One of SA's largest SWH projects rolled out at platinum mine

Awesome to see some big solar water heating projects being rolled out! This one has 270 collectors. At a guess, this system can deliver around 45,000 litres of hot water per day, although they only have 28 000 litres of storage, which is a bit small. It works out at 45 litres each day for each of the 1500 miners– enough for a short quick efficient shower. I hope they were clever enough to put low flow heads on the showers!

As the storage is a bit small, the electrical side will definitely kick-in between shifts, which is a bit of a waste, and on such a large system, why they did not use a heat pump instead of the electrical backup I do not know. Frank

http://www.engineeringnews.co.za/article/one-of-sas-largest-swh-projects-rolled-out-at-platinum-mine-2009-09-09

PBMR socio-economic report flawed

Greetings from Scotland on a wet and windy day! In the article below the PBMR comes under more flack for a poorly done Socio-Economic Impact Assessment. Not surprising – PBMR’s have poor Socio Economic Impacts! Frank

http://www.energynews.co.za/web_main/article.php?story=20090827203547153&ltype=article

Gotta love George.... "Not Even Wrong"

Gotta love George Mobiot, even if the stuff he writes sometimes makes the carbon stand up on the back of your neck! Like:

“The targets and methodology being used by governments and the United Nations - which will form the basis for their negotiations at Copenhagen - are not even wrong; they are irrelevant. Unless there is a radical change of plan between now and December, world leaders will not only be discussing the alignment of deckchairs on the Titanic, but hotly disputing whose deckchairs they really are and who has the responsibility for moving them. Fascinating as this argument may be, it does nothing to alter the course of the liner.”

More below. Frank

http://www.monbiot.com/archives/2009/08/31/not-even-wrong/

More Mini-Nukes

Looks like the PBMR may get beaten in the race for a mini-nuke... Frank (PS: note the cents are US cents)

http://www.greentechmedia.com/articles/read/sandia-joins-race-for-mini-reactors

Eskom slumps to record R9,7bn loss on big coal, metals-linked derivatives swing

This makes for scary reading! Frank

Eskom slumps to record R9,7bn loss on big coal, metals-linked derivatives swing

By: Terence Creamer

27th August 2009

State-owned power utility Eskom slumped to its worst ever loss of R9,7-billion in its 2008/9 financial year to end March, primarily on higher coal costs and a massive fair value loss on embedded derivatives, associated with pricing agreements the utility has with metals smelters in South Africa and Mozambique.

Had it not been for the big swing in the loss associated with metal-price-linked contracts, the Eskom's operating loss for the year was a considerably lower R3,1-billion.

But the results were also negatively affected by a 2,4% falloff in sales of electricity to 214 850 GWh, partly the result of load shedding and partly a consequence of the slowdown in demand brought on by the recession.

Eskom, which employs 37 857 people and has a total of 4,3-million customers, had a nominal capacity is 44 193 MW and net maximum capacity is 40 503 MW.

CEO Jacob Maroga indicated that actions were being taken in a bid to try and return the business to a breakeven position during the current 2009/10 financial year.

COAL CRUNCH

Eskom spent a whopping R25,4-billion on coal in the period, some R7-billion more than the R18,3-billion spent on the primary-energy source in 2007/8. It bought 133-million tons, 13-million tons more than the 120-million tons of 2008, and burnt 121-million tons, a level likely to be repeated in the current financial year.

The higher expenditure was mainly the result of Eskom's use of short-term contracts, deployed to rebuild stockpiles that had been depleted to unacceptable levels, and helped precipitate the load-shedding crisis of early 2008. Moreover, this restocking was implemented at a time when the export coal price was peaking at above $100/t.

Stock levels were now running at a far more comfortable 41 days as compared with the 13 days of stocks at the peak of the 2008 crisis.

The additional costs were also a consequence of the fact that the existing power-station fleet, which was having to be run harder owing to capacity shortfalls, was burning more coal than that contracted for with the dedicated, or tied, collieries. More coal also had to be transported from distant mines, which had added considerably to logistics costs.

Coal cost savings of R4-billion were being targeted for the current financial year, as Eskom gave greater priority to engagements with the coal-mining industry to better manage these costs. A national coal forum had been established to reduce the coal costs to Eskom and coal costs had already started to moderate.

Eskom was concerned, however, that there was currently insufficient coal-mining capacity in South Africa for long-term supply contracts to be concluded, as new mines had not been opened.

DISCOUNTED POWER CHALLENGE

A far more difficult problem to resolved, however, was the one relating to the discounted electricity prices to aluminium and ferrochrome producers - contracts that had been negotiated at a time when the utility was power flush and which effectively transformed South Africa into a major world aluminum producer in a matter of a few decades.

But as Eskom's reserve margin had declined and the country had experienced blackouts, the utility has been keen to extricate itself from the deal, which it viewed as unsustainable and in conflict with its shareholder's stated position that all State-owned enterprises move to end embedded-derivatives contracts that could cause undue earnings volatility.

In the year to March 31, Eskom's commodity-linked pricing contracts with aluminum producer BHP Billiton (which were based on London Metal Exchange prices adjusted for the rand: dollar exchange rate) as well as other smaller arrangements, had deepened the losses by a whopping R6,6-billion.

"Correcting embedded derivatives is a big issue," Eskom CEO Maroga told Engineering News Online, while chairperson Bobby Godsell added that Eskom would be engaging its commodity-liked customers with a view to achieving more equitable pricing.

Godsell stressed that it stilled valued its commodity-linked customers, but stressed that the contracts were concluded a long time ago and under very different circumstances.

"These customers have long-term as well as short-term interests and we will simply sit down with them and explain why these contracts are problematic, not only in price, but also because of the accounting uncertainty that they impose that makes proper strategic management of resources very difficult.

"We will look at both the form and the content of the contracts and I would hope that we could come to a good long-term basis of doing business," Godsell said.

NOT SUSTAINABLE

In the context of a R385-billion, five-year capital investment roll-out, the scale of the loss was viewed as "unsustainable" by Eskom, which still had an R80-billion funding shortfall for its Medupi, Kusile and Ngula projects.

The much discussed funding plan - which was meant to be finalised soon, given that Eskom wanted clarity ahead of the September deadline for its full submission to the regulator of a new tariff application under the second multiyear tariff determination period (MYPD-2) - would be key to placing the utility back on a sustainable footing.

