub Total 100,674,216 R 37,646,081 37.39

Large Power LV (Municipal) 24,025,940 R 11,025,132 45.89

Large Power MV (Municipal) 89,574,627 R 22,675,880 25.32

Sub Total 113,600,567 R 33,701,012 29.67

Off Peak - Dedicated Plant (Municipal) 1,111,107 R 184,536 16.61

Sub Total 1,111,107 R 184,536 16.61


53

Street Lighting 122,336,107 R 39,881,571 32.60

Traffic Signals 13,481,232 R 4,394,882 32.60

Sub Total 135,817,339 R 44,276,452 32.60

TOTAL MUNICIPAL 355,096,880 R 117,227,765 33.01

Other revenue derived from Electricity

Distribution (Mainly Service Charges)

R 213,020,379

Capital Grants + Donations R98,502,623

Total Energy Output and Income 9,172,410,553

R 3,206,802,623

Efficiency of System

(Energy out /Energy In) 91.8%

Source: CCT Electricity and Financial Figures (2006/7)

6.1.2 Eskom Controlled Electricity Energy and Cash Flow (2006-2007)

As this data has not been made available by Eskom, the following figures are based on the roughly

calculated data from Section 3.5.3 of this report, and Eskom‟s published national average c/kWh per

users for 2006.


User Type No of Users

Energy Consumed

(kWh)

Ave c/kWh

Income Annual

Income Monthly

Domestic – Conventional meters

45,000 460,000,000 40.08 R 184,368,000 R 15,364,000

Domestic – Energy dispensers

260,190 709,694,244 40.08 R 284,445,453 R 23,703,788

Commercial – Small 1 & 2

3,500 620,663,798 22.69 R 140,828,616 R 11,735,718

Large & Very Large

1,700 1,680,964,452 14.75 R 247,942,257 R 20,661,855

CT Metro

1 9,972,008,301 17.56 R 1,751,084,658 R 145,923,721

Gross Income

13,443,330,795 R 2,608,668,983 R 217,389,082

Source: Eskom Annual Report 2006, NER, CTSOER 2003, Household Numbers in Cape Town-

Discussion Document (CCT, Aug 2006), CT Energy Futures Report

6.2 Quantification of liquid fuel flow in financial terms


54

In terms of liquid fuels, the price at which refineries sell their products is controlled by the State. This

price is determined by the “Basic Fuels Price” (BFP) which is the cost at which products could be

landed in South Africa if they had been sourced from a basket of refineries mainly in the Far East. The

mark-ups or „margins‟ of the South African refineries are therefore very similar to those in the Far East.

When the Far East market changes its nature, it has a direct and immediate effect on the economics

of the South African refineries.

Fuel prices are regulated to varying degrees by government::

Petrol is regulated right up to petrol station selling price.

Diesel is regulated up to the wholesale price. The dealers can determine their particular markup.

Paraffin is regulated to wholesale price (482.10c/l). The government places a cap on the maximum for

an unlabelled litre of paraffin at 602c/l. Paraffin is VAT exempt

LPG, jet fuel and HFO are affected by the BFP but are not regulated

Sapia publishes aggregated profit margins per litre of product sold over all products from all SAPIA

members per year. This is highly aggregated information, and provides little insight into the resource

flows per product or per refinery. However, it is useful for viewing the bigger liquid fuel financial

picture.

(Source SAPIA Annual Report 2005)

As the refineries and marketing companies do not wish to divulge their personal operating and

maintenance costs and capital budget, it is difficult to paint a more localized financial picture.

However, gross profits from sales of regulated products can be determined, and are represented in

the tables below.


55

6.2.1 Petrol

The refinery‟s profits are built into the basic fuel price. This information is not available.

Table Showing Financial flow of Petrol in Cape Town 2006/7

Petrol Beneficiary

Crude Oil Used (93% of Crude oil is

refined) (l) 1,333,484,124

Refined Product Sold in Cape Town (l) 1,240,140,235

Customs + Excise (4c/l) R 49,605,609 Government

Fuel Tax (121c/l) R 1,500,569,684 Government

Total Government income R 1,550,175,294

Wholesale margin (39c/l) R 483,654,692 Marketers

Service differential (7c/l) R 86,809,816 Marketers

Total Marketing Company income from

sales in Cape Town-2006/7 R 570,464,508

Retail Margin (48c/l) (97% of product) R 576,725,143 Petrol Station

Owner

Road Accident Fund (41.5c/l) R 514,658,198 Government

Fund

Source: SAPIA, DME regulation figures 2006

Marginal profit for oil companies (based on

14c/l SAPIA figure)

