MANCHESTER METROPOLITAN UNIVERSITY, UK VISITING RESEARCH FELLOW, GRADUATE SCHOOL OF BUSINESS LEADERSIP, UNIVERSITY OF SOUTH AFRICA

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1 SOUTH AFRICA s RENEWABLE ENERGY INDEPENDENT POWER PROCUREMENT PROGRAMME (REIPPPP): A CASE OF LOCALISING THE RENEWABLE ENERGY INDUSTRY Dr. TIDINGS P. NDHLOVU MANCHESTER METROPOLITAN UNIVERSITY, UK VISITING RESEARCH FELLOW, GRADUATE SCHOOL OF BUSINESS LEADERSIP, UNIVERSITY OF SOUTH AFRICA Ms. NTOMBIFUTHI NTULI DIRECTOR:RENEWABLE ENERGY INDUSTRIES, INDUSTRIAL DEVELOPMENT & POLICY DIVISION, DEPARTMENT OF TRADE AND INDUSRTY (dti), SOUTH AFRICA

2 INTRODUCTION: Context Climate Change - alternative renewable and green economy approaches Reliance on fossil fuels, especially coal. Implications for social and ecological sustainability South African pledges: 34% emissions reduction below business as usual by 2020 and 42% by 2025 President Jacob Zuma: $100bn per year needed for low carbon development plus $100bn per year for adaptation Outline: Theoretical framework; Green Economy Accord; Renewable Energy Rollout Renewable Energy Independent Power Producer Procurement Programme (REIPPPP); Localisation of Renewable Energy; Evaluation and Challenges of Localisation; Evaluation of Job Creation via Localisation; Conclusion

3 MARKET VERSUS INSTITUTIONAL APPROACHES: TOWARDS A TRANSFORMATIVE APPROACH OF THE GREEN ECONOMY Market Approaches: - free market solutions - Marketization and commodification of nature Institutional Approaches: - State Planning and Regulation institution building; social cohesion - Transformative strand: ecological, social and political sustainability; role of developmental state; localization; democratization

4 Context - Energy 87% of primary energy supply from fossil fuels 86% of power generation capacity from coal 95% of crude oil requirement is imported 2006 data, Source: DoE 2011 data, Source: Eskom Electricity demand may reach MW with economic growth 4% if 6% 2.3 % if 4% Source: Eskom

5 Context Manufacturing Manufacturing declined by almost 20% from 2008 to 2009 and then recovered somewhat, showing growth of 5, 0% and 2, 5% in 2010 and 2011 respectively. manufacturing share of GDP Source

6 Context Unemployment Unemployment (25.5%) 4,2 million actively looking for work with an additional 2.5 million discouraged work seekers Manufacturing employment Source:

7 Government Policy on Renewables IRP ,8 GW of Renewable Energy 42% of new build capacity Failed REFIT Renewable Energy IPP Procurement Programme Green Economy Accord Local Procurement Accord

8 REIPPPP Renewable Energy Independent Power Producer Procurement Programme Initial Determination 3725 MW by 2016 Additional determination 3200 MW by 2020 Additional 6800MW committed.

9 REIPPP - Procurement

10 REIPPP- Procurement Government Framework Support Agreement

11 REIPPP - Evaluation Price 70 % 30 % ED

12 REIPPPP Economic Development Criteria

13 Technology Onshore Wind Solar Photovoltaic Solar CSP Without Storage Local Content Requirements Local Content First Bid Second Bid Third Bid Submission Date Submission Date Submission Date Current Current Target Threshold 25% 45% 25% 60% 40% 65% Threshold Target Threshold Target 35% 50% 35% 60% 45% 65% 35% 50% 35% 60% 45% 65% CSP with 25% 45% 25% 60% 40% 65% storage Biomass 25% 45% 25% 60% 40% 65% Biogas 25% 45% 25% 60% 40% 65% Landfill gas 25% 45% 25% 60% 40% 65% Small scale hydro 25% 45% 25% 60% 40% 65% 25% 45% 25% 60% 40% 65%

14 Progress in REIPPPP Rollout

15 Summary of BW1, BW2, BW3 & BW4 Total MW Allocated Total Project Cost (R Mil) Total Local Content Value (R Mil) Total Construction Jobs Total Operations Jobs BW MW R R BW MW R R BW MW R R (Person Months) BW MW R R (person months Total 5037 MW R R (BW1 & BW2)& (BW3 & 4 in person months)

