Independent Power Producers Procurement Programme (IPPPP) An Overview As at 31 March 2016
1 Table of Contents Page IPPPP context and highlights 2 The REIPPPP contribution 10 Energy supply capacity impact 17 National impacts 28 Investment impact 29 Economic and socio-economic impacts 34 Youth in green energy (special insert) 46 Provincial and community impacts 58 Appendix A Clarification notes, glossary of terms and icons A
2 IPPPP context and highlights
3 Introduction Introducing the context for the IPPPP The National Development Plan (NDP) identifies the need for South Africa to invest in a strong network of economic infrastructure designed to support the country s mediumand long-term economic and social objectives. Energy infrastructure is a critical component that underpins economic activity and growth across the country, and it needs to be robust and extensive enough to meet industrial, commercial and household needs. The NDP requires the development of 10 000 MW additional electricity capacity to be established by 2019 against the 2010 baseline of 44 000 MW. The (policy adjusted) Integrated Resource Plan (IRP) 2010 1 developed the preferred energy mix with which to meet the electricity needs over a 20 year planning horizon to 2030. In line with the national commitment to transition to a low carbon economy, 17 800 MW of the 2030 target are expected to be from renewable energy sources, with 5 000 MW to be operational by 2019 and a further 2 000 MW (i.e. combined 7 000 MW) operational by 2020. Planning requirements 2 further include capacity to supply for base load and medium term risk mitigation (MTRM) plans. In May 2011, the DoE gazetted the Electricity Regulations on New Generation Capacity (New Generation Regulations) under the Electricity Regulation Act (ERA). The ERA and Regulations enable the Minister of Energy (in consultation with NERSA) to determine what new capacity is required. Ministerial determinations give effect to components of the planning framework of the IRP, as they become relevant. New capacity determinations include: 13 225 MW of renewable energy (comprising of solar PV: 4 725 MW, wind: 6 360 MW, CSP: 1 200 MW, small hydro: 195 MW, landfill gas: 25 MW, biomass: 210 MW, biogas: 110 MW and the small scale renewable energy programme: 400 MW); 2 500 MW designated from coal-fired plants (excluding cross-border projects); 1 800 MW of cogeneration; 3 126 MW of gas-fired power plants; and 2 609 MW of imported hydro. Opening the market for IPPs A significant share of the new electricity capacity will be developed and produced by Independent Power Producers (IPPs). The introduction of private sector generation offers multiple benefits. It is contributing greatly to the diversification of both the supply and nature of energy production, assisting in the introduction of new skills and in new investment into the industry, and enabling the benchmarking of performance and pricing. Note 1. Electricity Regulations on the Integrated Resource Plan 2010-2030, under the Electricity Regulation Act, 2006 (Act No. 4 of 2006) as promulgated and gazetted on 6 May 2011. Note 2. Given effect by various Ministerial Determinations.
The New Generation Regulations establish rules and guidelines that are applicable to the undertaking of an IPP Bid Programme and the procurement of IPPs for new generation capacity. These guidelines include: compliance with the IRP 2010; the acceptance of a standardised power purchase agreement (PPA); a preference for a plant location that contributes to grid stabilisation and mitigates against transmission losses; and a preference for a plant technology and location that contributes to local economic development. The Independent Power Producers Procurement Programme (IPPPP) Office and mandate The IPPPP has been designed not only to procure energy, but has also been structured to contribute to the broader national development objectives of job creation, social upliftment and broadening of economic ownership. The programme is contributing to alleviating the electrical energy shortfall South Africa is facing. In this context the DoE is in the process of procuring significant additional renewable energy, coal, gas and cogeneration capacity from the private sector (and cross-border projects) to fill the electricity supply gap up to 2023. This implies a sharp ramp-up in procurement to 21 448 MW. To contextualise this capacity, it is equivalent to introducing nearly 2.5 times the combined capacity of the Medupi and Kusile power plants within a period of only 10 years. Of this, a majority of 13 207 MW is expected to be from renewable energy sources. 4 The Department of Energy (DoE), National Treasury (NT) and the Development Bank of Southern Africa (DBSA) established the IPPPP Unit for the specific purpose of delivering on the IPP procurement objectives. In November 2010 the DoE and NT entered into a Memorandum of Agreement (MoA) with the DBSA to provide the necessary support to implement the IPPPP and establish the IPPPP Office. The programme s primary mandate is to secure electrical energy from the private sector for renewable and non-renewable energy sources. With regard to renewables, the programme is designed to reduce the country s reliance on fossil fuels, stimulate an indigenous renewable energy industry and contribute to socio-economic development and environmentally sustainable growth. Non Renewable 2 Energy Procurement Coal (base load) Cogeneration Gas The activities of the office are in accordance with the capacity allocated to renewable energy and non-renewable generation in the Integrated Resource Plan (IRP) 2010; subsequent ministerial determinations and DoE support service requirements. The IPPPP Office provides the following services: Professional advisory services; Procurement management services; Monitoring, evaluation and contract management services (as from 7 July 2014) with contract period up to 30 years. 1 3 Renewable Energy Procurement REIPPP Programme (onshore wind, solar PV, CSP, small hydro, biomass, biogas, landfill gas) Small REIPPs Hydro Cogeneration (from agricultural waste / byproducts) Advisory services Gas Policy Framework Small Projects Fund Biofuels Demand Side Management and Energy Efficiency Solar Water Heaters
The IPPPP has been commended 1 for effectively avoiding the quicksand of laborious administrative arrangements, without undermining the quality or transparency of the programme. The IPPPP partnership is funded by a Project Development Facility (PDF) financed through bid registration fees payable by all bidders and the Development Fee paid by selected bidders. Economic growth and development Industry Physical 5 An evolving scope of services Civil society Energy sources Government The IPPPP Office has three interrelated focus areas: It is a key procurement vehicle for delivering on the national renewable energy capacity building objectives; It is responsible for securing electricity capacity from IPPs for non-renewable energy sources as determined by the Minister of Energy; and It is providing advisory services, related to programme / project planning, development, delivering and financing focused on creating an enabling and stable market environment for IPPs. The IPPPP activities continue to evolve in order to effectively respond to the planning and development needs in the current energy context. As an example, the IPPPP Office is coordinating the development of the gas policy and strategy framework to provide broader context for the procurement of the required gas capacity as per the IRP 2010. Energy triangle 2 Increasingly, a sound, comprehensive energy strategy is structured as a triangle with the three sides denoting, respectively: promoting economic development, providing energy security and access while achieving environmental sustainability. South Africa s current electricity development strategy aims to achieve a greater balance between these three aspects, focusing on achieving a balanced energy mix to include more gas and renewables. An appropriate approach to development of a sustainable energy portfolio has to take account of how new development and capacity delivers against the imperatives of the energy triangle. Energy access and security Carriers Markets & demand sectors Social Boundary constraints Environmental sustainability Renewable energy procurement approach Historically, feed-in tariffs (FITs) have been the most widely used international government policy instrument for procuring renewable energy (RE) capacity. After investigating a REFIT, the South African government favoured a competitive tender approach that has proven to be exceptionally successful for attracting substantial private sector expertise and investment into gridconnected renewable energy at competitive prices. Tenders are structured as a rolling bid-window programme that not only allows for continued market interest, but increased competitive pressure among bidders to participate and offer reduced pricing. In achieving a competitively priced, clean energy bid programme, the IPPPP is meeting successfully the challenges of the energy triangle through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Note 1. South Africa s Renewable Energy IPP Procurement Program: Success Factors and Lessons, May 2014, World Bank Group. Note 2. Source: World Economic Forum Global Energy Architecture Performance Index Report (2013).