R 173,619,633

Importing,Refining,

Marketing



56

6.2.2 Diesel

Table Showing Financial flow of Diesel in Cape Town 2006/7

Diesel Beneficiary


refined) (l) 772,504,517

Refined Product Sold in Cape Town (l) 718,429,201

Customs + Excise (4c/l) R 28,737,168 Government

Fuel Tax (121c/l) R869,299,333 Government

Total Government income R 98,036,501

Wholesale margin (39c/l) (64% bulk) R 80,187,388 Marketers


Total Marketing Company income from

sales in Cape Town-2006 R 330,477,432

Retail Margin (approximately 48c/l) (34%

of sales) R 23,795,989

Petrol Station

Owner

Road Accident Fund (41.5c/l) R 98,148,118 Government Fund

Source: SAPIA, DME regulation figures 2006

Marginal profit for oil companies (based

on 14c/l SAPIA figure) R 100,580,088

Importing,Refining,

Marketing

Source: SAPIA

6.2.3 Paraffin

Table Showing Financial flow of Paraffin in Cape Town 2006/7

Paraffin Beneficiary


refined) (l) 88,544,285


Wholesale margin (39c/l) R 32,115,012 Marketers


Storage Cost (7c/l) R 5,764,233 Marketers

Distribution Cost (7.4c/l) R 6,093,618 Marketers

Total Marketing Company income from R 55,501,329


57

sales in Cape Town-2006

Retail Margin (approximately 77c/l

unbottled) R 25,996,691

General dealer

(41% of CT

paraffin market)

Source: SAPIA, DME regulation figures 2006, paraffin spaza shop

Marginal profit for oil companies(based on

14c/l SAPIA figure)

R 11,528,466

Importing,Refining,

Marketing

Source: SAPIA

6.2.4 Jet Fuel

The assumption is made that jet fuel and paraffin prices are very similar, as the process of producing

the two products is nearly identical. However, as this is an unregulated product, the specific sales

information in terms of margins is not freely available.

Considering the gate price for paraffin and jet fuel to be the same (399c/l), the profit margin to

aeroplane operators is approximately R1.80 today

Table Showing Financial flow of Jet Fuel in Cape Town 2006/7

Jet Fuel Beneficiary


refined) (l) 443,647,502


Wholesale margin (180c/l @ retail price of

579c/l) R 42,665,919 Marketer

Source: SAPIA, Private Aeroplane Company

Marginal profit for oil companies (based on

14c/l SAPIA figure)

R 57,762,905

Importing,Refining,

Marketing

Source: SAPIA Annual report 2005

6.2.5 LPG + HFO

A gate price for LPG and HFO is not available. Based on the SAPIA 14c/l net profit figure for

importing, refining and marketing, profit for sales in Cape Town will be:-

Table Showing Financial flow of LPG and HFO in Cape Town 2006/7

Product Litres sold Net marginal profit

LPG 127047856 R 17,786,700

HFO 118295985 R 16,561,438


58

Source: SAPIA, SAPIA Annual report 2005

6.3 Billing systems used by Eskom & municipality

6.3.1 City of Cape Town Billing System

The following table is taken off the CCT Electricity Website. This indicates all of the city‟s billing

systems for the period July 2006 – June 2007.

Domestic: Domestic 1 for high consumption users (above 600kWh/month) and Domestic 2 for low

consumption users (below 600kWh/month). Domestic 2 users will receive 50 free kWh per month if

they prove to use less than 450kWh/month on average for 12 months. Clusters are with dealt as 1

user, with the developer breaking up the bill per house within the cluster.

The following tariffs are applicable to Domestic Customers

1.1 Domestic 1 (High consumption – exceeding 600 kWh per month)

Daily Service Charge (R) 1.99

Energy Charge (c/kWh) 30.50

1.2 Domestic 2 (Low consumption – less than 600 kWh per month)


1.3 Domestic 3 (3 Phase)



Commercial:

2.1 Small Power Users (For supply up to a maximum of 500 kVA)

2.1.1 Small Power Users 1 (High consumption – exceeding 1 000 kWh per month)



2.1.2 Small Power Users 2 (Low consumption - less than 1 000 kWh per month)


2.2 Large Power Users Commercial customers with installed capacity between 500 kVA and 1 MVA must take their supply at either the Low Voltage or Medium Voltage Large Power Users tariff. No other supply will be permitted. The demand charge will only be applicable on weekdays from 06:00 to 22:00 provided suitable metering is installed at the customers‟ premises.