Earlier, the National Energy Regulator of South Africa granted Eskom an "interim" 31,3% increase in its electricity tariff while it awaited the funding plan and the MYPD-2 application.

Eskom has continually stressed the need for an average tariff that reflected the full cost of electricity, as well as to support a build up of reserves to help it fund the capital expansion.

But business and labour have argued for a "smoothing" of such increases, suggesting that a spike would have devastating consequences for the economy and employment.

For that reason, the funding plan envisaged will probably not have an over-emphasis on revenue generated from tariffs alone, with the financing gap being closed through a combination of equity or near equity, government guarantees, commercial and development-finance debt, as well as consistent and transparent tariff increases.

Government had already provided R60-billion in the form of a subordinated loan with equity characteristics, and had made a further R176-billion available in the form of guarantees.

A development bond, which would enable South Africans to invest in the expansion of their energy system, was also being considered – with Martin Creamer.

Cars & the grid

This, my friends, is the way I see the future of electric cars and the grid. Viva the Smart Grid! Viva! Frank

PS: Cars are evil

http://ecogeek.org/automobiles/2913-ford-will-roll-out-plug-ins-with-smart-grid-tech

SA working on financial instruments to boost renewable projects

The article below talks about three funding mechanisms for Renewable Energy:

· REFIT – Best idea, let’s wait and see if it happens – see my comments below

· REFSO – A joke

· REMT – Brilliant, but little clout

ESKOM to produce 6000GWh of Renewables Energy, 60% of our target? How? They just shelved their only wind farm and only solar project?

“700 MW” of Renewables. If we assume 60% for ESKOM, that leaves 280MW for IPPs. It is a bad joke! Even 700MW is a bad joke. We can do 2GW wind in the Cape easy! See below...

“Challenge of connecting generators to the grid should not be underestimated, as it was substantial” = lots of excuses why NOT to connect renewable energy from Independent Power Producers.

To fund Renewable Energy “A massive electricity price increase would be required to meet those targets and costs.” = rubbish! The 2c levy by treasury is already enough for over 2GW of wind farms.

Seems to me that DoE (Department of ESKOM, er sorry, Energy) is eating up all the garbage that ESKOM is spewing to them.

Come on, we (South Africa) can do better than this!

Frank

From: http://www.engineeringnews.co.za/article/sa-working-on-financial-instruments-to-boost-renewable-projects-2009-08-17

RE: 50|50 Environmental Program to be taken off the air

I think it is a travesty that the leading environmental program on TV is to be taken off the air. Please support this petition to try and stop this happening. Frank

http://www.save5050.co.za/

BP stand for "back to petroleum" - oil giant shuts clean energy HQ, slashes renewables budget up to $900 million this year, dives into tar sands

You definitely cant leave it to big oil to solve the energy problems. They know how to make money from petrol, not from anything else. So I am dying of not surprise reading this article.

From: http://climateprogress.org/2009/06/30/bp-stand-for-back-to-petroleum-oil-giant-shuts-clean-energy-hq-slashes-renewables-budget/

RE: G.D.P. R.I.P.

This is a great article on why we should do away with GDP. One of the core flaws he picks up is that "every instance of replacement of a natural-capital service with a built-capital service shows up as a good thing" in GDP. Intuitively to do this makes no sense. Read on for more! Frank

http://www.nytimes.com/2009/08/10/opinion/10zencey.html

Another reason (or two) to not be building coal power stations

To run coal power stations, Eskom needs 1) coal and 2) water.

1) Coal – we don’t have enough. The world does not have enough. We don’t have enough oil either, and thanks to SASOL Coal = Oil. Thus the price is going to go through the roof. Thus running coal fired power stations will become expensive.

2) Water – we don’t have enough. And dry-cooling is expensive.

Frank

ESKOM's Energy Dilemma: http://business.iafrica.com/news/1857243.htm

RE: Chevrolet Volt

It’s amazing to what extent legislation can support green-washing. Chevrolet has just launched their hybrid electric-petrol car, the Volt, with the claim that it does 230 miles to the gallon, or approximately 100 km per litre. This calculation is according to the US Environmental Protection Agencies draft calculator for calculating such a value. The value, of course, is meaningless, as it is only for short distances and it INCLUDES the distance travelled using the electric charge when the car is not using any petrol at all!

Applying the same methodology to a completely electric car would claim that it gets an infinite amount of mileage for every gallon of gas...

Article on the Volt: http://wheels.blogs.nytimes.com/2009/08/11/gm-chevy-volt-gets-230-mpg/

RE: Climate Change Seen as Threat to U.S. Security

Pay the price today, economically, or later, militarily. Frank

From: http://www.nytimes.com/2009/08/09/science/earth/09climate.html?_r=1&th&emc=th

Wish you weren't here: The devastating effects of the new colonialists

This makes for scary reading. You could just as well replace “food” with “energy”. Those with money continue to exploit the poor, and as all resources become more scarce, one can only imagine the backlash from the deprived and dying.

http://www.independent.co.uk/environment/nature/wish-you-werent-here-the-devastating-effects-of-the-new-colonialists-1767725.html

China starts building first 10-GW mega wind farm

Imagine that! China builds one wind farm a quarter of the size of the whole of South Africa’s generation capacity! That’s probably about 5000 turbines.

From: http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE5771IP20090808

Cost of Nuclear 1 - SA

Alas, it appears that the figure quoted by Eskom chief executive Jacob Maroga for the cost of the new nuclear plant for South Africa was wrong. He said R300 billion. Seems that is the cost for the next THREE nuclear plants. Thus the cost of nuclear is not ZAR 75 million / MW but rather ZAR 25 million / MW. Still more than wind, and that is without overruns.

But, I am not sure what is more scary, the fact that nuclear is still expensive and we’ll do it anyway, or that the Chief Executive of ESKOM does not know what they cost!

Frank

Power to the Tower!