IPPPP - giving effect to the IRP 2010 diversified energy mix Baseload/midmerit determination 25 May 2012 Share of total new (GW) 29% 9% 4% 2% 17% 5% 33% 1% 25.0 20.0 15.0 10.0 5.0 0.0 16.4 4.9 2.4 Baseload/midmerit determination 25 May 2012 18 Aug 2015 1.3 9.6 2.6 18.8 0.5 Procurement and implementation Procurement and implementation focus Coal (base load) 1 Cogeneration 2 Gas Gas Policy Framework Renewable Energy determinations 1 Aug 2011 19 Dec 2012 18 Aug 2015 REIPPPP 3 (onshore wind, solar PV, CSP, small hydro, biomass, biogas, landfill gas) Advisory 6 Planning and strategy development inputs in support of DoE and / or IPPPP future procurement objective: Biofuels programme alignment DSM and energy efficiency Solar Water Heaters Capacity share 6 4 New builds 16.4 4.9 2.4 1.3 9.6 2.6 18.8 0.5 Existing fleet (2010) 35.6 2.4 0.0 1.6 1.8 2.1 0.0 0.4 2010 81% 5% 0% 4% 4% 5% 0% 1% 5 2030 46% 8% 3% 3% 13% 5% 21% 1% Denotes active programmes Small REIPPPPs 3 Cross border (hydro, coal, gas, etc.) Implementation only focus Monitoring of DoE IPP Peaking Plant Small projects fund (FIRST) Cross border Note 1. Ministerial Determination Baseload/mid-merit determination 25 May 2012. Note 2. Ministerial Determination for Medium Term Risk Mitigation (MTRM), 19 December 2012. Ministerial Determination for cogeneration 18 August 2015. Note 3. Ministerial Determinations for renewable energy, 1 August 2011,19 December 2012 and 18 August 2015. Note 4. New builds includes all. Note 5. Energy share 2030 takes into consideration decommissioned coal units (10.9 GW) and previously committed Wind and CSP (i.e. 1.0 GW over and above 17.8 GW IPP target). Note 6. Share of total installed capacity (MW).
7 IPPPP portfolio status at a glance Summary of the current status for each of the IPPP programmes in terms of the determinations by the Minister of Energy to date. Carrier (Capacity determined) Master planning Project preparation RFP Bid submission Bid announcement Financial close COD Coal (2 500 MW) Local and Cross Border IRP Completed 15 Dec 2014 Nov 2015 Q2 2016/17 Q2 2017/18 2021 onwards Cogen (1 800 MW) IRP Completed 4 June 2015 1a 11 Aug 2015; 1b 9 Sept 2015; 1c Q3 2016/17 1a - 15 Dec 2015 1b Q3 2016/17 4 1c Q4 2016 /17 1a Q2 2016/17 1b Q1 2017/18 1c Q3 2017/18 1a - Q4 2016/17 1b Q4 2017/18 1c Q3 2018/19 Floating Power Plants August 2015 Document preparation 1 st draft RFP completed Project currently on hold Imported Gas (3 126 MW) Dec 2015 2 Document preparation RFQ Q3 2016/17 RFP Q4 2016/17 Q3 2017/18 Q4 2017/18 Q4 2018/19 First power 2021/22 - ongoing Domestic and Piped Gas (126 MW) Dec 2015 2 Document preparation Q3 2016/17 Q1 2017/18 Q2 2017/18 Q1 2018/19 2018/19 - ongoing Peakers (1 020 MW) Renewable energy (13 225 MW) Bid window 1 (1 423.80 MW) Bid window 2 (1 043.86 MW) Bid window 3 (1 451.56 MW) IRP Completed Completed Completed Completed Sept 2013 IRP Completed 3 Aug 2011 4 Nov 2011 6 Dec 2011 5 Nov 2012 IRP Completed 3 Aug 2011 5 Mar 2012 21 May 2012 9 May 2013 IRP Completed 3 May 2013 19 Aug 2013 29 Oct 2013 12 Dec 2015 30 Sept 2015 5 ; 9 Sept 2016 100% COD 100%GC 1 78% COD 89% GC 1 0% COD 0% GC 1 Bid window 3.5 (200 MW CSP) IRP Completed - 31 Mar 2014 15 Dec 2014 Q1 2016/17 Q4 2018/19 Bid window 4 and 4 additional (2 205 MW) Bid window Expedited (1 800 MW) IRP Completed 26 May 2014 18 Aug 2014 16 Apr 2015 Q2 2016/17 IRP Completed 25 Jun 2015 11 Nov 2015 Q2 2016/17 Q2 2017/18 Q2 2017/18 onwards Q1 2019/20 onwards Bid window 5 (1 566 MW) IRP Document preparation Q2 2016/17 Q4 2016/17 Q2 2017/18 Q2 2018/19 Q4 2020/21 onwards Small renewables First Stage Two (49 MW) Small renewables Second Stage Two (51 MW) IRP Completed - 3 Nov 2014 4 Oct 2015 Q2 2016/17 Q4 2017/18 IRP Completed 18 Dec 2015 Q1 2016/17 Q3 2016/17 Q3 2017/18 Q4 2019/20 Small Renewables Bid Window 3 (100 MW) IRP Document preparation Q2 2016/17 Q4 2016/17 Q2 2017/18 Q2 2018/19 Q4 2020/21 onwards Where COD Commercial Operation Date, RFP Request for Proposals; IRP Integrated Resource Plan (*Green areas indicate milestones completed with completion dates shown. Grey areas indicate planned milestone dates.) Note 1. GC Grid connected. Note 2. A Gas Policy and Strategy Framework is in the process of development. Note 3. 16 of the 17 projects have signed. One IPP still to finalise financial close. Note 4. Dates applicable to the 3 response submissions under BW1. Note 5. Dedisa reached COD on 30 September 2015.
