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PROPOSED INCREASE IN SA’S SOLAR RENEWABLE ENERGY WILL LEAD TO POSITIVE SPIN-OFFSBy James Ricketts, Project Manager, EES

South Africa is a country fraught with ongoing challenges in the form of severe power shortages and an inconsistent, unreliable power supply. The increased solar energy allocation, if implemented, would of course help alleviate this situation by diversifying energy resources and boosting energy security.

ABOUT EES:

Established in 2001, EES provides management, engineering and auditing services.

As an ISO 9001:2008 certifi ed company, we specialise in the integration of mul-

tiple system infrastructure including ICT, Data Centres, Audio Visual, Life Safety,

Security and Building Automation Systems. With over 180 successful projects to date,

EES operates predominantly in the Renewable Energy, Oil & Gas, Financial Services,

Infrastructure, Utilities, Telecoms and Mining sectors.

EES is committed to proactively assisting clients reduce their carbon footprint and

facilitate the development of a ‘green’ commercial environment. With offi ces in

Johannesburg, Cape Town and Stellenbosch, EES plays a key role in mission criti-

cal environments in Africa. Having successfully delivered on numerous international

projects, our clients, partners and stakeholders benefi t from the company’s global

knowledge and expertise.

CONTENTS

Page 2 Abstract

Page 2 Introduction

Page 2 Context REIPPPP

Page 2 Findings: Local Content Manufacturing

Page 3 Findings: Local Job Creation

Page 4 Findings: Green Energy

Page 4 Recommendations

Page 4 References

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PROPOSED INCREASE IN SA’S SOLAR RENEWABLE ENERGY WILL LEAD TO POSITIVE SPIN-OFFS

February 2014

Context: REIPPPP

In addition to the solar revisions, the combination of revisions under the new IRP which are fi nally accepted and implemented will steer the course of the Department of Energy’s (DoE’s) Renewable Energy Independent Power Producers Procurement Programme (REIPPPP) going forward. The REIPPPP is part of South Africa’s national strategy to introduce up to 17800 MW of renewable energy by 2030. With the addition of the 17 projects in the third bidding round, South Africa now has 64 approved REIPPPP pro-jects with a collective capacity of 3933 MW.

There have been a number of developments in the energy sector in South and Southern Africa due, for example, to changes in consumption patterns and technology costs, since the promulgation of the IRP 2010-30. It is for this reason that the revisions became necessary. It is in fact essential that the IRP is adaptable and is updated regularly.

The DoE’s commitment to renewable energy and its benefi ts is outlined in the following statement made by Energy Minister, Dikobe Ben Martins: “The Department will continue to work with the Industrial Development Corporation (IDC), the co-ordinator of the government’s green energy programme, and other stakeholders in the energy industry and local com-munities, to ensure that the socio-economic commitments related to job creation, skills development, local procurement and local economic devel-opment are met. A progressive increase in local content and job creation numbers has also been witnessed. Window three will contribute approxi-mately $4.4 billion to socio-economic development.”

South Africa’s initiatives are paying dividends. The 2012 Pew Trust report, ‘Who’s Winning the Clean Energy Race,’ states that: “South Africa has emerged as the leading destination globally for clean energy investment, attracting $5.5 billion dollars, up from $30 million the year before – a 20.5% increase.” An impressive 80% of that went to the solar sector.

Findings: Local Content Manufacturing

According to the ‘SA Solar Energy Technology Roadmap (SETR)’ draft (Oc-tober 2013): “In conceptualizing the REIPPPP one of the key aims was to promote the development of local supply and manufacturing industries.” ¹

The draft points out that: “In order to justify investment in local manufac-turing facilities, a certain level of commitment capacity is required.” Inter-estingly this comment was made prior to the new IRP revision was released for comment.

Today local manufacturing, as well as job creation and social upliftment (dis-cussed under ’Findings: Local job creation’ further on is this paper) are legal requirements stipulated by the REIPPPP. All Independent Power Producers (IPPs) must meet specifi c targets for local content, job creation, ownership, black people in top management, preferential procurement and enterprise development, and it is compulsory for renewable energy equity projects to include local communities.

The REIPPPP stipulates seven key requirements in relation to ‘Economic De-velopment’ criteria. Under the Implementation Agreement, part of the Bid Response, bidders have to meet these requirements and stated minimum thresholds.

There has been an increase in local content targets in each round of the REIPPPP. In the fi rst round the local content requirement for CSP was 21%. In the third round this was raised to as much as 40%.

To date, the renewable energy industry has seen large international com-panies partnering with South African companies to meet the local stipu-lations. A World Bank Study: ‘Concentrating Solar Power in Developing

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Abstract

Apart from diversifying and increasing South Africa’s en-ergy resources, the proposed increase in solar renewable energy allocations under the draft Integrated Resource Plan (IRP) revision (Update report 2013) issued at the end of 2013, will boost local socio-economic development. This would be in the form of local content manufacturing and local job creation. The proposed revisions would also contribute to green energy and a green environment by helping reduce carbon emissions in South Africa, a coun-try with one of the highest carbon emissions worldwide.