59

2.2.1 Large Power Users (Low Voltage)



Demand Charge (R/kVA) 49.06

2.2.2 Large Power Users (Medium Voltage) This tariff is compulsory for customers with installed capacity above 1 MVA unless they elect to take supply at the Very Large Power User tariff.




2.3 Very Large Power Users This tariff is only available at medium voltage and could be beneficial to customers using more than 12 GW.h per annum.

Daily Service Charge (R) 1 751.20



3 Off Peak Tariff (For installed capacity above 50 kVA)

This tariff is available for customers supplied at the Domestic or Small Power Users tariffs with installed capacity above 50 kVA. It will be applicable during the off peak periods from 22:00 to 06:00 on weekdays and from 22:00 on Friday to 06:00 on Monday.

Note: Customers charged at the Large or Very Large Power Users tariffs automatically enjoy a similar benefit as the demand charge is not applicable during the off peak periods provided suitable metering is installed.

Daily Minimum Charge (R) 18.06


4 Wheeling Tariff


5 Green Energy Tariff

Energy Surcharge (c/kWh) 25.00

6 The following tariffs are only applicable where the supply agreement already exists

6.1 Time-of-Use Tariff


Energy Charge: Peak (c/kWh) 48.53

Standard (c/kWh) 17.44

Off Peak (c/kWh) 8.72

6.2 Off Peak Tariff (For dedicated plant)

Daily Minimum Charge (R) 2.03

Energy Charge (c/kVA) 16.49


60

6.3.2 Eskom Billing System

Domestic Tariffs (Mar 2006- Feb 2007)

Homepower is directed at high usage residential customers. Homelight is directed at low usage

customers. Up to 350kWh per month Homelight is cheaper than Homepower.

Charges: Network

Charge (per

day)

Service

Charge (per

day)

Energy

Charge (per

kWh)

Homepower 1 (3 ph 40A/ph) R1.95

Homepower 2 (3 ph 80A/ph) R4.21 R1.27 27.81c

Homepower 3 (3ph 150A/ph) R8.48

Homepower 4 (1 phase 80A) R1.00

Homelight 1 (10A) N/A N/A 42.75c





Commercial Tariffs

Charges: Network

Charge (per

day)

Service

Charge (per

day)

Energy Charge

(per kWh)

Businessrate 1 (<25kVA) R3.45 R3.59 25.06c

Businessrate 2 (>25 <50kVA) R4.97 R3.59 25.06c

Businessrate 3 (>50 <100kVA) R9.73 R3.59 25.06c

Businessrate 4 (<25kVA,

<622kWh/m)

N/A N/A 59.48c

Industry Tariffs

Nightsave (>1MVA)- Seasonal, Off peak savings

Megaflex (>1MVA) – Time of use differentials

Miniflex (100kVA-5MVA) – Time of use differentials

Network Demand Charge (per KVA) R 7.08 R 7.08 R 7.08


61

Network Access Charge (per KVA) R 6.26 R 6.26 R 6.26

Service Charge (per day)

R1.01(<100kVA)-R62.22(>1MVA)

R62.22 (>1MVA) R2.32 (<100kVA) R62.22 (>1MVA)

Admin Charge (per day)

R2.49(<100kVA)-R33.39(>1MVA)

R35.89(>1MVA) R2.61(<100kVA)-R34.71(>1MVA)

Energy Demand Charge (per kVA)

R32.37 (Jun-Aug) 4.59 (Sep-May)

-

Active Energy Charge (per kWh) - Peak

- 55.30c (Jun-Aug) 15.69c (Sep-May)

56.55c (Jun-Aug) 17.44c (Sep-May)

Active Energy Charge (per kWh) - Standard




Active Energy Charge (per kWh) - Off Peak

- 7.95c (Jun-Aug) 6.90c (Sep-May)


6.3.3 Comparison of Eskom and CCT tariffs based on average consumption figures:

It should be noted that the tariffs compared are the current rates as at the writing of this report. CCT

rates will go up in July 2007, While Eskom‟s will only go up in March 2008.