Concentrated Solar Towers are good to go! This one was turned on yesterday. Another company has orders for 2GW. Frank

http://www.greentechmedia.com/articles/read/esolar-shows-off-its-solar-thermal-tower/

Update on Nukes

Here is a great little article on Nuclear from the Home Power magazine in the US that a friend sent me. http://www.homepower.com/article/?file=HP132_pg110_PowerPolitics

There is also another good article on the state of nuclear at http://europe.theoildrum.com/node/5631 by Dr. Michael Dittmar, a researcher with the Institute of Particle Physics of ETH Zurich, and he also works at CERN in Geneva. Here are some highlights:

• The overall fraction of nuclear energy to electric energy has gone down from 18% in 1993 to less than 14% in 2008. With electric energy providing roughly 16% of the world-wide energy end use, one finds overall a nuclear energy contribution of less than 2.5%.
• The number of produced TWhe of electric energy from world-wide nuclear power plants is now lower than in 2005, and it has decreased by about 2% from a maximum of 2658 TWhe in 2006 to 2601 TWhe in 2008.
• Today and world wide, 48 nuclear power plants with a capacity of about 40 GWe are under construction. Only 10% of them are being constructed within OECD countries, which host currently about 85% of the existing nuclear reactors. However, about 100 older reactors with slightly larger capacity are reaching their retirement age during the same period. It follows that even if all 48 reactors might be connected within the next 5 to 10 years to the electric grid, it will be difficult to maintain the current level of TWhe produced by nuclear energy.
• The natural uranium equivalent required to operate the 370 GWe nuclear power plants of today is roughly 65,000 tons per year. However during the past 10 years, the world-wide uranium mines extracted, on average, only about 40,000 tons of uranium per year, and the difference had to be compensated for by secondary resources. According to the data from the Red Book 2007 and the WNA, the remaining civilian uranium stocks are expected to be exhausted during the next few years. Consequently the current uranium supply situation is unsustainable.
• The urgency to increase world-wide uranium mining by a large amount is well documented in the current and past Red Book editions and related official declarations. However, the latest uranium mining data indicate that new uranium mines will not be capable to compensate for the diminishing secondary uranium resources, and that it will be difficult to fuel the existing 370 GWe. It seems that either a rather welcome but improbable further large conversion of nuclear weapons into reactor material will happen during the coming years, or fuel supply problems within the next 3-5 years will force a 10-20 GWe reduction of the operational nuclear power capacity.

Frank

Sasol sponsors Stellenbosch solar thermal energy research

With no offense to my friends at Stellenbosch University, but this is greenwashing on SASOL’s part. It is a pity that it is a giant petrochemical company is sponsoring this work, and R3-million is piddly sum too. Last year in June, during the oil crisis, SASOL was making R100 million per day!!! (http://www.mg.co.za/article/2008-06-06-sasols-profit-rockets-to-r100m-each-day). I challenge SASOL to give one days profit to Stellenbosch University.

When will the industrial sector / government see the light and invest in solar in the same way they invest in fossil fuel processes (coal to oil, gas to oil) and nuclear? The money is great for Stellenbosch, but greenwashing for SASOL.

Frank

Article at: http://www.engineeringnews.co.za/article/sasol-sponsors-stellenbosch-solar-thermal-energy-research-2009-08-04

Fly TURTLE airlines

Now THIS is the way to fly! :) Frank

From: http://cleantechnica.com/2009/07/28/solar-blimp-to-fly-from-nyc-to-paris-rests-on-land-or-water/

World is running out of oil

"The era of cheap oil has ended”.

Here we go again. Last time oil got to around USD160 a barrel, where will we go this time? And oil at that price means any economic recovery will stall.

Don’t forget this will impact the price of coal and food. Coal = oil (ie SASOL). Food = oil (ie biofuels). And all of these exacerbate climate change. For South Africa, you can guarantee electricity prices will continue to rise dramatically.

Frank

http://www.busrep.co.za/index.php?from=rss_&fArticleId=5111083

Cost of nuclear demo plant soars to R31bn

So a new conventional nuke (Nuclear-1 @ 4000 MW and 75% capacity factor) is going to cost us around ZAR 300 billion, and the much smaller PBMR around ZAR 31 billion (assuming 75% capacity factor). For the conventional nuke, that is ZAR 75 million / MW. Assuming that both the heat AND electricity are used form the PBMR, that is ZAR 110 million / MW.

Wind is only ZAR 16 million per a MW (assume 27% availability), and concentrated solar with storage (ie dispatchable, with 40% availability) ZAR 38 million per MW. Even taking into account capacity factors, that makes wind and solar cheaper than nuclear.

What on earth are we doing with our industrial strategy?????

Frank

From: http://www.busrep.co.za/index.php?from=rss_&fArticleId=5109729

Levi factory dumping waste

Here is a great (ie disgusting) example of “externalisation of costs”. I love Lesotho, and makes me sick the exploitation there, of the people (like in this example) and natural resources (like the Lesotho Highlands Water Scheme) - Frank

http://www.news24.com/Content/Africa/News/965/b96c0ad386474d2993707ba8dd4b2239/02-08-2009%2006-58/Levi_factory_dumping_waste

Engineering News Highlights

A lot in the Engineering News this week.

First, DPE minister Barbara Hogan supports the PBMR: http://www.engineeringnews.co.za/article/minister-re-affirms-that-government-is-behind-pbmr-nuclear-programme-2009-07-30. She argues that it is a great way to develop a product to export. It is not. And it wont be for electricity any more, but for heat. See also: http://www.engineeringnews.co.za/article/sa-nuclear-company-concentrates-on-core-competences-and-diversifies-markets-2009-07-31

Then, a new “miracle” vertical axis turbine (VAWT): http://www.engineeringnews.co.za/article/sa-researcher-develops-new-vertical-axis-wind-turbine-configuration-2009-07-31. It is presented as increasing energy yields by 400%, but this is an unfair comparison to normal VAWTs as this configuration has more than 2x the wind area than a normal VAWT, so at best ,maybe a 30% increase, but this would probably put it beyond the limits of what can actually be harvested from the wind, so there is something else happening here. Not to mention that the configuration of the “blades” is awful in terms of vibration on the main shaft! I cannot see this design practically working versus a traditional VAWT of the same area.

And lastly, a summary of an energy caucus I went to: http://www.engineeringnews.co.za/article/civil-society-should-be-directly-involved-in-determining-sas-energy-future-2009-07-31. Worth a read. The main outcome is an argument for openness and transparency in all that ESKOM and the DoE are doing – at the moment, most of the energy happenings happen behind closed doors.

