Business Day – Sa’s renewable energy plan a global success story
SOUTH Africans may be negative at times about their country’s prospects, but its renewable energy sector has rapidly emerged as a global leader. It is investor friendly, is based on pragmatic policy and sees the government working efficiently with business.
The emergence of the sector was triggered in part by the 2008 power crisis and the onset of load shedding. SA could no longer ignore the incredible energy potential of its abundant sun and wind.
The government responded with bold targets in its 2010-30 Integrated Resource Plan (IRP) for 17,800MW of new power generation capacity from renewables. At the time, this was a huge 42% of total power generation capacity.
Today, renewables are delivering clean energy, jobs, technology, foreign investment, rural development, community benefits, skills and new research.
The World Wildlife Fund calls SA’s renewable energy sector “a flagship public-private partnership model for SA and the rest of Africa”.
Renewable energy has attracted investment of R192.6bn, of which 28% (R53.2bn) is foreign investment — equal to 85.8% of all foreign direct investment in SA last year. Investment in renewables grew 20,500% between 2011 and 2012.
The booming sector has contributed more than 109,000 jobs and cut the equivalent of 4.4-million tonnes of carbon dioxide.
The 2014 United Nations Environment Programme put SA among the top 10 countries for renewable energy investments. SA has a world-first wind atlas, and is the 10th-biggest solar market in the world for installations of 5MW and above.
The 2014 ClimateScope study placed SA third among 35 surveyed nations in attracting capital to low-carbon energy sources.
An independent study by the Council for Scientific and Industrial Research (CSIR) found energy generated from solar and wind during the first six months of this year created R4bn in financial benefits.
Renewables have also reduced the frequency and duration of load shedding, according to Stellenbosch University’s Centre for Renewable and Sustainable Energy Studies.
SA’s renewable energy resources are just as abundant as its mineral resources, but they are becoming easier to access.
WITH more than 2,500 hours of sunshine a year, SA is in the world’s top three countries for solar power potential, and wind is abundant on the coast and inland.
For more than a century, SA depended on resources below the ground, with an industrial model that was sociopolitically and environmentally unstable. Between 1970 and 2013, SA’s total carbon emissions were well above what one would expect for a country of its size and wealth, exceeding those of Brazil, Iran and Spain.
That changed in 2009 when President Jacob Zuma committed SA to take mitigating action that would reduce emissions by 34% by 2020, and 42% by 2025, provided the international community supported SA with financial aid and the transfer of technology. Both have been forthcoming and in a very short time, SA has developed one of the world’s most progressive alternative energy programmes.
The vision for this remarkable turnaround is to be found in the National Development Plan and the Constitution, which unambiguously calls for a sustainable energy future. Renewables enabled SA to balance the competing national goals of development, energy security and environmental responsibility.
The departments of energy and environmental affairs gave substance to the constitutional vision. Three policy papers laid the foundations for a successful regulatory environment: the 1998 white paper on energy policy, the 2003 white paper on renewable energy, and the 2011 national climate-change response white paper policy.
These guided the IRP, which calls for a doubling of electricity capacity from a mixture of energy sources, mainly coal, gas, nuclear and renewables including large-scale hydro power imported from SA’s neighbours.
At the heart of the success are a tongue twister and a brilliant decision. In 2010, the Department of Energy, the Treasury and the Development Bank of Southern Africa collaborated to set up the Independent Power Producer (IPP) office. This provided focus and commitment to independent power generation, and was followed by the introduction of the Renewable Energy Independent Power Producers Procurement Programme. A key directive was that Eskom enter into Power Purchase Agreements (PPAs), which enabled IPPs to make firm revenue projections — a key criteria for investors. Bankability is enhanced by having payment risk mitigated by government guarantee.
The guaranteed power off-take provided the foundation for the world’s fastest-growing renewable energy programme, and one of Africa’s biggest infrastructure investments.
THE programme was designed as rolling competitive bid windows, ensuring a pipeline of new energy-generation projects that could take advantage of technology advances. It secured local and international investor interest and was rapidly oversubscribed, enabling the selection of only the best bids in terms of price, technology and socio-economic development potential.
The Department of Energy has already committed to 13,225MW of renewable energy generation by 2025. By the middle of this year, more than 6,000MW had been procured from 92 independent producers, with 37 having started commercial operations, which added 1,860MW to the grid.
Market forces are working with the government to provide clean energy and development.
Construction times for projects average less than two years, and the average electricity price paid to projects has declined 68% within three years, to be on a par with market leader Germany.
Communities have been substantial beneficiaries, with a shareholding of 10.5% in renewable projects, more than four times the required minimum of 2.5%. Communities that host renewable energy projects are expected to receive a net income of R29.1bn over 20 years, or R1.46bn a year.
BILLIONS of rand have been committed to socioeconomic development in these communities. The total projected value of goods and services to be procured from broad-based black economic empowerment suppliers is more than R101bn.
The energy department reckons the renewable energy sector could create up to 462,000 jobs, with more than 25,000 already created.
Renewables are also boosting manufacturing. In 2012, a solar PV manufacturing plant was built in Pinetown near Durban, employing 160 people and with the capacity to produce 250,000 solar panels a year. Spain’s Gestamp Renewable Industries has a solar tower manufacturing facility in Atlantis outside Cape Town, and employs 200 people. Further benefits are skills development and technology research. There is a research chair in biofuels at North-West University, and a centre for renewable and sustainable energy studies at Stellenbosch University.
The University of Cape Town hosts the Energy Research Centre, the University of Pretoria has an Energy Efficiency Hub, and the CSIR has the Battery Research Unit.
The government and the private sector have set up the South African Renewable Energy Technology Centre at the Cape Peninsula University of Technology to train technicians to service renewable energy projects.
There seems to be no limit to the scope of SA’s green economy. A solar energy technology road map estimated that by 2050, 70GW of power could be generated from solar photovoltaic and concentrated solar power sources.
Up to 247MW of small-scale hydro power could be developed in rural Eastern Cape, Free State, KwaZulu-Natal and Mpumalanga.
Work has also begun on a national biomass action plan. Only 200 biogas operations have been registered in SA since 2011, but there are an estimated 12-million in India, and 17-million in China. The Southern African Biogas Industry Association estimates that biogas could contribute 2.5GW generation capacity to SA, using waste water, food waste, manure, agricultural residues and commercial processes including abattoirs, breweries and cheese factories.
• Nassiep is CEO of the South African National Energy Development Institute
BY KEVIN NASSIEP, OCTOBER 07 2015, 06:23