The Green Economy National Climate Change Response Strategy

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The Green EconomyNational Climate Change
Response Strategy
Status Report Briefing Note to Portfolio
Committee of Water and Environmental Affairs 07
June 2012 Cape Town
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Climate Change an EDD Perspective

• The Mandate of the Economic Development
  Department
• Promote economic planning and co-ordination
  through economic planning proposals
• Provide oversight and policy co-ordination of
  identified development finance institutions and
  economic regulatory bodies.
• Contribute to the development of the Green
  Economy
• Purpose The Green Economy provides a unique
  opportunity for South Africa to create a large
  number of sustainable jobs by, developing new
  industrial sectors, while addressing concerns
  about climate change.
• Process The country can draw on its
  technological research and manufacturing base to
  generate new process and products, it is the
  responsibility of government to create an
  enabling environment and for citizens and
  business to do things differently
• Outcome Combined efforts of all constituents
  will be harnessed to achieve the goals of
  creating at least 300 000 jobs in the Green
  Economy by 2020. (green economy accord, EDD,
  2011)

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The Challenge to Green Economy

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Managing the Transition

• Fundamental Problem The transition to greener
  growth is economically costly for South Africa,
  because, alternatives to externality intensive
  production are few and expensive . Policy should
  focus on reducing externalities (carbon
  intensity, water use) of economic activities
  through the development and diffusion of low
  carbon technologies (carbon taxing vs tax
  credits, incentives, rebates)
• All new policies should be assessed in terms of
  their likely impact on growth, employment and
  resource use to ensure coherence in policy design
  and implementation
• Policies should be phased out over time to permit
  adaptation to ensure change in long-term
  behaviour without overburden on current economic
  output. (balance between jobs, economic growth
  and climate change mitigation) (The cost of going
  green vs not going green)
• In South Africa, market-based approaches alone
  are insufficient due to unequal impact of on
  stakeholders such as the poor. Need to focus on
  complementary polices such as regulations
  standards, RD investment, labelling. -
  dissagregation

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Managing the Transition
Time to phase out, time to market, time to
innovate
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Key Designated Areas of GE

• Energy generation, which pertains to the
  generation of energy from sustainable, renewable
  and/or alternative sources with low or no carbon
  emissions
• Energy efficiency, which captures initiatives
  aimed at reducing energy consumption through
  green buildings, solar water heaters, industrial
  equipment, public transportation and others
• Emission and pollution mitigation, relating to
  the utilisation of technologies aimed at reducing
  the harmful emissions associated with highly
  polluting industries, including air pollution
  control, electric vehicles, cleaner stoves,
  recycling, carbon capture and storage and water
  treatment and
• Natural resource management, which covers the
  sustainable management and restoration of natural
  resources, specifically water, soil and land
  management, as well as the conservation and
  restoration of eco-systems.

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USA Study
Dr Gordon Rands, Univ Western Illinois, 2010
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SA Energy Mix

• IRP2010 baseline revised balance scenario
• Increasing Renewable contribution in energy mix
• 3725MW for first allocation, phase 1 (2011),2,3
  (2013)
• Wind, CSP and Co-gen are major energy players in
  the energy generation mix
• These energy generators must satisfy the medium
  and long term job creation requirement of country
• Technology shall follow the skills development to
  support these segments

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Renewable energy and job creation

• Job creation estimates as per IDC projects
• (Currently under development)
• Concentrated Solar Power
• Permanent 0.9 job per MW
• Construction 9.8 jobs per MW
• Wind
• Permanent 0.3 job per MW
• Construction 1.4 jobs per MW
• PV
• Permanent 1 job per MW
• Construction 4 jobs per MW

Total pipeline job creation expectation
5 500 jobs

• IDCs current pipeline
• 5 CSP
• 19 Wind ca R 62bn
• 18 PV (total project value)

Opportunities for job creation through
Manufacturing of components for RE
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Potential Job Creation in RSA

• Short term 2011 2012 - 97 000 jobs
• Medium Term 2013-2017 - 250 000 jobs
• Long Term 2018-2025 - 450 000 jobs
• Natural Resources (44-51)
• energy generation(16-26)