Frank

Exxon Embracing Algae Biofuels

Greenwash or serious? Just another away of making money, or a real attempt to save the planet? Those are the questions... Frank

http://ecogeek.org/biofuels/2879-exxon-embracing-algae-biofuels

Incredible Shadow Art Created From Junk

Wouldn’t it be amazing if junk could not be turned into amazing art, but put to good use as inputs to other processes, and thus become beautiful again? Frank

http://www.environmentalgraffiti.com/featured/incredible-shadow-art-created-from-junk/12265

Asia Challenges the U.S. for Green-Tech Supremacy

The space-race is now the green-race. Maybe the East will win this one? Frank

http://www.time.com/time/world/article/0,8599,1906704,00.html

ESKOM comments on everything of interest!

This is a very interesting interview, with comments about Coal, Renewables and IPPs that make for very interesting reading! A few highlights below. Frank

From: http://www.eepublishers.co.za/view.php?sid=18119 Coal is cheap, and this has been a driving force in developing the industrial economy that we have in South Africa today. Now we should diversify, and we are serious about reducing our carbon footprint and introducing renewable energy. But we all know that this is more expensive, and that we cannot deal with the current energy deficit through the provision of renewable energy now. Of the renewable energy resources that we have in the country, the most abundant one, solar, is certainly not at a stage of development that it could meet the country’s current energy deficit. Eskom is still committed to nuclear energy, and we believe that there is a policy in the country that is very clear about nuclear energy and its future, and that nuclear energy should play a role in South Africa. Water is going to become a significant restraining resource, and you have already spoken about our carbon footprint. My personal view is that nuclear energy is South Africa’s best response. Eskom supports that it should have a nuclear programme, and that it should be based on the pressurised water reactor technology that we have at Koeberg, which is our existing skills base in South Africa. We have decided to put the 100 MW wind farm project on hold. In terms of Cahora Bassa, we have worked on the purchase of a fifth generator at Cahora Bassa, we have upgraded our Apollo substation to be able to import more power, and certainly we would be looking for the upgrade of the Tsonga substation in Mozambique to then facilitate the increased import through the HVDC line. There is no specific plan in Eskom to keep IPPs out. But the one debate that nobody has is how much do you pay for this lot? And I can say to you, it’s not the price we have just got from the Regulator, and it’s not what we asked for – it is at least double. But that debate is never had. Unless we deal with how to fund, not only Eskom’s operation, how to deal with IPPs, and pay for this, and fund this as an industry, we cannot commit. You cannot expect us to commit into an agreement without having the money to pay for it. You will agree with me – like you said for the build programme – that would be irresponsible.

Maties Join Global Bioenergy Project

It is indeed important to have a global view on bio-energy, especially with the scare last year around the impacts of ethanol biofuels on food production. Great that Stellenbosch University is a leader in this field. There will also be a seminar by some of the esteemed individuals mentioned below on the 3^rd of August in Cape Town. If you are interested in going, let me know, and I’ll put you in touch. Frank

http://www.cbn.co.za/dailynews/3916.html

At Wal-Mart, Labeling to Reflect Green Intent

Tesco in the UK has started labeling products with their Carbon Footprint, and now even the US Wal-Mart is considering doing something – only bigger and better! Frank

http://www.nytimes.com/2009/07/16/business/energy-environment/16walmart.html

Solar powered flower ad's for the New Toyota Prius

These oversized flower sculptures are partially powered by solar panels on the back of their petals and the base of their stems. Each of the five Solar Flowers provides seating for up to 10 people, access to free Wi-Fi service and power to charge cell phones and laptops.

http://www.flickr.com/photos/toyotausa/sets/72157621338986277/

Frank

The demise of the pebble bed modular reactor

Bye bye nasty PBMR nuke. Yippee! Frank

http://thebulletin.org/web-edition/features/the-demise-of-the-pebble-bed-modular-reactor

Why America is flunking science

This article makes you think....

Makes you also wonder what our scholars (learners?) think of scientists, if they think of them at all....

http://www.salon.com/env/feature/2009/07/13/science_illiteracy/

Frank

Climate Negotiations

Seems that the politicians are at in again. Prepared to agree to a fuzzy “we can’t let global warming go over 2 degrees” but are not prepared to even consider targets that would remotely get us in that space. Guess we are heading for 3 degrees. 2 was bad enough, 3 will be catastrophic. Developing countries have the most to lose.

The saddest part of it is, nobody really believes it will happen.

http://www.nytimes.com/2009/07/09/world/europe/09prexy.html?_r=2&th=&emc=th&pagewanted=print

What South African Fleets should be doing

Now THIS is what we should be doing with government fleets in South Africa - going electric! When will they order from Optimal Energy, our very own Electric Car company??? Let’s wait and see...

http://www.autobloggreen.com/2009/07/06/redefining-e-mail-japan-post-to-start-testing-40-electric-ve/

The safest Nuclear Power Station in the World

I have finally been persuaded that at least ONE nuclear power station is safe. It look a while, but I am now a believer that indeed a nuclear power station can be safe. Before jumping on me, please read the article below:

http://blog.reegle.info/blog/the-safest-nuclear-power-station-in-the-world.htm

:)

Carbon Capture and Storage for Coal Power Stations

Is there such a thing as clean coal? I would say no, or at least, not at an affordable cost. As Al Gore has said, there is currently no such thing as clean coal technology. (Also see http://www.thisisreality.org/)

What about CCS? Carbon Capture and Storage has been touted as the "solution" to coal power stations. However, this too is a fallacy. A recent McKinsey report (http://www.mckinsey.com/clientservice/ccsi/pdf/CCS_Assessing_the_Economics.pdf) lists CCS costs at USD80 to USD120 per ton now, and USD40 to USD60 per ton by 2030. That equates to R0,80to R1,20 per kWh now, and R0,40 to R0,60 per kWh by 2030.

The proposed new coal power stations for SA are touted to be "CCS ready" (whatever that means), but are we prepared to pay double the price for coal-based electricity, where even the long term storage possibilities for the CO₂ are dubious?