Domestic:

Ave lo income use 286 kWh/month

Ave hi income use 837 kWh/month

Ave days/month 30.4

Network Charge

Service Charge

Energy Charge

Total ave cost/month

1 Phase Domestic (Hi Income)

Domestic 1 (CCT) - 60.496 R 255.29 R 315.78

Homepower 4 (Eskom)

36.784 40.736 R 246.50 R 324.02

3 Phase Domestic (Hi Income)

Domestic 3 (CCT) - 91.2 R 255.29 R 346.49

Homepower 1 (Eskom)

62.928 40.736 R 246.50 R 350.16

1 Phase Domestic (Low Income)


62

Domestic 2 (CCT) - - R 116.26 R 116.26

Homelight 1 (Eskom)

- - R 129.47 R 129.47

Tariffs compare very similarly between the two distributers for domestic supply.

It is difficult to compare business and Industry tariffs, as charges differ greatly from user to user,

depending on power requirements, and not enough detailed information is available on Eskom‟s

users.

6.4 Analysis of margins made by municipality and Eskom

6.4.1 City of Cape Town

The City of Cape Town is set to make a gross profit on electricity sales of R1.45 billion over this

operating year ending June 200734. However, taking O+M and capital expenditure costs into account,

the net profit is estimated to be R180million. Excluded in this figure is a contribution to the rates

account of a figure in the region of R150 - R300 million (see O+M budget breakdown). It is clear that

the electricity department is a net generator of income for the city, and that it subsidises other areas of

the council. The tariffs charged to users in the city are comparable to those charged by Eskom, so in

terms of competitiveness there is very little discrepancy.

Item R (2006) R/ month

Gross Income R 1,455,715,342 R 121,309,612

Costs -R 1,276,212,342 -R 106,351,029

Marginal Income R 179,503,000 R 14,958,583


6.4.2 Eskom

The average Eskom figure of total cost of energy sold of 14c/kWh for 2006 was used. This figure

includes operating costs and net interest, and is based on electricity sold, not generated.

Item kWh c/kWh R (2006) R/ month

Gross Income 13,443,330,795 R 2,608,668,983 R 217,389,082

Operating Costs -13,443,330,795 14c R -1,882,066,311 R -156,838,859

Marginal Income R 726,602,672 R 60,550,222

Source: Eskom Annual Report (2006)

34

CCT Electricity Department financial figures


63

6.5 Capital Budgets

6.5.1 CCT Capital Budget

2005 2006 2007

Actual Actual Projected

Capital Budget Item R'000 R'000 R'000

External Financing Fund

(EFF) 93,784 192,025 178,641

Grants 8,508 33,393 35,400

Asset Financing Fund

(AFF) 17,691 274,173 123,105

Developers

Contributions (DC) 22,082 1,776 21,000

Private Sector 26,054 11,750

Other Authorities 0 5,707

Revenue 202 1,452

Total 168,320 520,275 358,146


Current prioritisation in the capital budget is their high voltage (HV) network35.

6.5.2 Eskom Capital Budget

The Eskom capital budget for the Western Cape was R500 million for the year ending March 2007.

Projects are prioritised according to a weighted criteria schedule:

Criteria Weighting

Financial 40

Statutory Requirements 5

Technical Sustainability 30

Social Responsibility 5

Customer Focus 15

Strategic Objectives 5

Total 100

35

Donovan Leewendaal, CCT Electricty, Personal Communication, June 2007


64

Source: Eskom Employee, Personal Communication

6.6 Breakdown of operating and maintenance

6.6.1 CCT

The CCT electricity department are developing an overall maintenance strategy for the service. A

number of areas have proactive maintenance but mostly maintenance is reactive due to staff

constraints36.

The following table provides a full financial breakdown from the City of Cape Town‟s electricity

department. It includes O+M and capital costs and shows contributions to and from the rates system.

Capital costs are worked into this table, as this is the way the City presented the data to the

researchers.