IPPPP highlights 8 The REIPPPP is offering new and emerging opportunities to address youth [un]employment young Many hands make LIGHTS work as at 31 March 2016 contributed of all South African citizen 2 jobs on the REIPPPP ~R90 million 3 to Education and Skills Development enabling young South Africans to become Note 1. Person months (i.e. the reporting unit of IIPP agreements) converted to Full Time Equivalents (FTEs) as per the Extended Public Works Programme (EPWP) definition. Includes employment in both construction and operations phases. Note 2. Expressed as percentage of jobs held by SA citizen jobs and not total jobs. Note 3. An approximate value based on total spend and percentage allocation to the category.
9.6 18 17.0 708 2 545 8 378 5 408 11 121 13 742 15 690 32.6 16 880 17 785 19 050 40.1 20 933 23 044 24 965 53.2 53.4 7 MW 1 045 MW 191 MW 639 MW 1 522 MW 1 709 MW 1 860 MW 1 405 GWh 5 003 GWh 2 021 MW 2 021 MW 2 145 MW 8 273 GWh The REIPPPP is successfully delivering clean energy timeously and cost effectively, 9 megawatts operational portfolio price trend 2 (MW) (R/kWh) clean energy generated 3 (GWh) planned: 2 332 MW - 34% 2.37-19% - 39% 1.56 1.26 0.77 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013/14 2014/15 2015/16 BW 1 BW 2 BW 3 BW 4 Jan - Mar 2016 Apr 2015 - Mar 2016 Nov 2013 - Mar 2016 REIPPs have consistently contributed new capacity to the network since the end of 2013. At March 2016, 93% of IPPs scheduled 1 to be operational have started commercial operations. The average lead time for these 43 projects to complete has been 1.8 years. The REIPPPP is procuring energy at increasingly cost competitive rates. Prices stated in April 2015 terms. Energy weighted average (R/kWh) considering average technology RFP submission price (published) per BW and projected, annual energy contribution per technology type. Although production is only ramping up as IPPs become operational, 8 273 GWh have already been generated by the RE portfolio since inception to date - thereby offsetting 8.4 Mton CO 2 emissions 4. and is supporting broader development objectives Total foreign investment attracted of total investment (cumulative R194.1 billion) Debt Equity employment creation 3 (job years) 5 equitable shareholding (%) 3 SA Citizens SA Citizens from local communities 30% BW 1 BW 2 BW 3 BW 3.5 BW 4 BW 1S2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/13 2013/14 2014/15 2015/16 The total foreign equity and financing invested in REIPPs (BW1 - BW4 & 1S2) reached R53.4 billion. This is equivalent to 86.1% of the total FDI attracted into South Africa during 2014 (R62 billion) 6. Employment for South African citizens including people from communities local to the IPP operations. Black South Africans hold 30% of the shares across the complete supply chain (for the 63 projects in BW1, BW2 and BW3). Local communities hold 11% equity in the IPPs of BW1, BW2 and BW3. Note 1. 43 IPPs have reached commercial operation date (COD) out of 46 that were planned by March 2016. Note 2. Contracted price (at which power is sold to Eskom) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50) (in April 2015 terms). BW3 estimated rate incorporates the peak tariff (270% of base rate) applicable to CSP. BW3.5 is not included as it is technology specific. Note 3. For actual achievements only BW1, BW2 and BW3 data is reported BW3.5, BW4 & BW1S2 have not completed financial close. Note 4. Carbon emission reductions reflect all energy generated Inception to date. Note 5. Employment / Job creation measured in job years (equivalent of a full time employment opportunity for one person for one year). Note 6. South African Reserve Bank (SARB). 2015. Quarterly Bulletin March 2015:45. Pretoria: SARB. Foreign equity in the REIPPPP (BW1 BW4 and 1S2) is R35 billion i.e. equivalent to 56.5% of the inward FDI attracted into South Africa during 2014.