Read more in the following article: http://www.greentechmedia.com/articles/read/carbon-capture-its-possible-solutions-part-i/

Frank

Plentiful Coal, Not Peak Oil, Is Greatest Global Warming Threat

If South Africa is serious about Climate Change, then they need to consider this: ‘"Returning carbon dioxide to 350 parts per million by this century is still feasible," he said. But a key part of getting there would be to phase out all emissions from coal by 2030’

See: http://www.greentechmedia.com/articles/read/plentiful-coal-not-peak-oil-is-greatest-global-warming-threat-5395/

Frank

Barbara Hogan for President

A few select quotes from our Minister of Public Enterprises, Barbara Hogan (full speech below) (Note SOE = State Owned Enterprise):

· (The state’s) job, as a developmental state, ... is to re-orient the SOE towards the twin goals of attaining our socio-economic developmental goals and maximising operational efficiency and financial sustainability.

· Despite significant funding challenges, the implementation of Eskom’s capacity expansion programme must continue, with particular emphasis on bringing the two new 4 000 Megawatt plus Baseload coal-fired power stations, Medupi and Kusile, into service as soon as is humanly possible.

· Eskom’s planned capacity expansion programme will spend R385 billion in nominal terms over the five years which began in the 2008/9 financial year. The programme in its entirety plans to double Eskom’s generating capacity to 80 000 Megawatts by 2026, with a projected spend in excess of R1 trillion.

· The funding of Eskom’s capital expenditure programme remains a challenge, especially in these times of reduced debt access in the global markets, in the context of an electricity price that does not accurately reflect the cost of production.

· The price of electricity, for instance, has not been reflective of the true cost of production, especially in light of the new build programme. Since 1990 ,Eskom has foregone over R148 billion in revenue in nominal terms (R257.8 billion in 2009 money). This has led to falling financial reserves, to the point where Eskom is no longer able to meet its expansion requirements without significant borrowings, or financial injection from the state.

· The Electricity Pricing Policy (EPP) approved by Cabinet in December 2008, states that “revenue from tariffs should reflect the full cost (including a reasonable risk adjusted margin or return) to supply electricity and ensure that the industry is economically viable, stable and fundable in the short, medium and long term”.

· The current 34% price increase is based purely on the increases in operational expenditure and excludes the cash flow requirements for the capital expansion programme.

· It is absolutely paramount that the Eskom capital expenditure programme continue unabated as it will also serve to support South Africa’s economic growth and provide jobs in these difficult times.

· It is an imperative that Eskom’s operational costs are fully funded through its tariff which is regulated by the National Energy Regulator of South Africa (NERSA).

· Failure to obtain the 34% increase will result in a severe cashflow shortfall for Eskom and it will have to take the necessary steps to curtail its business operations to remain financially stable.

Frank

DEPARTMENT OF PUBLIC ENTERPRISES, VOTE 30

ADDRESS BY MINISTER BARBARA HOGAN TO THE NATIONAL ASSEMBLY

EMBARGOED: NOT FOR RELEASE BEFORE 16h00

23^RD JUNE 2009

Mr Speaker,

Historical Role of State-owned Enterprises

State-owned enterprises, in their past and present form, have played an indispensable role in the development of our country and our economy by providing essential infrastructure, such as postage, rail, water, telephony, communications, fuel, energy and development financing, without which no economy or country could have functioned or survived

As is the case elsewhere, they are creatures of their time, reflecting in their practices or founding mandates the socio-political objectives of their governments. In the case of South Africa in particular, this was most evident in the era of apartheid, where they were aggressively used to disempower blacks and drastically reduce white poverty by privileging the white working-class, to insulate the apartheid economy from economic sanctions, and to ‘develop’, euphemistically speaking, the homelands. Finally, they became the aggressive entry point for white Afrikaners into the economy, from beyond the traditional confines of agriculture - a form of white Afrikaner affirmative action.

With the advent of democracy in South Africa in 1994, government inherited a large and complex array of SOE, with varying degrees of efficiency, efficacy and purpose. Its job, as a developmental state, both then and now, is to re-orient the SOE towards the twin goals of attaining our socio-economic developmental goals and maximising operational efficiency and financial sustainability.

From the point of view of efficiency and sustainability, government has adopted a multi-faceted approach to restructuring, which, whilst incorporating privatisation as an option, is not limited to that alone. Restructuring is officially defined as ‘the matrix of options that includes the redesign of business management principles within enterprises, the attraction of strategic equity partnerships, the divestment of equity either in whole or in part where appropriate, and the employment of various immediate turnaround initiatives.”

Privatisation on its own is never a guarantee of either success or failure in attaining efficiencies and sustainability. Decisions have to be taken on a case-by-case basis with careful consideration of the context and the environment, and of the value of the transaction to the State. For instance, the privatisation of Telkom had some negative consequences for it entrenched monopolistic practices and undermined accountability for service provision. The problems are compounded in a poor regulatory environment. On the other hand, the disposal of non-core assets in Transnet stable has enabled the corporation to focus on its core business, and we look forward to seeing dramatic improvements in that regard.

The entities that fall under the DPE stable are in the main all corporatised, with independent boards. Most of the SOE in our portfolio operate in key network infrastructure areas – in the electricity, broadband, aviation, and port, rail and pipelines sectors, as well as areas of advanced manufacturing, which have the potential to catalyse economic growth and to ensure that this growth is accompanied by the creation of much-needed jobs.

To be able to fulfil this role these SOE must be strong enterprises and must be institutionally responsive to the Strategic Intent signals of Government as shareholder. Being a strong enterprise means that there is an enabling external environment for the SOE to operate in. A strong enterprise also means that these SOE have:

· Adequately capitalised balance sheets

· Adequate and predictable cash flows going forward, sufficient for the execution of their respective business plans

· Strong Boards and Management teams

· Solid strategic and business plans

· Alignment with labour

· Responsiveness to Government’s strategic objectives.

All of these characteristics are of course to varying degrees not in place.

Our responsibility as the shareholder manager is to balance the commercial sustainability of the SOE with the State’s strategic intent in owning these enterprises. This creates a delicate balance in that if the strategic purpose subverts commercial viability, the enterprise will collapse, but if commercial considerations override the strategic purpose, government objectives will be compromised. It is our challenge to provide shareholder oversight in a manner that builds financially robust, developmental enterprises, rather than to see these two aspects of the SOE as mutually exclusive.