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Job Types

• Energy generation prominent job contributor
• Short term biofuels, waste-energy, co-gen
• Medium term biomass, combustion
• Long Term Wind, solar PV, CSP, Gasification

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Job Types

• Less contribution by energy and resource
  efficiency
• Natural Resource and Energy Generation are major
  contributors Sustainability
• BRT, SWH, Green build programs support job
  expansion

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Key Challenges

• Regulatory Framework public sector
  co-ordination
• Lack of readiness, timescales, uncertainty,
  investment impact (REFIT, BIOFUELS)
• Skills shortages
• Commitment and Readiness to ensure growing Green
  demand
• Localization industrialisation
• Beneficiation, local manufacture, value add,
  imports, jobs
• Financing and investment costs
• High capital cost of projects, REFIT, carbon
  financing, Climate of uncertainty, certainty of
  demand, fuel price, bankability, lack of
  comprehensive financing strategy
• Sustainable resources
• Water supply, licensing, pollution, GHG emission
  commitment, human and industrial need, recycling
• Immature Technologies
• Old vs new integration, gas-powered vehicles,
  marine power, carbon capture, storage sites,
• System weaknesses
• Ability to manage, integrate consolidate and
  direct.

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Actions

• EDD is increasing its activity and function in
  national projects and programs under the purview
  of the NGP in activities such as,
• SARi- South African Renewable Energy Initiative
  with dti , DOE and NT as part of the oversight
  steering committee- Lead departments are
  preparing a draft declaration being compiled with
  ODAs by COP17.
• Strategic support for Provincial Climate
  Innovation Centre by Gauteng for SMME and green
  innovation incubation
• Evaluation of solar farm bids as part of the bid
  team through CEF

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EDD Actions

• Signing of national green economy accord- pledge
  by business labour, government and communities _at_
  COP17, Dec 2011.
• Green Jobs Report commissioned by IDC and DBSA
  launched December 2011 outlining key job areas in
  green economy over next 20 years including
  renewable energy generation, energy efficiency
  activities and waste and water management
  technologies, including biofuels and
  bio-technologies as key areas.
• Green Growth Economic Cluster Committee formed in
  Q1 2012- policy leadership- objective to
  formulate an economic green growth strategy
  including implementation of national climate
  change response strategy NT, dti, EDD, DEA

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SWH implementation

• Project Steering Committee established (EDD, DOE,
  DTI, DPE, DST, DPW, Eskom, IDC, NT, DHET)
• Committee discussed the following
  issues/challenges
• Localisation plans
• Even provincial distribution
• Youth employment
• Funding proposals
• Amendments to regulations/regulatory
  interventions
• Guarantees for installed solar heaters (in event
  installers go out of business)
• Set-asides for cooperatives (installation)
• Scale-up financial support for achievement of the
  target of a million solar water heaters installed
  by 2014,
• Different financial programs for LP and HP
  systems using either contractual (combination of
  carbon tax pool and IDC support)or SOP (employed
  on REIPPP) model is being simulated for
  workability and achieving objectives.
• Increase local production of components mandatory
  in selection process
• IDC ESKOM partnership in CDM project with World
  Bank creating 500 jobs
• By Dec 2011, Eskom rolled out up to 200 000 units
  with Eastern Cape leading the rollout
• 2012/2013 approved MTEF allocation R4.7Bn to
  rollout with 80 for LP

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SWH workstreams

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Designation

• Cabinet Approved minister can designate for
  special strategic support key sectors.
• Influence state procurement programs in order to
  effect required impact
• December 2011, first round of Designated
  (sub)sectors
• Dti Department of Trade and Industry mandated
  area- study completed May 2012
• Seek to apply for new round of 1 million geyser
  rollout
• Study completed- identifies component and system
  designation potential
• up to 11 million units as market potential