Spin-offs and benefi ts:

• Local socio-economic development in the form of - Content manufacturing, and - Job creation• Green energy

This paper focuses in more detail on the above-men-tioned spin-offs and benefi ts that the IRP revisions, if promulgated, will result in.

Introduction

A key revision outlined in South Africa’s draft IRP revi-sion (Update report 2013), is the proposed substantial increase in solar renewable energy capacity, both Photo-voltaic (PV) and Concentrated Solar Power (CSP).

South Africa is a country fraught with ongoing chal-lenges in the form of severe power shortages and an in-consistent, unreliable power supply. The increased solar energy allocation, if implemented, would of course help alleviate this situation by diversifying energy resources and boosting energy security.

However, as importantly, the increase would also help overcome other major challenges confronting the coun-try, and lead to a number of very positive spin-offs and benefi ts:

• Socio-economic development and job creation urgently need to be addressed. Increased solar renewable energy capacity would drive economic growth in South Africa by boosting local content manufacturing and job creation, in particular employment of people from local communities.

• South Africa needs to dramatically reduce its carbon emissions. Increased renewable energy capacity would contribute to green energy, a green environment and climate change mitigation, integral to which would be a reduction in the country’s carbon emissions.

The draft IRP revision proposes that the PV allocation be increased by 1330 MW, while CSP allocation, which to date has only been given a low MW capacity, be in-creased by a substantial 2100 MW.

The closing date for comments on the draft from renew-able energy industry players was 7 February. The com-ments received are being used to compile a fi nal draft to be submitted to Cabinet by March 2014. Following Cabinet endorsement, the approved document will be promulgated.

PROPOSED INCREASE IN SA’S SOLAR RENEWABLE ENERGY WILL LEAD TO POSITIVE SPIN-OFFS

February 2014

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Countries: Regulatory & Financial Incentives for Scaling Up’ (2012), enlarges on this: “The uptake of local manu-facturing capabilities will be partly driven by major interna-tional industry players that have already established a pres-ence in South Africa and are assembling land, organising permits and developing local partnerships, in order to pre-pare themselves to get involved on a signifi cant scale.” ²

However, IPPs and industry players with solar plants cur-rently under construction are already calling for more lo-cal manufacturing suppliers. Integral to increased solar allocation will be the construction of many more plants, and this would mobilize local manufacturing. Increased solar capacity would also develop new busi-nesses and propel existing businesses providing goods and services to the sector, throughout industry value supply chains.

South Africa’s Department of Trade & Industry, states that the country already has a number of local content suppliers in value chains: “A South African advantage is its existing industrial capabilities in a range of relevant areas eg. engineering, metal fabrication, composites etc. It has a growing number of component suppliers into renewable energy value chains, off a low base.”

There is also the prospect in future of exporting technology, equipment, skills and expertise as solar renewable energy programmes in the rest of the continent gain momentum.

Supporting these viewpoints on local manufacturing is the SA SETR draft, which states that: “In addition to ad-dressing South Africa’s growing electricity generation needs, the focus on renewable energy development is also meant to create manufacturing, installation, main-tenance and related service sector ‘green economy jobs’ and to develop potential exportable products, services and project development skills for the larger African market.“ ¹

Findings: Local Job Creation

The SA SETR reports further: “In 2011, organizations including the IDC and Development Bank of South Af-rica (DBSA) estimated that 34 000 ‘green jobs’ could be created through the pursuit of a myriad of renewable energy related projects.” ¹

The IRP draft revision’s solar renewable energy propos-als, if promulgated, would dramatically increase the employment of local people, both skilled and unskilled, and provide the opportunity to create new jobs through small start-up businesses and expansion of established businesses.

Community participation requirements today include job creation for citizens from local communities; ownership in the project company by black people and local com-munities; and development of emerging enterprises lo-cated in local communities.

These requirements are already being put into practice. According to a statement made by a leading renewable energy industry player, Abengoa: “During the construc-

tion and subsequent operation and maintenance over the course of the useful life of solar power plants, between four and fi ve temporary jobs will be created for each MW during project execution and between one and two permanent positions per MW during the operating period.”

Abengoa has already completed construction of South Africa’s fi rst solar tower, the 50 MW Khi Solar One, while its 100 MW parabolic trough plant, KaXu Solar One, is still under construction in the Northern Cape. More than 1400 local construction jobs and 70 permanent operational jobs have been created by Khi Solar One and KaXu Solar One.

Construction, operation and maintenance of Xina Solar One, awarded to Abengoa in the third round of the REIPPPP, will also stimulate regional so-cio-economic development by creating numerous direct and indirect jobs.