This is in line with the ruling party’s Polokwane resolution that calls for “strengthening the role of state-owned enterprises and ensuring that whilst remaining financially viable, SOE’s, agencies and utilities – as well as companies in which the state has significant shareholding – respond to a clearly defined public mandate and act in terms of our overarching industrial policy and economic transformation objectives.”

There is a further strategic, historical imperative. In the present worldwide economic recession, and in the light of the huge backlog in infrastructural investment, the SOE must massively expand the rollout of their infrastructure programmes. This will help to counteract the economic downturn by accelerating jobs and investment. Comprising an investment of R787 billion rand, it is the world’s third-largest infrastructural investment programme. Both Eskom and Transnet are critical to this programme.

These infrastructural investment programmes can be used to systematically develop the manufacturers that supply the SOE with the components necessary for the infrastructure roll-out. This leverage is optimised when there is long-term infrastructural planning, combined with a high level of standardisation of requirements and the building of strategic relationships with national suppliers. This gives industry a firm basis to invest, and allows them to achieve economies of scale and high levels of efficiency as a result of the learning curve. The Department established the Competitive Supplier Development Programme (CSDP) in 2007 to embed the supplier development process into the heart of the investment programmes. However, in order to achieve these objectives, sophisticated procurement capabilities are required – a further reason to emphasise the building of procurement capacity. In addition, it is critical that we build our capacity to coordinate a range of government incentives with the procurement process to ensure investment in advanced manufacturing capabilities. We believe effective procurement leverage can result in sustained job creation and, ultimately, in exports.

The current regulatory system was established during a period of minimal investment, and has not been adequately revised. The consequence is that tariffs, particularly in electricity, are not designed to provide enterprises with the cash flows to fund an aggressive build programme. Given the scale of the investment programmes, it is unlikely that the fiscus will be able to fund the costs of the capital build. This is a major threat to the investment programmes and needs to be given considerable focus.

Given the accumulated backlog of investment in infrastructure, it is critical that we create an environment where the private sector can participate in the system alongside SOE, rather than as an alternative to them. A further problem with the low tariff regime is that it hinders the ability to introduce private operators and funding into the system, as the returns offered to these players will not be sufficient to justify the investment. These investors do not only bring much needed financial capital, but can also introduce a competitive dynamic to the system that will increase efficiencies, and in certain instances will give consumers greater choice.

Finally, it is absolutely critical that funding models for our enterprises be finalised as soon as possible. Many of our SOE are unable to adequately generate their funding requirements from their own operations and are reliant on borrowings that are often guaranteed by the State. It is absolutely clear that additional sources of funding must be sought. The state as 100% shareholder is a potential source of equity funding, but as is well-known, the fiscus is not in a position to provide the scale of funding required. We are living in harsh economic times when even yesterday’s newspapers were reporting on the imminent collapse of a number of welfare organisations, when only a few months ago a Province ran out of anti-retroviral medication and when pressures on the Unemployment Insurance Fund will accelerate. These sobering reminders of the desperate need out there must galvanise the department to urgently address the finalisation of appropriate funding models for our SOE’s: this must become an absolute priority.

While we will deal more intensively with each of the SOE in our regular interactions with the Portfolio and Select Committees, it is prudent that I speak here directly to the issue of Eskom:

Eskom

Despite significant funding challenges, the implementation of Eskom’s capacity expansion programme must continue, with particular emphasis on bringing the two new 4 000 Megawatt plus Baseload coal-fired power stations, Medupi and Kusile, into service as soon as is humanly possible.

Eskom’s planned capacity expansion programme will spend R385 billion in nominal terms over the five years which began in the 2008/9 financial year. The programme in its entirety plans to double Eskom’s generating capacity to 80 000 Megawatts by 2026, with a projected spend in excess of R1 trillion.

The funding of Eskom’s capital expenditure programme remains a challenge, especially in these times of reduced debt access in the global markets, in the context of an electricity price that does not accurately reflect the cost of production.

The price of electricity, for instance, has not been reflective of the true cost of production, especially in light of the new build programme. Since 1990 ,Eskom has foregone over R148 billion in revenue in nominal terms (R257.8 billion in 2009 money). This has led to falling financial reserves, to the point where Eskom is no longer able to meet its expansion requirements without significant borrowings, or financial injection from the state.

The Electricity Pricing Policy (EPP) approved by Cabinet in December 2008, states that “revenue from tariffs should reflect the full cost (including a reasonable risk adjusted margin or return) to supply electricity and ensure that the industry is economically viable, stable and fundable in the short, medium and long term”.

The principles behind the EPP are based on a sustainable electricity supply industry where a prudent operator can recover the full prudent costs of production and earn a reasonable return on their assets, and energy efficiency is promoted through a cost reflective tariff.

To ensure efficiency in consumption, revenue generated from tariffs should at the very least cover operational expenditure. This cost is borne by the consumer through a progressive tariff which provides protection for poor households. The current 34% price increase is based purely on the increases in operational expenditure and excludes the cash flow requirements for the capital expansion programme.

It is absolutely paramount that the Eskom capital expenditure programme continue unabated as it will also serve to support South Africa’s economic growth and provide jobs in these difficult times.

There is some concern over Eskom’s ability to access the debt markets to the extent necessary to fully fund its capital expenditure programme in the current economic climate. Any shortfall in funding that is not provided for either by additional government support or through its electricity tariffs will result in the curtailment and/or re-phasing of build programme projects.

In addition to the capital expenditure, Eskom’s cost of operations is on the increase. One of the fastest rising costs is that of primary energy which is comprised of coal, diesel and water.

It is an imperative that Eskom’s operational costs are fully funded through its tariff which is regulated by the National Energy Regulator of South Africa (NERSA).

The lack of clarity regarding the funding of Eskom’s capital expenditure programme and the appropriate mix of government support, access to debt and tariff support has necessitated that Eskom apply to NERSA for an interim increase for this year to enable it to cover its operational costs only. Failure to obtain the 34% increase will result in a severe cashflow shortfall for Eskom and it will have to take the necessary steps to curtail its business operations to remain financially stable.