The REIPPPP contribution 10
11 National Development Plan (NDP) Making a broader contribution Outcome Primary focus IPP 1 Quality basic education n/a 2 A long and healthy life for all South Africans 3 All people in South Africa are and feel safe 4 Decent employment through inclusive economic growth 5 A skilled and capable workforce to support inclusive growth 6 An efficient, competitive and responsive economic infrastructure network 7 Vibrant, equitable, sustainable rural communities contributing towards food security for all 8 Sustainable human settlements and improved quality of household life 9 Responsive, accountable, effective and efficient developmental Local Government system 10 Protect and enhance our environmental assets and natural resource 11 Create a better South Africa, contribute to better and safe Africa in a better world 12 An efficient, effective and development orientated public service 13 An inclusive and responsive social protection system 14 Nation building and social cohesion D D = Direct, ID = Indirect, n/a = Not Applicable ID n/a D D D ID D ID D ID n/a n/a Infrastructure investment is a key priority of the National Development Plan (NDP). The NDP identifies the need for South Africa to invest in a strong network of economic infrastructure, designed to support the country s medium- and long-term economic and social objectives. This chosen procurement approach has further enabled the programme to effectively target and contribute to several of the national outcomes as defined in the NDP. Across the 14 stated national outcomes, the IPP programme contributes directly and indirectly to 10 of these. The most significant contribution is however towards Outcome 6: An efficient, competitive and responsive economic infrastructure network. In terms of electricity infrastructure planning, the NDP translated the IRP 2010 long-term planning framework into prioritised, intermediate milestones, as captured in the Medium Term Strategic Framework (MTSF). The key target for electricity infrastructure development is to increase the electricity generation reserve margin from 1% (2014) to 19% in 2019 to ensure the continued, uninterrupted supply of electricity in the country. The corresponding MTSF interim delivery targets for Outcome 6 therefore require the development of 10 000 MW additional electricity capacity to be commissioned by 2019 against the 2010 baseline of 44 000 MW. Outcome 6, as it relates to electricity infrastructure that supports efficient, competitive and responsive economic development, is the principal NDP-defined outcome relevant to the DoE. The procurement and support services of the IPPPP Office, as IPP Procurement Office for the DoE, will therefore contribute directly and primarily towards this Outcome.
12 Outcome 6 Creating (clean) energy supply infrastructure Outcome 6 - as it relates to electricity infrastructure that supports efficient, competitive and responsive economic development - is the principal NDP-defined Outcome relevant to the DoE and the IPPPP. The NDP sets a target of 10 000 MW of new generation capacity to be commissioned by 2019 to ensure the continued, uninterrupted supply of electricity in the country. The NDP further specifies that of this target, 5 000 MW 2 should be from renewable energy sources, with an additional 2 000 MW 3 procured (to become operational within the following year) during the same timeframe. The REIPPPP gives effect to these objectives through the procurement of IPPs for new generation capacity in accordance with determinations by the Minister of Energy. Strategic Infrastructure Projects (SIPs) are vehicles created for implementation and coordination, planning, integration and monitoring of the infrastructure development targets (sub-outcome 3). The REIPPPP constitutes a key element of the Strategic Infrastructure Programme (SIP) 8: Green energy in support of the South African economy. The REIPPPP has therefore been designed to procure renewable energy generation capacity and to contribute towards socio- Outcome 6 An efficient, competitive and responsive economic development infrastructure network, including Strategic Infrastructure Projects. Outcome 6 Impact indicators 1 Impact indicator 1 Adequate electricity generation capacity commissioned 2 Electricity generation reserve margin increased Baseline (2010) Relevant sub outcomes Sub Outcomes 44 000 MW (Eskom) 2019 target 10 000 MW (added) 1% 19% Sub-Outcome 2: Reliable generation, transmission and distribution of energy: Electricity, liquid fuels, coal and gas Sub-Outcome 3: Coordination, planning, integration and monitoring implementation of SIPs economic and environmentally sustainable growth in South Africa. The REIPPPP aims to stimulate the local renewable energy industry, including developers, contractors and manufacturing. The Energy supply capacity impact section reports on the progress made in terms of generation capacity building, providing the required supply infrastructure in direct support of economic activity / growth. Baseline (2010) 44 000 MW (Eskom) 2019 Target 10 000 MW added to the baseline of which 5 000 MW RE operational + additional 2 000 MW contracted Baseline 1% reserve margin Target 19% by 2019 Note 1. A selection of relevant indicators only. Note 2. Sub-outcome 2, item 26. Note 3. Sub-outcome 2, item 18.
Outcomes 2, 4, 5, 7, 8, 9, 10, 11 and 14 13 Making a broader contribution In order to leverage the IPPPP for purposes of economic and socio-economic development, an exemption from the Preferential Procurement Policy Framework Act, 2000 (PPPFA) and the 2011 regulations under the Act, was secured for the IPPPP to set minimum achievement targets not ordinarily set in terms of other legislation and policy instruments and to induce competitiveness in offering higher target commitments. The exemption was granted by the Minister of Finance on 22 July 2011 and on the understanding that the DoE is aiming to maximise opportunity to still achieve certain economic development objectives that includes the following: Job creation, with the emphasis on jobs for South African citizens, South African citizens who are black people and South African citizens from local communities; Local content, with the view that a certain percentage of the project value would be spent in South Africa; Ownership, with the aims to advance ownership by black people and local communities; Management Control, with the aim to achieve the involvement of black people in management positions and responsibilities; Preferential Procurement, with focus on sub-contracting to empowered enterprises, black enterprises and enterprises owned by women; Enterprise Development, with the aim of development of emerging enterprises, and those merging enterprises located in local communities; and Socio-economic Development, which attempts to address the socio-economic needs of local communities. Key to the design of the IPPPP is supporting the DoE s commitment to contribute to the achievement of outcomes 2, 4, 7, 8 and 10 and so stimulate a virtuous cycle of development growth associated with the renewable and non-renewable energy programmes. Progress of the REIPPPP against these parameters is reported in the Economic, social and environmental footprint section. At a provincial and project level the REIPPPP also contributes to Outcomes 2 and 9 where IPP community development projects are relevant, as follows: Outcome 2 Improved health facility planning and infrastructure delivery. Socio economic commitments under the REIPPPP include contributions to health care and education. Activities include building, upgrading and improvement of facilities for schools, hospitals and clinics, amongst others. Outcome 9 Members of society have sustainable and reliable access to basic services. A contribution towards this outcome is made through community projects that include infrastructure development such as development of roads or electrification of local communities.