Another case in point is RustMo 1, the fi rst South African renewable en-ergy engineering, procurement and construction (EPC) PV solar farm to be connected to the grid. According to a statement: “The installation will not only provide clean and sustainable electricity to ten thousand households, it will additionally boost the local economy. The project directly involved more than 200 people during the engineering and construction phase, as well as some operational jobs for the entire lifetime of the plant (more than 20 years). Furthermore, RustMo 1’s local content is more than 40%.”

However, so much more needs to be done. The SA SETR contends: “To achieve its localisation plans, which involve the creation of thousands of engineering, manufacturing and installation jobs, South Africa will need signifi cantly ramped up efforts to train and educate a labour force that will be capable of handling the demand which current policies are trying to create.”

The World Bank Study: ‘Concentrating Solar Power in Developing Coun-tries: Regulatory & Financial Incentives for Scaling Up’ (2012), provides a broad perspective on job creation: “The creation of jobs will enhance the number of people with disposable income, which means an increased pur-chasing power of goods and services, which in turn increases the Foreign Direct Investment (FDI) by foreign companies wanting to take advantage of the improved disposable income in South Africa.” ²

PROPOSED INCREASE IN SA’S SOLAR RENEWABLE ENERGY WILL LEAD TO POSITIVE SPIN-OFFS

February 2014

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Written by James RickettsProject Manager, EESTel +27 (0)21 200 5931Email info@eeslive.com

James has over 10 years of Project Management and Consulting experience and was recently involved in the project management of 2 x 11MW EPC Photovoltaic power plant projects in the Northern Cape, South Africa. In addition, his fi elds of knowledge include Intelligent Building Design, Building Management Systems, Data Centre, Access Control System and CCTV System Design and Audio Visual Integration. James is a Green Star SA Accredited Professional.

Findings: Green Energy

According to the SA SETR draft: “As South Africa is one of the leading carbon emitting nations in the world, in-creasing the solar energy content within the national energy mix will help reduce greenhouse gas emissions (GHG) from the country.” ¹

South Africa has made a number of international com-mitments to reduce its carbon emissions. For example, under the agreement in the Copenhagen Accord (2009), the country committed to reducing its green house gas emissions to 34% below its ‘business-as-usual’ growth trajectory by 2020. It is also committed to achieving the Millenium Development Goals (United Nations, 2000), which target environmental sustainability.

In South Africa the mandate for a green economy de-rives from the country’s constitution and the country has a number of policies in place to implement the green economy. The National Development Plan (NDP), for ex-ample, is very specifi c about goals and a key focus is on energy and carbon, because greenhouse emissions are expected to peak in 2025.

The National Planning Committee presented the NDP to South Africa in November 2011. The NDP’s main focus was reportedly reducing the country’s carbon emissions to a sustainable level by adopting adaptation and mitiga-tion policies.

As renewable energy emits no carbon (carbon emission being a problem with regard to the country’s traditional coal-fi red power), the draft IRP revision’s proposal to in-crease solar renewable energy allocation would contrib-ute to implementing green energy and achieving a green environment in South Africa. Increased independent re-newable energy production in the national electricity grid would certainly put the country in an improved position in terms of its carbon emissions.

Abengoa is a case in point. Its Xina Solar One will pro-duce the clean energy equivalent to that needed to power approximately 90 000 households, thus prevent-ing the emission of 315 000 tonnes of carbon annually.

Khi Solar One will save 183 000 tonnes of carbon a year, and Khi Solar One and KaXu Solar One towers combined will save a total of 498 000 tonnes of carbon a year.

Recommendations

The greatly increased solar renewable energy allocations proposed by the draft IRP revision have far-reaching, very valuable, tangible spin-offs and benefi ts for South Africa. The implementation of the increased allocations is a move to be wholeheartedly encouraged and supported. The REIPPPP has been lauded globally as a South African success story. There is no rea-son why increased solar renewable energy allocation should not in the same vein be successfully implemented.

The solar renewable energy industry, in particular CSP, has for some years now been calling for increased capacity. The IRP draft revisions regarding solar would answer this call.

If promulgated, the proposed increased allocations would provide policy certainty. This is vital if solar renewable solar energy is to grow and be sus-tainable. The revised allocations would demonstrate Government’s long-term commitment and vision for solar renewable energy, both for PV and in particular for CSP. Promulgation of the proposals would generate increased confi dence amongst industry players, and fast track further implementa-tion of solar renewable energy going forward to the benefi t of South Africa as a whole.

References:

¹ ‘SA Solar Energy Technology Roadmap (SETR)’ draft (October 2013) ² A World Bank Study: ‘Concentrating Solar Power in Developing Coun-tries: Regulatory & Financial Incentives for Scaling Up’ (2012), by Natalia Kulichenko and Jens Wirth