2005 2006 2007

ACTUAL ACTUAL PROJECTED

R'000 R'000 R'000

INCOME

Revenue from sales of Electricity 2468530 2561495 2895280

Revenue from sales to Consumers (All sales from

tariffs) 2358678 2439074

Revenue from sales for own use 69400 75106

Revenue from sales for street and traffic lighting 40452 47315

Revenue from sales to other departments 0 0

Other revenue derived from electricity distribution 198413 303594 213020

Reconnection fees 2550 3081

Interest on Arrears 15200 19022

Electricity Service Charges 138932 214788

Other 41731 66703

Total revenue derived from electricity distribution 2666943 2865089 3108300

36

Donovan Leewendaal, CCT Electricty, Personal Communication, June 2007


65

Capital Grants and Donations 34262 31735 98500

TOTAL INCOME 2701205 2896824 3206800

EXPENDITURE

Purchases

Purchases (Bulk electricity) 1546599 1609564 1751360

Salaries and Maintenance 409280 449932 534058

Salaries, Wages and Allowances 290535 293787 345283

Contracted Services 12225 20945 33899

Repairs and Maintenance 106520 135200 154876

Cost of Capital 288740 201127 177564

Depreciation 108643 104576

Impairment of Assets 80304 51

Internal Interest 99793 96500

Contribution to Funds 53451 73510 47996

Provision for Medical Aid 24417 15423 15965

Provision for Bad debts 29034 58087 32031

Net Contribution to Rates account 155759 218100 296897

Contribution to Rates account 252000 288100

Contribution from Rates account -96241 -70000

Charges allocated from other Departments

(administrative) 24127 28078 28211

Charges allocated from other Departments (for

services) 85463 105605 133399

Charges allocated to other Departments -60445 -50712 -66968


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General Expenses 100058 139336 124780

TOTAL EXPENDITURE 2603032 2774540 3027297

Surplus / (deficit) for the year 98173 122284 179503


6.6.2 Eskom

Eskom‟s aggregated figure of 14c/kWh sold is the closest approximation of operating costs available

to the researchers. This then places the operating costs at R1,882,066,311 for supply and

distribution to Cape Town.

(Source: Eskom Annual Report 2006)


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6.7 Aggregate of all flows of energy payments

6.7.1 Electricity (June 2006- July 2007)

Energy Consumed

(kWh) Ave

c/kWh Income Annual Income Monthly

Eskom

Energy Into System/ Expenditure -13,443,330,795 14 R -1,882,066,311 R -156,838,859

Energy Out of System / Income

Domestic – Conventional meters 460,000,000 40.08 R 184,368,000 R 15,364,000

Domestic – Energy dispensers 709,694,244 40.08 R 284,445,453 R 23,703,788

Commercial – Small 1 & 2 620,663,798 22.69 R 140,828,616 R 11,735,718

Large & Very Large 1,680,964,452 14.75 R 247,942,257 R 20,661,855

Sold to CCT 9,972,008,301 17.56 R 1,751,084,658 R 145,923,721

Cape Town Total 13,443,330,795 R 2,608,668,984 R 217,389,082

Net Profit (Eskom) R 726,602,672 R 60,550,222

CCT

Energy Into System/ Expenditure

Total Energy Bought -9,972,008,301 17.56 R -1,751,084,658 R -145,923,721

O+M Costs R -918,066,342 R -76,505,529

Capital Costs R -358,146,000 R -29,845,500

Total (CCT) R -3,027,297,000 R -252,274,750

Energy Out of System/ Income

Domestic-Conventional meters 1,495,589,251 34.54 R 516,572,461 R 43,047,705

Domestic – Energy dispensers 2,259,057,104 36.32 R 820,529,850 R 68,377,488

Commercial – Small 1 & 2 1,396,618,069 35.42 R 494,740,058 R 41,228,338

Large & Very Large 3,663,490,079 25.82 R 945,766,209 R 78,813,851

Off Peak 2,559,170 17.32 R 443,278 R 36,940

Municipal 355,096,880 33.01 R 117,227,765 R 9,768,980

Distribution Service Charges R 213,020,379 R 17,751,698

Total Energy Sold 9,172,410,553 R 3,108,300,000 R 259,025,000

Distribution losses 799,597,748 R 0

Capital Grants and Donations R 98,500,000 R 8,208,333

Total (CCT) 9,972,008,301 R 3,206,800,000 R 267,233,333

Gross Profit on Sales R 1,455,715,342 R 121,309,612

Net Profit (CCT) R 179,503,000 R 14,958,583

Source: 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); CT State of Energy Report 2003, Eskom Annual Report 2006,


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6.7.2 Liquid Fuels (2006)

Fuel Volume

(l) Income (R)