Improving shareholder oversight

Until 2004, official government policy focused on privatising SOE, rather than leveraging the enterprises to achieve strategic national goals. This resulted in a high level of uncertainty and a limited view of the shareholder management process. Consequently, the relationship between the shareholder manager and the SOE remains relatively immature. A number of improvements have been achieved in the form of the following interventions introduced in the past four years:

• Shareholder Compact with clear KPIs between the DPE and the individual SOE
• SOE CEO and Chair forums
• Information sharing and compilation of the DPE-SOE Dashboard
• Regular KPI-based reporting on the various SOE based on an in-depth analysis of the financial and operation performance of the SOE
• The development of a rigorous shareholder management model by the DPE – which is still to be fully implemented.

In order to exercise ownership towards capital efficiency and achieve strategic objectives, the DPE must be clear, transparent and accountable in its communication to SOE of expectations on shareholder value maximisation. The primary objective is to ensure that the State's shareholdings deliver sustained, positive returns and return their cost of capital over time within the policy, regulatory and customer parameters set by government, by acting as an effective and intelligent shareholder. In order to achieve this, the DPE has to co-ordinate policy and commercial positions within government before directing an SOE to align its corporate strategy with the State’s strategic intent in respect of financial, operational and socio-economic performance.

The DPE is strengthening the measurement of SOE output, and key principles underlying this approach include:

· clarity and transparency of objectives, ensuring that such objectives are measurable and can directly demonstrate their impact on the economy;

· a shared vision for each SOE, based on agreed objectives, which are explicitly agreed by the shareholder, the Board and the management team;

· active involvement of the shareholder around the exercise of its key levers of interest , namely best practice corporate governance, Board appointments, strategy formulation and performance monitoring.

Conclusion

Our ability as the shareholder to give clear, long-term strategic direction to the SOE is vital to ensuring that these enterprises deliver on Government’s strategic intent.

The Department remains committed to ensuring that the SOE are turned around to become viable enterprises which add value to the economy.

I would like to thank the Director-General, Ms Portia Molefe, and her team for their hard work in ensuring that we become a more active shareholder.

I also look forward to engaging with Portfolio and Select Committee members and their Chairs Ms Mentor and Ms Themba; – we look forward to your continued support and vigilance when it comes to the work of the Department and the SOE.

To the Chairs and CEOs of the SOE, a lot of hard work lies ahead, but I have no doubt that all of you are up to the task.

Honourable members, I commend this Budget to the House.

My first CSP plant

Back in 1991, I build my first ever solar dish for a science project. Here is a photo of it.

Now I want to build something on a 1,000,000 times bigger...

Frank is in a FIT of ecstacy!

It has been a long time since I last posted. But, as my blog has been entitled, I feel a FIT of Renewed Energy.

The National Energy Regulator of South Africa (NERSA) has seen FIT. Fit to release their FIT, or Feed-In-Tariffs for South Africa.

Here is the low down:

Technology Unit REFIT
Wind R/kWh 1.25
Small hydro R/kWh 0.94
Landfill gas R/kWh 0.90
Concentrated solar R/kWh 2.10

( 1.00 R (or ZAR) = 0.10 USD )

This is AWESOME! I think we are, at last, on the verge of seeing large wind farms, concentrated solar systems, and more!

Watch this space.... And if anyone would like me to help build their wind farm...


Frank Spencer MSc(Eng)

Thin Film PV

I'm haven't generally been a thin-film PV fan, but this video of Nanosolar's new production facility is amazing!

They also came up in TIME magazine recently, in this article.

Response to Business Report Article on Biofuels

In response to this article, I wrote the following:


Dear Editor


In response to the article “State is blamed for biofuels fizzle” (Business Report, Tues 17th June) I would like to say “Good for the State!” Biofuels have some serious issues, none of which have been addressed by the SA Biofuels Association.

These issues include:
• Food security – Food prices are increasing dramatically, and biofuels can only make the problem worse. “The grain required to fill an SUV tank could feed one person for one year" (Washington Post, December 10, 2006). Internationally, Nestlé’s CEO is quoted as saying “If, as predicted, we look to use bio-fuels to satisfy 20% of the growing demand for oil products, there will be nothing left to eat” (http://www.gympietimes.com.au/storydisplay.cfm?storyid=3767737). India’s Finance minister, Chidambaram, recently directly blamed the US corn (food) to ethanol policy for the spurt in grain prices, calling it “outrageous” (http://news.bbc.co.uk/2/hi/south_asia/7315308.stm).
• Land-use change and carbon emission impacts - To create space to grow biofuels crops, farmers can plow up what was forest or grassland, or they can convert land that was previously used for other agricultural purposes to bio-fuel crops, requiring other land to be plowed up for food crops. Forests and grasslands act as carbon stores, and when they are destroyed, a tremendous amount of carbon gasses is released into the atmosphere, creating a “carbon debt” that needs to be repaid. This means that biofuels start off with a tremendous carbon-positive release even before the crops are grown. If this carbon debt is factored into the carbon arguments for biofuels, it would take approximately 167 years for US corn ethanol to pay it back. Biomass ethanol in the US comes in at a 138 years carbon payback. That is just to get carbon NEUTRAL. (Reports available on request)

Currently carbon stores, such a forests and wetlands, are not economically valued according to their real ecological value, and the ethical value of human life is not considered when large corporations, who own most of the agricultural land, drive a commercial agenda that appears to be driving up food prices. It is disingenuous to appeal to job creation when the such strategies undermine our food supplies which supports our economy.

The rush to biofuels has happened without a sound scientific appraisal, and can be considered an inappropriate switch from crude oil. If we wish to have sustainable resource consumption with regards to energy, the current methodologies with regards to biofuels are problematic. Buyelwa Sonjica has been wise in her approach to biofuels, excluding maize and not overdoing rebates.

Without a shadow of a doubt more energy that we could every use that could easily be harvested from proper renewable energy resources in ecologically friendly ways. Solar alone could easily meet this need. Just looking at transport, an analysis of PV versus biofuels reveals some startling results (Podewills, “Organised Wastefulness”, Photon International, Apr 2007). It looked at the distance that a car could travel based on the energy production of one hectare of land in one year. If the energy production on that one hectare is from biofuels, at best a traditional car could travel is 22’500km. If Photovoltaics (PV) are used and coupled to a hybrid car, a distance of 3’250’000 km! That is a factor of 144 times further!

There is much more I could write on this topic, but I hope that the above is found to be helpful.