Alignment of development objectives and bid obligations Outcomes Relevant focus Bid category 14 Outcome 4 Outcome 4 - Decent employment through inclusive economic growth, achieved Productive investment through infrastructure investment programme, Employment opportunities in the infrastructure build programme, Economic opportunities for historically excluded and vulnerable groups, Number of small businesses, Number of adults working in rural areas. Job creation Enterprise development Ownership Preferential procurement Local content Outcome 5 Outcome 5 A skilled and capable workforce to support inclusive growth. Job creation Management control Outcome 7 Outcome 7 Vibrant, equitable sustainable rural communities contributing towards food security for all Reduction of rural unemployment rate, Increased access to quality infrastructure and services specifically education, healthcare and public transport. Job creation Socio-economic development Ownership Enterprise development Outcome 8 Outcome 8 Sustainable human settlements and improved quality of household life. Socio-economic development Outcome 10 Outcome 10 Protect and enhance our environmental assets and natural resources Reduced total emissions of CO 2 by 34% reduction from business as usual scenario. Resulting from power generation from clean energy sources (a consequence of Outcome 6) Outcome 11 Outcome 11 Create a better South Africa, contribute to a better and safer Africa in a better world Increased FDI: R230 billion by 2019 (from baseline of R40 billion in 2013). Ownership Outcome 14 Outcome 14 Nation building and social cohesion Disability and gender equality, Equal opportunities and redress inequality. Preferential procurement Job creation Ownership
Item Engage Report + align Alignment with Strategic Infrastructure Projects (SIPs) 15 Government adopted a framework consisting of 18 Strategic Infrastructure Projects that is intended to transform the economic landscape of South Africa, create a significant number of new jobs, strengthen the delivery of basic services to the people of South Africa and support the integration of African economies. In order to address these challenges and goals, Cabinet established the Presidential Infrastructure Coordinating Committee (PICC) to: o o o coordinate, integrate and accelerate implementation; develop a single common National Infrastructure Plan that will be monitored and centrally driven; identify who is responsible and hold them to account; and o develop a 20 year planning framework beyond one administration to avoid a stop-start pattern to the infrastructure roll-out. Under their guidance, 18 strategic integrated projects (SIPs) have been developed. The SIPs can be grouped into the following broad areas: Five geographically-focused SIPs; Three energy SIPs; Three spatial SIPs; Three social infrastructure SIPs; Two knowledge, one regional integration and one water and sanitation SIP. 1. In this context (through engagement with the PICC secretariat) the relevant SIPs for the IPPPP have been identified (to leverage synergy around economic and socio economic development) as well as the associated reporting requirements (for alignment and integration purposes) for the IPPPP (subsequent table). The Green Energy Strategic Infrastructure Programme (SIP 8), that operationalises NDP Outcome 6, reinforces the RE infrastructure imperative with a target to deliver 6 725 MW RE through IPPs by 31 March 2019 (not including 200 MW by small scale RE projects). Strategic Infrastructure Project 1 SIP 1: Unlocking the northern mineral belt with Waterberg as the catalyst Co-ordinating institution: Eskom Description: Unlock mineral resources as well as infrastructure such as rail, water pipelines, energy generation and transmission infrastructure. Urban development in Waterberg. Rail capacity to Mpumalanga and Richards Bay. Shift from road to rail in Mpumalanga. Logistics corridor to connect Mpumalanga and Gauteng. 2 SIP 3: South-Eastern node & corridor development Co-ordinating institution: Transnet Description: New dam at Mzimvubu with irrigation systems. N2-Wild Coast Highway which improves access into KwaZulu-Natal and national supply chains. Strengthen economic development in Port Elizabeth through a manganese rail capacity from Northern Cape; a manganese sinter (Northern Cape) and smelter (Eastern Cape). Possible Mthombo refinery (Coega) and trans shipment hub at Ngqura and port as well as rail upgrades to improve industrial capacity and performance of the automotive sector. 3 SIP 5: Saldanha-Northern Cape development corridor Co-ordinating institution: IDC (Industrial Development Corporation) Description: Integrated rail and port expansion. Back-of-port industrial capacity (including an IDZ). Strengthening maritime support capacity for oil and gas along African West Coast. Expansion of iron ore mining production and beneficiation. X X X X SIP target for RE 6 725 MW By 2019
Item Engage Report + align Item Engage Report + align Strategic Infrastructure Project 4 SIP 8: Green energy in support of the South African economy Co-ordinating institution: IDC (Industrial Development Corporation) Description: Support sustainable green energy initiatives on a national scale through a diverse range of clean energy options as envisaged in the Integrated Resource Plan (IRP2010). Support bio-fuel production facilities. X X Strategic Infrastructure Project 8 SIP 17: Regional integration for African cooperation and development Co-ordinating institution: To be determined Description: Participate in mutually beneficial infrastructure projects to unlock longterm socio-economic benefits by partnering with fast-growing African economies with projected growth ranging between 3% and 10%. X 16 5 SIP 9: Electricity generation to support socio-economic development Co-ordinating institution: Eskom Description: Accelerate the construction of new electricity generation capacity in accordance with the IRP2010 to meet the needs of the economy and address historical imbalances. Monitor implementation of major projects such as new power stations: Medupi, Kusile and Ingula. X X 9 SIP 18: Water and sanitation infrastructure Co-ordinating institution: TCTA (Trans- Caledon Tunnel Authority) Description: A 10-year plan to address the estimated backlog of adequate water to supply 1.4 m households and 2.1 m households to basic sanitation. The project will involve provision of sustainable supply of water to meet social needs and support economic growth. X 6 SIP 10: Electricity transmission and distribution for all Co-ordinating institution: Eskom Description: Expand the transmission and distribution network to address historical imbalances, provide access to electricity for all and support economic development. Align the 10 year transmission plan, the services backlog, the national broadband rollout and the freight rail line development to leverage off regulatory approvals, supply chain and project development capacity. X X The DoE is conducting the monitoring and progress with regard to the implementation of the IPP projects through its IPPPP office. The DoE retains the responsibility to report on programme achievements of SIP 8 and SIP 9 to the PICC structures. With respect to SIP 9, Electricity generation to support socio-economic development that is coordinated by Eskom, the IPPPP Office, in providing a monitoring function, collates and supplies status information on Avon, the OCGT IPP plant still in construction. 7 SIP 16: SKA & Meerkat Co-ordinating institution: SKA (Square Kilometre Array) Description: SKA is a global mega-science project, building an advanced radio-telescope facility linked to research infrastructure and high-speed ICT capacity and provides an opportunity for Africa and South Africa to contribute towards global advanced science projects. X SIPS: Addressing spatial imbalances through targeted infrastructure investment, Source: Presidential Infrastructure Coordinating Commission