Oil Companies

Importing and Refining Gross Profit Unknown

Importing and Refining Operational costs Unknown

Marketing Gross Profit -Petrol 1,240,140,235 R 570,464,508

Marketing Gross Profit -Diesel 718,429,201 R 330,477,432

Marketing Gross Profit -Paraffin 82,346,185 R 55,501,329

Marketing Gross Profit -Jet Fuel 412,592,177 R 42,665,919

Marketing Gross Profit -LPG 127,047,856 Unknown

Marketing Gross Profit -HFO 118,295,985 Unknown

Marketing Operational Costs Unknown

Oil Companies’ Net Profit-Importing, Refining and Marketing (14c/l) 2,698,851,639 R 377,839,229

Fuel Tax and Customs and Excise

Government Income - Petrol 1,240,140,235 R 1,550,175,294

Government Income - Diesel 718,429,201 R 98,036,501

Government Income - Total R 1,648,211,795

Road Accident Fund

Road Accident Fund -Petrol 1,240,140,235 R 514,658,198

Road Accident Fund -Diesel 718,429,201 R 98,148,118

Road Accident Fund -Total R 612,806,316

Petrol Stations

Petrol Station Gross Profit - Petrol 1,202,936,028 R 576,725,143

Petrol Station Gross Profit - Diesel 258,634,512 R 23,795,989

Petrol Station Gross Profit - Total R 600,521,132

Other Retail Unknown

Source: SAPIA, SAPIA Annual Report 2005, DME Fuel Regulation Margins

7. Challenges, Constraints and Future Plans

7.1 Ten year outlook – constraints and opportunities

7.1.1 Electricity

With 98% of Cape Town‟s residents having access to electricity, the future challenges lie in:-

i. providing enough capacity to ensure that enough electricity is available to supply Cape Town‟s

growing demand in the future, and

ii. ensuring that as many energy efficiency and renewable measures as possible are put in place

to keep the growth rate of fossil and nuclear power demand as low as possible.


69

As indicated earlier in this report, Cape Town‟s electricity supply is limited by the capacity of the

transmission lines from the north, and by the size of Koeberg. Therefore, to accommodate increased

demand, new power stations need to be developed in the Western Cape, and/or the capacity of the

transmission line network from the north must be improved. As the national demand for electricity

grows and Eskom‟s generation capacity is stretched, it is becoming clear that Eskom will struggle to

provide the Western Cape‟s additional energy needs from its power stations in the north. Also huge

transmission losses of up to 20% are incurred in getting electricity to the Western Cape37. It therefore

makes more sense to develop power stations locally.

This can be seen as a great opportunity for the implementation of renewable power stations in the

province. Cape Town wishes to source at least 10% of its electricity from renewables by 2020, and the

Western Cape has a target of 15% by 2014. The potential for renewable developments has been

established by the Renewable Energy Plan of Action for the Western Cape, 2007. There is strong

potential for large scale wind, solar and tidal/wave power in the region. The challenge still lies in

developing renewable energy as a base load supply source, and not as an intermittent source, driven

by the forces of nature. Effective means of storing extra energy generated on site for later demand use

must be developed. When this becomes a reality, a real case can be made for using renewable

energy in the place of traditional base load stations (coal and nuclear).

In the meantime though, Eskom is pushing ahead with plans for more nuclear power stations in the

area (pebble bed and pressurized water reactors) to provide the base load requirements for the

anticipated increase in future demand. There is large scale concern that the full cost accounting

principle has not been taken into account with nuclear power. The cost of decommissioning a nuclear

power station and disposing of its spent fuel is estimated to be of a similar order of magnitude for

commissioning it.

7.1.2 Liquid Fuels

South Africa‟s demand for liquid fuels is expected to outstrip refining capacity in the next ten years38.

More refined product will be imported, further increasing the country‟s dependence on other countries

to provide its energy needs.

37

State of Energy Report for Cape Town, 2003 38



70

The largest growth areas in the industry are in jet fuel and diesel, with the demand for petrol, heavy

fuel oil and LPG also rising steadily. Paraffin demand is dropping with increased electrification of low

income areas39.

7.1.3 Coal

Coal is still a big factor in Cape Town‟s industrial energy picture. Very little information is available on

projected growth figures, and where the coal industry is headed in the future.

