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INTEGRATED ENERGY PLANNING COLLOQUIUM

POLICY ANALYSIS FRAMEWORK

PRESENTED BY

VICTOR SIBIYA

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Why PAF?

To develop consistency in terms of:

• Policy development process;

• Structure of policy content; and

• Coordination of policy development and review.

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Purpose of the PAF

The fundamental purpose of the PAF is to promote excellence in policy development and review within the DOE.

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Objectives of the PAF

The objectives of the PAF are to:

• ensure greater consistency in the development and recommendations of policies in the IEP;

• ensure greater commitment to reviewing policies;

• improve communication and implementation of policies; and

• Make better use of stakeholders in developing or reviewing policies.

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Evaluate outcomes

Implement interventions

Make recommendations

Describe the current situation

Determine objectives

Identify trends and possible future events

Describe and quantify Policy questions

Describe and quantify Plausible futures

Identifying possible courses of action

Determine best course of action Describe and quantify Policy options

Multi-criteria decision analysis

Modelling process

Describe and quantify policy objectives (targets & outcomes)

Balancing of qualitative and quantitative analyses

Existing energy system and implemented policies

Policy development Generalised

policy development process

IEP policy analysis

Make policy recommendations

IEP Colloquium 30 March 2012

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Areas of focus on the PAF

1. Recommending Policy Options in the IEP (Annexure A)

2. Dealing with Key Policy Questions in the IEP (Annexure B)

3. Analysing the impact of policies from other Government departments (Annexure C)

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Identifying the PAF for IEP

• Frameworks for analysing the contents of policy options (i.e. what to do?)

• Frameworks for analysing policy-making processes (i.e. who is involved, why, when and how?)

• Frameworks for analysing functional policy stages or phases (i.e. what steps are followed to achieve policy outcome?)

• Other Frameworks (mathematical and optimal models)

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FRAMEWORKS FOR ANALYSING POLICY CONTENTS OF POLICY OPTIONS

1.The rational-comprehensive framework

2.The incremental framework

3.The mixed-scanning framework

4.Garbage can framework

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STEPS FOR DEVELOPING POLICY OPTIONS AND POLICY

RECOMMENDATIONS IN THE IEP

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Step 1: Recognizing and defining the policy issue to be dealt with

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FACTORS THAT GUIDES AND DRIVE THE ENERGY SECTOR IN SOUTH AFRICA

•

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Energy sector

Demand management

Economic regulation

Upward pressure on cost

of energy

Climate change (Clean energy)

Skills and capacity

Energy security

Access to energy

Diversity of supply

Safety

International cooperation

Transformation

Recognizing the current energy issues • Increasing demand for energy

• Energy supply < Energy demand

• Accessibility to modern energy (sustainable energy access)

• Energy’s contribution to GHG Emissions

• Increasing costs of energy (affordability)

• Dependency on imports (particularly hydrocarbons)

• Inadequate energy Infrastructure

• Lack of maintenance in EI – leading to poor performance/unreliability

• Dependency on finite resources

• Limited investment on R&D in the energy sector leading to lack of technological advancements

• Shortage of skills in the energy sector

• Availability of water resources

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The policy issue to be addressed

Ensuring energy security for sustainable development of Southern Africa

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Step 2: Identifying the possible courses of action to deal with the

policy issue • This step involves specifying the policy options whose consequences are to be estimated. The different policy options that would best meet the objectives of solving the problem are identified so as to evaluate them and choose the best alternative within those options to meet the objectives of the policy.

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Instruments to deal with the Policy Issue

"Policy instruments" is the term used to describe some methods used by governments to achieve a desired effect.

• Laws

• Regulations

• Guidelines

• Frameworks

Regulatory Instruments

• Taxes & Fees

• Subsidies

• Incentives

• Tradeable permits

Economic Instruments

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Policy Options Proposals

• Use policy instruments for the development and use of renewable energy

• Use policy instruments to promote energy conservation and efficiency

• Introduce an incentive based rural home heating program

• Introduce policy instruments to ensure companies install improved sulphur emission controls at, gas plants, refineries, and power plants. • Promote the use of indigenous sources and use policy instruments to limit the exports • Use policy instruments to set a maximum level for a particular type of emission for a geographic area

• Introduce policy instruments to ensure trading of emission permits in a particular geographic area

• Use policy instruments to ensure companies reduce the emissions of nitrogen oxides; carbon dioxides; methane or volatile organic compounds.

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Policy Options Proposals

• Promote diversification of places where energy sources are imported

• Use policy instruments to incentives R&D and technological development to level playing field in the energy sector • Use policy instruments to ensure investments in energy infrastructure

• introduce policy instruments to encourage the use of gas as alternative for households cooking and heating

• Introduce policy instruments to encourage the development of pollution control technologies

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Step 3: Establishing the criteria for weighing up the advantages and

disadvantages of each of the policy alternatives

• In this phase, emphasis is placed on the need to understand which factors should be considered as part of the decision making process. In this part of the process all economic, social and environmental factors that are important to the policy decision need to be identified and then expressed as policy decision criterion.

• Criteria will be used to compare different options` contribution to meeting the objectives. The criterion must be measurable, in the sense that it must be possible to assess at least in the qualitative sense, how well a particular option is expected to perform in relation to the criterion.

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Identifying the IEP objectives

National Objectives (MTSF & NDP)

Departmental Objectives

(Strategic Plan)

IEP

(National Energy Act)

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Competing & Conflicting Objectives

These are further broken down into criteria.

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Minimise Emissions

Diversity of Supply

Access to Energy

Exploitation of Indigenous Resources

Localisation and

Technology Transfer

Minimise Cost of Energy

Water Constraints

Defining the criteria

Organising the criteria and objectives in this way facilitates scoring the options on the criteria and examining the overall results at the level of the objectives.