The REIPPPP contribution: Energy supply capacity impact NDP, Outcome 6 17
18 The procured portfolio of RE capacity REIPPPP capacity procured Capacity (GW) Wind 47% 31 percent 17.8 GW by 2030 (IRP, NDP) 13.2 GW determined 7 GW procured by 2019 to be operational by 2020 (NDP) 6.4 GW procured 2.1 GW commissioned (operational) Electricity mix Share of available capacity (GW) 3 8400 8400 CSP 6% Solar PV 47% 2700 2800 1000 500 5% -11% of the 2020 target for RE is already operational (Mar 2016) CSP 9% Wind 53% 4725 6360 Landfill, Hydro, Biomass, Biogas 1% Solar PV 36% 2292 1200 3357 600 940 128 IRP 2030 IRP 2020 Determined Actual (Procured) Solar PV Wind CSP Landfill,Hydro, Biomass, Biogas and Smalls 3 Delivery on Outcome 6 targets and the REIPPPP procurement mandate The REIPPPP has successfully procured 6.4 GW from 102 IPPs in BW1 to BW4 and 1S2 1. Of this, 3.9 GW (from BW1, BW2 and BW3 2 ) are at various stages of construction or have commenced with commercial operation. By end March 2016, 2.2 GW of the procured capacity had already started operations and was delivering 2.1GW of actual capacity (i.e. 43 IPPs delivering 13MW short of procured capacity). In terms of national targets for renewable energy capacity, as defined by the IRP and National Development Plan, this represents 12% towards the 2030 target and 31% towards the 2020 target (i.e. 7 GW RE capacity to be procured by 2019 and commissioned by 2020 and 17.8 GW by 2030). 0.6 GW is still to be procured to meet the 2019 procurement target. Achieving the desired energy mix The energy mix of the procured REIPPPP portfolio is well aligned with the IRP planned mix as targeted for 2030. The relative share from both CSP and wind is higher than the original plan, with the solar PV share 11% lower in the current mix. The slight divergence from the IRP 2010 is informed by technology, price and system requirements and follows from the three ministerial determinations in 2010, 2011 and 2015. Energy Capacity N1 Refer to Appendix (interpretation notes) for a complete breakdown of targets IRP 2010 plan: RE (new build, excluding hydro) 21% of total capacity by 2030 21% Note 1. 1S2 refers to the first completed bid cycle for small RE projects consisting of two bid rounds. Note 2. 16 of 17 projects have reached financial close and started construction. Note 3. The 940 MW allocation for landfill gas, hydro, biomass and biogas includes small projects of 400 MW. The 128 MW Actual (Procured) for landfill gas, hydro, biomass and biogas includes small projects of 49MW.
Technology capacity allocation 1 Capacity (MW) Capacity breakdown (procured) Capacity (MW) 102 IPP projects 6,376 Megawatts 2.37 3040 1470 1850-34% 1.56 7 000 6 000 5 000 4 000 3 000 2 000 1 000 2200 1075 1450 0 1.26 Per window (MW) 0.77 BW 1S2 49 BW 4 2 205 BW 3.5 200 BW 3 1 457 BW 2 1 040 BW 1 1 425 1.14 Per technology (MW) REIPPPP estimated 4 price trends Energy weighted average (R/kWh) Other 5 128 Wind onshore 3 357 Solar CSP 600 Solar PV 2 292-19% N8-39% 600 460 400 255 200 225 Wind PV CSP Landfill,Hydro, Biomass, Biogas and Smalls 1 0.86 0.63 BW 1 BW 2 BW 3 BW 4 MedupiI Kusile MedupiE Note: REIPPPP prices expressed in April 2015 terms In three separate ministerial determinations (2011, 2012 and 2015), the Minister of Energy determined that 13 225 MW power from renewable energy be procured, drawing from the following technologies: onshore wind; solar photovoltaic; concentrated solar power (CSP); biogas; biomass; landfill gas; and small hydro. The determinations provides for the capacity contributions from the respective technologies towards the total 13 225 MW, as shown in the figure to the left. The determinations have been implemented in rolling bid windows with six (1, 2, 3, 3.5, 4 and 1S2) bid windows successfully completed in the first five years. The number of projects, capacity contribution and technology share resulting from the procurement process towards the overall target are illustrated on the left. In terms of progress, this represents 48% of the already determined capacity (13 225 MW). Cost effectiveness of the REIPPPP (Actual bid prices) In line with international experience, the price of renewable energy is increasingly cost competitive with conventional power sources. The REIPPPP has effectively captured this global downward trend with prices decreasing in every bid window. Energy procured by the REIPPPP is progressively more cost effective and rapidly approaching a point where the wholesale pricing for new coaland renewable-generated energy intersect. Eskom published LCOEs 2 for Medupi and Kusile in 2012 quoted R0.54 and R0.73/kWh respectively (R0.63 and R0.86/kWh in April 2015 terms). Cost over-runs, increases in financing and (expected) increases in operational (including coal) costs prompted industry to challenge the validity 3 of Eskom s cost projections. Industry counter estimates at the time for the LCOE of Medupi were R0.97/kWh (R1.14 in April 2015 terms). Considering the ongoing delays in completion, indications are that these costs may even be significantly higher. 19 48% of the determined capacity procured Refer Page 20 for detail of the price trends per technology Refer note N8 for detail of the portfolio average estimate where: Medupi I - industry estimate Medupi E Eskom figure Note 1. The MW allocation for landfill gas, hydropower, biomass and biogas includes small projects of 400 MW. Note 2. Levelised Cost Of Electricity (figure shows April 2015 terms for comparison purposes). Note 3. MAC Consulting report (extract presented by Eskom), EIUG analysis on a levelised cost scenario of Eskom s New Build programme, NERSA media statements (2012). Latest industry estimates are about R1.05/kWh (SAWEA), i.e. R1.23/kWh in April 2015 terms. Note 4. Contracted (at which power is sold to Eskom) price (in 2015 terms) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50). BW3 estimated rate incorporates the peak tariff (270% of base rate) applicable to CSP (refer interpretation notes for additional detail). Note 5. 128 MW for Other technologies includes 49 MW for Smalls