7.2 What future plans are envisaged, and how are they likely to shape

sustainable outcomes positively or negatively

Both the City of Cape Town and the Western Cape provincial government have developed strategies

to move towards sustainability in the future. These include energy efficiency, renewable energy and

carbon emissions reductions targets. While these targets are admirable and may have some impact

on the status quo of energy use, indications are that fossil fuel and nuclear energy use is likely to

increase for many more years before it declines.

7.2.1 Electricity

The following table shows definite plans currently in place to accommodate the growth in electricity

demand in Cape Town and the Western Cape.

Technology Capacity Target

year

Sustainability profile

Open Cycle Gas

Turbine

1050MW 2007 Cleaner than Coal

Unsustainable

Nuclear*

PebbleBed Modular

Reactor

165MW 2013 Unsustainable

Pressurised Water

Reactors

4000MW 2020 Unsustainable

Darling Wind Farm 20MW 2008- Sustainable

(*Falls into plan to generate 20000MW in South Africa using nuclear in the next 20yrs (ESKOM))

39



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Expansion of Darling Wind Farm

Darling Wind Farm plans to add another six wind turbines (a further 7.8MW) to the wind farm, followed

by another ten (a further 13MW) in the longer term, adding that global demand for the wind turbines is

so high that the earliest additional wind turbines would be available only by 2008.

7.2.2 Liquid Fuels

General fuel consumption levels are predicted to increase in the future, and the oil companies in South

Africa are preparing to import extra refined fuel products as the country‟s demand for fuel outstrips its

capacity to refine.

The DME has set the target of biofuels making up 4.5% of South Africa‟s liquid fuel mix by 2013 (2%

ethanol, 8% biodiesel)40. These biofuels will be mixed in at the refinery prior to being distributed.

While there are obvious sustainable benefits to using biofuels, situations may transpire in the future

where land which should be used for food production will be used for biofuel crops due to better profit

margins.

8. Conclusion It is clear from this study that Cape Town is still firmly on an unsustainable path of using fossil fuel and

enriched uranium for the majority of its energy needs. Energy demand is also on the increase, with

growth expected in both the electricity and liquid fuel industries in the next ten years. Both industries in

Cape Town are multibillion rand operations, and are key elements of Cape Town‟s economic and

employment base.

Government relies heavily on the liquid fuel industry for income, receiving R1.65 billion in fuel taxes

from fuel sold in Cape Town alone in 2006.

With new nuclear power stations being planned for the Western Cape, every effort should be made to

see where energy efficiency and renewable energy can replace these plans. This should be an item of

the highest priority, in order to avoid being locked into an unsustainable fixed nuclear program for the

next 10 to 15 years. Government will have to drive these changes through its regulatory bodies.

40

Draft Biofuels Industrial Strategy of the RSA, DME, November 2006


72

A sustainable biofuels program and spending on infrastructure to achieve a transport modal shift will

increase fuel security and decrease fuel consumption levels.


73

BIBLIOGRAPHY

CCT: State of Cape town Report 2006

CCT: Request for proposals: Athlone Power Station: Independent Power Project, 2004

CCT & Haskins C: Household Numbers in Cape Town-Discussion Document August 2006

CCT & Sustainable Energy Africa: State of Energy Report for Cape Town 2003

CCT & Sustainable Energy Africa: Draft Energy and Climate Change Strategy 2005

Cowan, B & Mohlakoana, N 2004. Barriers to access modern fuels in low-income households: Khayelitsha. Cape Town, Energy Research Centre, University of Cape Town.

DME: Draft Biofuels Industrial Strategy of the RSA, November 2006

Droege, Peter: Renewable City, A Comprehensive Guide to an Urban Revolution, 2006

ESKOM: ESKOM Annual Report 2006

NNRA: National Nuclear Regulator Annual Report 2005/2006

SAPIA: SAPIA Annual Report 2005

Simmonds, G & Mammon, N 1996. Energy services in low-income urban South Africa: A quantitative assessment. Cape Town, Energy & Development Research Centre, University of Cape Town.

Sustainable Energy Africa: State of Energy in South African Cities 2006

Sustainable Energy Africa, Shell Foundation: Market Analysis of the SME energy sector 2002

Western Cape Department of Environmental Affairs and Development Planning, Banks D, Schaffler J:

A proposed renewable energy plan of action for the Western Cape 2007

Winkler H, Borchers M, Hughs A, Visagie E, Heinrich G: Cape Town Energy Futures: Policies and

Scenarios for sustainable city energy development, Jan 2005