Yours sincerely


Frank Spencer MSc(Eng)

Renewable Energy Engineer / Regional Manager - South Africa
Alt-e Technologies

The Harvester

Yesterday I had a surreal experience. I stood beneath a giant harvester, amazed that I had taken so long to go see them, and inspired by their beauty. Not only aesthetic beauty, but the beautiful manner by which they can create electricity.

I am, of course, talking about the wind turbine sup at Klipheuwel north of Cape Town, ESKOM's little test farm. I was there to help commission a much smaller little wind turbine, but it was beautiful to hear the blades of the monster 1.2MW machine rustling in the wind.

Much better than biofuels! And that is what I am going to write my case study on, I have finally decided. At last I have finished my literature review, and that convinced me that biofuels will be the best item to write on.

I wont inflict the whole assignment on you, but watch this space for a synopsis!

Is a more sustainable world possible? Can we decouple economic growth from resource consumption?

That is the title of the assignment I have been trying to wrap my head around for the last three weeks. It is my first assignment due as part of my MPhil in Renewable and Sustainable Energy. I have probably been doing too much reading in trying to grapple with the issue, but it is indeed fascinating.

Maybe the question can otherwise be phrased as: Can be increase GDP while reducing inputs and outputs? This has become one of the core questions of Sustainable Development.

As part of answering the question, I have to do two things: a literature review and a case study. Easy, I first thought, but boy have I been struggling to choose a topic! This is my list of ideas to date, in order of preference:

1) China & the Circular Economy
2) Biofuels & the SA biofuels strategy
3) Spirituality and Christianity -> social / economics
4) Oil, peak oil, and the oil end game
5) ESKOM & the SA Energy Crisis
6) Energy and Food
7) Global Sustainability – success of multilateral agreements
8) Climate Change
9) Woodstock – the suburb I live in
10) Stellenbosch housing requirements
11) South Africa and the looming water crisis

Biofuels, of course, is my personal bugbear, but not completely sure how to relate it to the question being asked. So I guess I might need to go with a look at China's national policy as it relates to their idea of the Circular Economy - Reduce, Reuse, Recycle.

Which would you have chosen? Give me your thoughts!


BTW, you might enjoy Jeffery Sachs article on "Common Wealth"...

TIME and biofuels

Seems TIME magazine thinks the same way I do: "But several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it's dramatically accelerating global warming, imperiling the planet in the name of saving it."

Hope to publish something new soon! :)

What can YOU do about Global Warming?

Thanks to the Sustainability Institute for this image:

A rant on bio-fuels

One of the things that has worried me for sometime is the whole concept of “biofuels”. In its most simple form it means turning organic materials, such as sugar cane or wheat, into fuels such as ethanol or bio-diesel.

Or even more simply, you are turning food into petrol.

What a horrific idea. We have close to a billion people who don’t have enough food to eat, and “filling the tank of an SUV with ethanol requires enough corn to feed a person for a year”.

No wonder the price of food, even in SA, is going through the roof!

What is happening here is that you are linking the price of oil with the price of food, or another way to look at it is that you are linking the value of agricultural land with that of energy.

And if you make energy / fuel with your agricultural land, you will make more money. Finish and klaar. So then, why grow food for people? Much better to grow food for fuel. And even in SA, this is being promoted by the bio-fuels strategy.

This is a major problem, for as we run out of oil, there will be a strong move to bio-fuels, which will drive up the food price. UNLESS we can move away from energy based on fossil fuels and biofuels from agricultural land.

So think of this next time you fill your car. Because you are using that petrol, someone elsewhere is making bio-fuel to replace it, and some else will starve.

Plug into Sustainability

Last week I was plugged into the Matrix.

Or that is what the experience felt like. I was in a place absolutely focused on thinking about HOW we look after this planet, how we help poorer countries to develop without destroying our ecosystems completely, how to get developed countries to cut back before they REALLY destroy our environment!? What do we do when OIL begins to run out (and it has, in all likelihood, begun to run out)? How do we deal with cities that may soon have 50% of the worlds population, consume 80% of our resources, and allow millions (if not billions) to live in most awful slums?

The place I was at last week was the Sustainability Institute, just near Spier. I started my MPhil in "Renewable and Sustainable Energy", with the 1st module - Sustainable Development. It was such an information download and challenge to our conventional resource usage paradigm that I felt like I was in another world. A world where my eyes were (further) opened to the damage we, as humankind, are doing to the planet, and where I could imagine that maybe, just maybe, if we did what God mandated us to do, to care for this planet, that we might not destroy ourselves this century.

Got me thinking about my own input and output patterns when it comes to resource usage and waste. It is not often that I have stopped to think about WHERE all the stuff that goes into my life each day comes from. My "ecological footprint" (go do this assessment!) is probably around 17 hectares - the amount of land required to support all the STUFF I consume (average in SA is around 1.7). If everyone lived like me, we would need a whole lot more Earths - NINE of them! And all the garbage that comes out of my life? Where does that all go? What is the environmental cost? More than I would like to imagine.

Have you ever stopped to think about it?

The way we price environmental resources are all skew. Their intrinsic value as a God created resource is left out. So the cost of so many things - electricity, fuel, waste disposal, is way too CHEAP! It needs to be priced properly. And we need to cut back. And we need to start doing it soon, else all of a sudden, as resources run out (such as oil), supply and demand will cause those resources to become so expensive so fast that we might not be able to adapt fast enough.

But there is hope...

One of the most delightful things of last week was the Group Project that I was involved in. Getting COMPLETELY out my comfort zone, I decided to join the Early Childhood Development group, where we did a study of how one can do interventions into young childrens lives that help them develop in a sustainable way. It was amazing to see how, in a rural community that suffers from a legacy of abuse, both physical and with alcohol, how positive interventions CAN make a difference in the life of a child. It only takes a few to make a big difference.

If you would like to see the videos or photos I took, let me know!


Today was another change - I started my new job at at Alt-e Technologies! How exciting to be given an opportunity to be involved in practically applying Renewable Energy technology solutions in our city of Cape Town. Watch this space, and send me all your leads if you know anyone wanting to improve their energy footprint!

And if you could like to do something, then, at the very least, install a solar water heater, and start recycling your waste!

Or if you are VERY brave, unplug completely - ditch the car and find another way.