16 Bid window 1 outcomes Technology MW Allocate d Price (fully Indexed) / MWh Total Project Cost (Mil) Local Content Value (Mil) Average local content Constru ction Jobs Operati onal Jobs Onshore wind 634 R1.14 R R % Solar PV 632 MW R2.75 R R % Solar CSP 150MW R2.68 R R % Small hydro None None None None None None None Total 1416 MW R R

17 Bid Window 2 Outcomes Technology MW Allocate d Price (fully Indexed )/ MWh Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Constru ction Jobs Operati onal Jobs Onshore 563MW R0.89 R R wind Solar PV 417MW R1,65 R R % Solar CSP 50MW R2.51 R4 483 R % Small hydro 14MW R1,03 R631 R % Total 1044 MW R R

18 Bid Window 3 Outcomes Technology MW Allocated Price (fully Indexed) / MWh Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Construc tion Jobs Operatio nal Jobs (person months over 20 yrs) Onshore 787MW R0.65 R R % wind Solar PV 435MW R0.88 R8 148 R % Solar CSP 200MW R1.40 R R % Landfill Gas 18MW R0,83 R288 R % Biomass 16MW R1.24 R1.062 R261 40% Total 1456 MW R R

19 Technology MW Allocated Price (fully Indexed) / MWh Bid Window 4 Outcomes Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Constructi on Jobs Onshore wind 676MW R0.61 R R % Solar PV 415MW R0.78 R8 504 R % Solar CSP n/a n/a n/a n/a n/a n/a n/a Small Hydro 5MW R1.11 R245 R80 40% Biomass 25MW R1.45 R1 195 R % Operation al Jobs (person months over 20 yrs) Total 1121MW R R

20 Why Renewable Energy Localisation? Round 1,2, 3 & 4 = R144 billion Renewable Energy a new sector re-industrialisation and reskilling opportunities and address unemployment Existing industrial capabilities in a range of relevant areas e.g. engineering, metal fabrication, etc. Growing number of component suppliers into renewable energy and energy efficiency value chains

21 Government interventions for Renewable Energy Localisation Market creation - Local Content Requirements Trade and Investment promotion and support Export promotion Manufacturing Incentives Financing through the IDC and DBSA Import Tariffs Standards and testing facilities R & D and Skills Development support DST and DHET

22 Components earmarked for localisation Components earmarked for local manufacturing in the immediate to short term wind turbine blades and towers; PV modules; PV inverters; and the metal structures used in PV plants. Government would eventually like to see all of these components manufactured in South Africa but understands that a gradual roll-out may be necessary in order to build manufacturing capacity in South Africa.

23 Studies Supporting Localisation of Renewables Solar and Wind Strategy Solar PV Localization Roadmap Solar CSP Localization Roadmap Wind Industry Localization Roadmap

24 Investments in Local Manufacturing Name of Investor DCD Wind Towers Location Technology Investment Amount Jobs Created Total Capacity Coega (PE) Wind Towers R300Mil towers/annum GRI Atlantis (CT) Wind Towers R237 Mil Towers/ annum Concrete Units CT Concrete Towers SMA CT Inverters R30 Mil 15 ILB Helios Eat London IDZ Solar Modules R220 Mil MW/annum Jinko Solar Solar Modules R60 Mil MW/annum AEG Inverters ART Solar Durban Solar Modules Sunpower Cape Town Solar Modules

25 Summary A national commitment to renewable energy A national commitment to localisation (Green Economy Accord, Local Procurement Accord) Development of a strong, competitive domestic manufacturing industry, Establish capability to compete with imports from an already established global industry Focus on Exports What will it take for local manufacturing industry to scale up? Market size Economies of scale Long term visibility market certainty Incentives required to support industry development Policy support Alignment of government policy objectives

26 Conclusion: Impact of South Africa s approach on economic, ecological, social and political sustainability Renewable energy will contribute significantly to the future energy mix of the country 42% (17.8 GW) of the total new electricity generation planned for in the current Integrated Resource Plan will be renewable. The cost (excludes interest and inflation) of this is expected to be R400 billion plus. Therefore such a large renewable energy programme is expected to put electricity on the grid, support industrialization, local value add and jobs and make a significant contribution to address South Africa s climate commitments Transformative Approach is likely to produce greater results