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Biofuels rollout

• The Biofuels Industrial Strategy aims to
  facilitate job creation and rural development
• Cabinet memo October 2011 in support of the dti
  and other departments.
• Bio-ethanol - Cradock project
• IDC partnership in pilot project
• Phase 1 - 6000 hectares of grain sorghum and
  sugar beet (2nd phase) DRDLR land
• Creation of in excess of 2000 jobs
• Phase 2 double capacity and create up to 20 000
  in total
• Implementation issues
• Feedstock
• Regulations on blend mix published for public
  comment
• Agricultural vs Industrial Water Licenses
• Strategic support/subsidy measures for growers
  and refineries
• Fuel levy exemptions for bio-diesel be increased
  and for bio-ethanol be introduced
• Streamlining licensing for small producers
• However, the latest taskteam meeting in March
  2012, the DOE advised that Biofuels was put on
  hold until they had concluded industry
  consultation and a study on the impact of
  blending regulation and break-even study for the
  industry as a whole. This put a hold on the
  project and outcomes are still awaited from DOE
  on the matter. In the interim, due to apparent
  lack of clear next step from DOE, the IDC has
  suspended its funding for the project.

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Biofuels rollout
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Bio- diesel

• The Economic Development Department has assisted
  Phyto Energy (Pty) Ltd develop a biofuels
  project in the Eastern Cape. 2011- German
  Technology, biodiesel from phytoplasm
• The rationale for EDD s involvement in the
  project is that the project is expected to
  stimulate the rural economy and SMME development
  as small holder farmers are expected to supply
  feedstock for the project
• Working with DRDLR small scale co-operative
  feedstock farming

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IDC investment in the Green Economy

• The IDC has aligned its sectorial focus areas
  with the requirements of IPAP2 and the NGP.
• The IDC will use a value chain approach with the
  emphasis on industrial development (including
  localization) and job creation.
• The IDCs role in growing the Green Economy would
  be through investments in
• clean production,
• clean energy,
• energy efficiency,
• demand side management interventions,
• emission and pollution mitigation,
• waste reduction and
• bio fuels.
• IDC has created an enabling environment by
  securing cheaper funding, with long debt tenures
  to act as a catalyst in the Energy Efficiency
  Markets.
• Green Energy Efficiency Fund was launched
  recently that offers the market debt at
  concessionary rates with debt tenures up to 15
  years by partnering with the German DFI KfW.
• IDC has structured the repayment of these loans
  to effectively match the savings profile of the
  technology installed. eg. On a Roof Top PV the
  savings over 15 years are equivalent to the debt
  service repayment and hence the facility of 15
  years is then proposed. Hence not an out of
  pocket expense for the company.

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Developing Renewable Energy in South Africa

• IDC has pro-actively sourced and developed
  projects for Renewable Energy
• Significant pipeline of projects that are bidding
  under the Renewable Energy Independent Power
  Purchase Procurement Program (REIPPPP) introduced
  by by the DOE on a capped tariff basis.
• The Bid structure effectively was on a
  competitive bidding process whereby a TARIFF CAP
  was set for each technology. A total of 3 725MW
  will be available under the program with 5
  bidding rounds.
• IDCs portfolio of projects for round 1 (4
  November) of this process was in excess of 800MW
  and ca R27 Billion project value.

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REIPP Procurement Programme RfP Highlights

• Up to 5 Phased Bid process pending subscription
  by Bidders of total allocation of 3 725MW spread
  across renewable energy technologies
• First phase submission November 2011
  announcement December 2011, June 2012- Financial
  closure 1 416MW - R46Bn
• Second phase submission early Mar 2012,
  announcement of preferred bidders May 2012
  1043.9MW - R28Bn
• Third Phase Expected August 2012 - 1 165.9 MW
• 100MW from 3 725W set aside for small lt5MW
  projects
• Key qualification criteria Project Structure,
  Legal, Land, Financial, Environmental, Technical,
  Economic Development, Bid Guarantee
• Proven technology - equipment must have been
  installed on two previous projects
• Track record of contractor - must have
  constructed two similar projects
• A bid bond of R100k/MW must be provided with the
  bid, increasing to R200k/MW when the Project is
  selected as preferred bidder
• If Qualification is met the bid will be evaluated
  mainly against Price (70) and Economic
  Development (30)
• Price not to exceed price caps for each
  technology
• Economic development matrix with focus on Jobs,
  local content, community and skills development.

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Green Economy Catalyst through investment in RE
by IDC
IDC participation summary (preferred bidder
status round 12)
Total community funding approved R1,5bn in all
projects
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Thank you/Siyabonga!
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