Energy Security

Energy Access

Security of Supply

Diversification

Emissions Reductions

Energy Efficiency

Localisations

Employment creation

Water Conservation

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Step 4: Analyzing the options and choosing the option which offers the best solution:

• After a wide range of policy options are created and reviewed, a short list may then be created to keep the process manageable. This can be done through the use of Multi Criteria Decision Methods (MCDM). • These techniques can be used to screen policy options and ideally identify a set of optimal solutions, such that no other feasible option exists which is just as good in objective and strictly better in at least one. Therefore, MCDM can be used to identify tradeoffs, co-benefits and compromise solutions to complex policy and planning problems. • With regards to the IEP, the weighting and scoring methods are recommended for use in the analysis of policy options.

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Defining a rating scale

Intensity of Importance (scale value)

Definition Explanation

0.33 Less importance An activity is less favored over another

0.50 Moderate importance

Experience and judgment slightly unfavor one activity over another

1 Equal Two activities contribute equally to the objective

2 More importance Experience and judgment slightly favor one activity over another

3 Strong importance An activity is favored strongly over another

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Weighting and scoring Table 6: Weights of criteria by use of comparison matrix

Criteria

Emp

loym

ent

crea

tio

n

Ener

gy

effi

cien

cy

Secu

rity

o

f Su

pp

ly

Wat

er

con

serv

atio

n

Div

ersi

fica

tio

n o

f su

pp

ly

loca

lisat

ion

Acc

ess

to

ener

gy

Emis

sio

ns

Stan

dar

ds

Tota

l

Weights

Employment creation

1 0.50 0.33 0.50 0.5 1 0.50 0.50 4.83 0.060

Energy efficiency

2 1 0.33 2 0.50 2 0.50 2 10.33 0.128

Security of Supply

3.03 3.03 1 2 2 3 2 2 18.06 0.225

Water conservation

2 0.50 0.50 1 0.50 2 0.50 1 8.00 0.099

Diversification of energy resources

2 2 0.5 2 1 2 0.50 2 12.00 0.149

Localisation 1 0.50 0.33 0.50 0.50 1 0.33 0.50 4.66 0.058

Access to energy

2 2 0.50 2 2 3.03 1 0.50 13.03 0.162

Emissions reduction

2 0.50 0.50 1 0.50 2 2 1 9.50 0.118

Total 15.03 10.03 3.99 11 7.5 16.03 7.33 9.5 80.41 1

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POLICY ANALYSIS MATRIX

CRITERIA

Cr1 Cr2 Cr3 Cr4 Cr5 Cr6 Cr7 Cr8

Weighted

averages

Weights 0.060 0.128 0.225 0.099 0.149 0.058 0.162 0.118

POLICY OPTIONS

Emp

loym

ent

cre

atio

n

Ener

gy

effi

cien

cy

Secu

rity

of

sup

ply

Wat

er

con

serv

atio

n

Div

ers

ific

atio

n o

f e

ne

rgy

reso

urc

es

Loca

lisa

tio

n

Acc

ess

to

e

ne

rgy

Emis

sio

ns

stan

dar

ds

Grants and subsidies for

renewable energy 7 5 10 9 8 2 7 5 7.2388

Promote research and development on renewable energy

5 6 8 7 6 5 5 6 6.2686

Legislation (where government enact legislative measures for energy efficiency),

8 6 4 7 9 5 7 6 6.3222

Set mandatory targets for energy efficiency- for vehicles, buildings and appliances supports by energy labelling and monitoring.

8 5 5 7 8 4 5 6 5.8870

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CALCULATION OF THE OVERALL WEIGTHED SCORES

This is done after the options were scored and weights were assigned for the policy options. The overall preference score for each option is simply the weighted average of its scores on all the criteria.

We multiply an option's score on a criterion by the weight of the criterion, do that for all the criteria, and then sum the products to give the overall preference score for that option.

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SENSITIVITY ANALYSIS

• Sensitivity analysis provides a means for examining the extent to which vagueness about the inputs or disagreements between people makes any difference to the final overall results. • First, interest groups will be consulted to ensure that the Multi Criteria Decision Analysis (MCDA) includes criteria that are of concern to all the stakeholders and key players. • Second, interest groups often differ in their views of the relative importance of the criteria, and of some scores, though weights are often the subject of more disagreement than scores. Examining how the ranking of options might change under different scoring or weighting systems can show that two or three options always come out best, though their order may shift. If the differences between these best options under different weighting systems are small, then accepting a second-best option can be shown to be associated with little loss of overall benefit. • Third, sensitivity analyses can begin to reveal ways in which options might be improved

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Step 5: Implementing the policy

• Policy implementation is the stage in the policy process where policy action occurs to address a recognized policy problem. At this stage, the design of a policy proposal is put into effect. • Effective and efficient policy actions require consideration to be given to the constraints and challenges of implementation—preferably even as the policy is formulated. How well a policy is implemented has much to do with determining if it is successful or not. • Ideally, each policy must have a design of how a public problem will be resolved. This design will define, in varying detail, the goal(s) of the policy, the set of policy instruments to be used, possible timetables, and the target population. The point of policy design is to match the correct set of instruments with the identified problem and to ultimately solve that problem.

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Step 6: Evaluating the policy

• Policy evaluation can be better defined as a process by which general judgments about quality, goal attainment, policy effectiveness, impact, and costs can be determined.

• The main objectives of evaluations are to improve decision-making, resource allocation and accountability. This can be achieved through informing the public, informing key decision-making processes and encouraging ongoing organisational learning.

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