Average technology tariffs 3 R/kWh Average Per bid window N8 In comparison, the estimated, average portfolio 1 cost for all technologies under the REIPPPP has dropped consistently in every bid period to a combined average 1 of R0.77/kWh in BW4. 20 R 0.92 R 2.43 R 1.75 R 1.26 R 1.53-50% 1.42 1.12 0.82-0.71-6% -7% Ave of base rate only 3.35 3.13 1.82 1.70 - -75% 3.43 2.05 1.10-0.85-9% - 1.28 - - 1.17-3% - - 1.55-1.51 Cost effectiveness of RE technologies Pricing and trends vary across the respective technologies, but have shown a similar downward trend. The price for wind power has dropped by 50% to R0.71/kWh, with the BW4 price directly comparable 2 with the per kwh price of new coal generation. Solar PV has dropped most significantly with a price decrease of 75% to R0.85/kWh between BW1 and BW4. CSP rates in BW3 and BW3.5 were differentiated with a base and peaking rate component and are therefore indicated separately. The average rate of CSP decreased by 6% to R3.13/kWh between BW1 and BW2 and by 7% to R1.70/kWh from BW3 to BW3.5 (average base rate) 4. R 1.04 - - 1.04 - - Average technology tariffs 3 R/kWh for small RE projects R 1.13 Per technology 1.08 1.15 1.55 More recently the first small scale renewable energy bid window has been procured at an average price of R1.13/kWh. The average rate per technology type for the small projects are shown to the left. As anticipated, the cost of small scale projects are higher than that of large projects. The rates achieved for all three technologies in this first procurement round are comparable to the corresponding large scale rates achieved in BW3 (bid announcement for BW3 was made in October 2013, 2 years prior to 1S2). Future tariff trends for small scale projects will be tracked to see whether a similar downward price trend is realised. Prices contracted under the REIPPPP for all technologies are well below the published REFIT prices. The REIPPPP has effectively translated policy and planning to deliver clean energy at very competitive prices. As such it is contributing to the national aspirations of secure, affordable energy, lower carbon intensity and a transformed green economy. Note 1. Contracted price (at which power is sold to Eskom) per IPP was weighted with consideration of the technologies and their relative, projected annual energy contribution (P50). Note 2. Without considering the technical differences in availability and load factors. Note 3. Fully indexed price, inflation adjusted (2015). Note 4. The peaking rate is 270% of the base rate (i.e. an average of R4.75/kWh for BW3 and 3.5).
Technology capacity procured Per technology per bid window (MW) 2 500 2 000 1 500 1 000 500 0 Procured vs determined Capacity Per technology (MW) Determined BW1 BW2 BW3 BW3.5 BW4 BW1S2 Hydro 14 5 Biomass 17 25 10 Landfill 18 Conc Solar 150 50 200 200 Solar PV 627 417 435 813 30 Wind 649 559 787 1 363 9 6,360 MW 53% 1,200 MW 50% 4,725 MW 49% 540 MW 15% 400 MW 12% Procured 6 360 MW Procured 3 357 MW Operational 970 MW 1 200 MW Procured 600 MW Operational 200 MW 4 725 MW Procured 540 MW 2 292 MW Operational 965 MW Procured 79 MW Operational 10 MW 400 MW Procured 49 MW Operational 0 MW Technology contributions The mix of renewable energy has varied very little between bid windows. Solar PV and wind have dominated the first two bid windows. Later bid windows have however shown some diversity. Small hydro technology was procured only in BW2 and BW4, biomass was procured in BW3, BW4 and BW1S2, while landfill gas was procured in BW3 only. CSP has been procured across 4 of the 6 bid windows. The third determination, promulgated on 18 August 2015, increased the allocation to be procured from RE by 6 300 MW. This determination has provided bidders and investors with a line of sight on future prospects which is important to maintain the momentum of the programme. Progress in terms of the revised targeted capacity from the respective technologies, as per the ministerial determinations, has been made as shown on the left. To date, 48% (i.e. 6 376 MW) of the total targeted RE capacity of 13 225 MW (including 400MW for Smalls projects) has been procured. More than half of the wind power has been procured to date (3 357 MW or 53% of the 6 360 MW determined capacity for wind). For CSP 50% or 600 MW of the determined capacity of 1 200 MW has been procured. Power procured from solar PV has reached 49% of the 4 725 MW determined while only 15% of the 540 MW allocated to small hydro, landfill gas, biomass have been procured to date. For small scale renewable energy projects 400 MW have been determined. During the last quarter 49 MW has been procured under BW1S2. The 49 MW include 30 MW from solar PV, 9 MW from wind power and 10 MW from biomass. This represents 12% of the allocated capacity for smalls. The second bid window for small projects for which second round bid submissions are expected in May 2016 will target the procurement of a further 51 MW. 21
Project Distribution Number of projects OW SH BM LG CS PV Key learnings identified Closer collaboration/improved alignment with provincial energy strategies, spatial planning and development plans are important to optimise the benefits of the REIPPPP to provinces. Forums are being created to facilitate improved interaction and alignment Geographic distribution IPP project distribution has automatically aligned with the prevalence of renewable energy resources. Solar has contributed the largest number of IPPs with PV and CSP IPPs making up 58 of the 102 projects. Solar projects are concentrated in the Northern Cape where the radiation intensity in the country is the highest. As a result, the Northern Cape has received the bulk of the projects (51 of 102 in BW1, BW2, BW3, BW3.5, BW4 and 1S2) and should see the benefit from the significant associated investments and the socioeconomic commitments that have been secured for local communities through the procurement process. Wind projects are largely located along the coastal regions of the Eastern Cape and Western Cape provinces based on the strong wind flows along these shores. After the Northern Cape, the Eastern and Western Cape share the largest number of the remaining IPPs (17 and 14 projects, respectively). The remainder of the IPP projects are distributed as follows: Free State: 8 projects North West: 5 Limpopo: 3 Mpumalanga: 2 Gauteng and KwaZulu Natal: 1 each BW3 included the first landfill gas and the first biomass IPPs, as well as the first projects in both Gauteng and KwaZulu Natal. Mpumalanga s first project was awarded in BW4. Generation from landfill gas and biomass power plants are less constrained by energy availability and typically offers higher load factors. Higher load factors, availability during peak demand hours, increasing energy diversity and a larger distribution footprint of generation capacity offered by these technologies, further contribute to the value of the renewable energy portfolio. 22 Refer Page 58 for detailed provincial distribution information Refer Page A6 for details on technology capacity factors
Technology distribution The geographical distribution of projects is largely based on favourable resource conditions, in particular solar radiation and wind flows throughout the year, as illustrated below. 23 Bid submission Under construction No financial close yet Early Operating Operational Started operation past quarter Expected to start operation next quarter Solar maps for South Africa, Lesotho and Swaziland, GeoModel Solar 1 Completed no grid connection Bid submission Under construction No financial close yet Early Operating Completed no grid connection Operational Started operation past quarter Expected to start operation next quarter Wind Atlas of South Africa (WASA), Large Scale High Resolution Wind Resource map Mean wind speed (ms-1) @ 100m WAsP modelled, 250 m resolution Bid submission Under construction No financial close yet Early Operating Operational Started operation past quarter Expected to start operation next quarter Solar maps for South Africa, Lesotho and Swaziland, GeoModel Solar 1 Completed no grid connection Note 1. Developed in partnership between Centre for Renewable and Sustainable Energy Studies, University of Stellenbosch and Group for Solar Energy Thermodynamics (GSET) at UKZN (2014), www.sauran.net.
Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Q1_2016/17 Q2_2016/17 Q3_2016/17 Q4_2016/17 Q1_2017/18 Q2_2017/18 Q3_2017/18 Q3_2018/19 24 Building capacity to power the country REIPPPP portfolio status a snapshot (as at 31 March 2016) Energy The status of the combined portfolio of the 102 IPP projects procured in BW1 BW4 and 1S2 1 is: There are 63 active 2 projects of which 43 projects are in operation and have added 2 145 MW generation capacity to the national grid and generated 8 272 GWh of renewable energy since the first plant became operational. 3 of these projects with 123 MW of generation capacity reached their commercial operation date (COD) in the reporting quarter. All 28 projects in BW1 have reached COD. For the 19 projects in BW2, all have reached financial close and 15 of these projects have reached their commercial operation date (COD). A 95 MW project has completed construction but is not connected to the grid yet and is receiving deemed energy payments. The remaining 3 projects are still in construction. Of the 17 projects from BW3, 16 are in the early stages of construction with 1 project is still awaiting financial close. The 28 projects in BW3.5 and BW4 are currently concluding financial close before they will commence with construction. 10 Smalls projects from BW1S2 with a capacity of 49 MW which were procured during the previous quarter are also concluding financial close. Capacity Operational capacity REIPPPP operational capacity Capacity (MW) Close correlation of actual to planned (refer close up of selected period) For the 63 active 2 projects, 43 have successfully completed construction. The average construction lead time for this current portfolio of projects has been 644 days (~1.8 years). Based on scheduled commissioning dates 3 and progress to date, it is projected that 100% of the capacity procured from active 2 projects in BW1, BW2, and BW3 (63 projects) will be operational by 30 November 2018. Planned Actual operational 2 332 MW (from 46 projects) was scheduled to be operational by end of March 2016, with 2 145 MW realised (from 43 projects). 92% of the scheduled capacity was achieved, with a 187 MW shortfall from the capacity expected by the end of this period. Note 1. 1S2 refers to the first complete bid cycle for small RE projects that consisted of two bid rounds. Note 2. Projects which have commenced construction. Note 3. The scheduled commissioning dates for BW3 projects have been updated to reflect the date as submitted at financial close and not the date from the original submission, as was previously reported.
Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Q1_2016/17 Q2_2016/17 Q3_2016/17 Q4_2016/17 Q1_2017/18 Q2_2017/18 Q3_2017/18 Q3_2018/19 REIPPPP operational capacity Capacity (MW) For most of the preceding quarters since the first IPP started operation, actual commercial operation dates tracked the planned or scheduled dates closely (refer to extract of the tracking graph on the left). 25 Planned 8% Short of planned Actual operational The lag of actual to planned peaked at 350 MWs at the end of June 2014. This is attributed to projects completing behind schedule and / or under delivery against contracted capacity. At end March 2016 the 3 projects that are running late on operations have a contracted capacity of 174 MW. The few IPPs in operations delivering below their contracted capacity are contributing a 13 MW shortfall bringing the total lag to 187 MW. Delivery risks (significant risk) Deemed energy payments. IPPs that have completed construction, but was prevented from connecting to the grid due to network unavailability is paid for deemed energy. Deemed energy payments to date is R138 million. Engagement with Eskom s Grid Access Unit remains ongoing. Monitoring of delays. Delays are monitored and, where possible, the resolution of cross cutting implementation issues (such as grid connection delays) facilitated or escalated as appropriate.! The average time delay between actual and scheduled COD for IPP s in operations was 67 days i.e. ~2.2 months. BW1 projects were mostly responsible for the delay, BW2 projects were on average only 28 days delayed. Delivery delays are partly ascribed to: Delays in grid connection Extended industrial action in the metals and mining industries early in 2014 A delay due to damage caused by lightning strike (50 MW) Of the 20 IPP s in construction or awaiting grid connection 3 are delayed. All 28 BW1 projects have reached COD. All BW2 projects were expected to be operational by 15 June 2016. Despite delays to 3 projects all BW2 projects should be completed by 30 June 2016. Operational capacity Per technology (MW) Solar PV 965 MW Wind 970 MW The scheduled commissioning dates for the 16 BW3 projects that have started construction have been updated to reflect the commissioning date as submitted at financial close and not the date from the original submission, as was previously reported. Against these corrected timings there are no expected delays. All projects should be completed by 30 November 2018 with the 2 BW3 projects expected to reach COD in July 2016. Per Technology (MW) Landfill 0 MW Hydro 10 MW Biomass 0 MW Conc Solar 200 MW Solar PV 965 MW Wind 970 MW In the next quarter, 4 projects with a planned capacity of 308 MW, are scheduled to start commercial operations. These are the 4 remaining BW2 projects which have not yet reached COD. Operational capacity (2 145 MW) is contributed by Solar PV (965 MW), Onshore Wind (970 MW), CSP (200 MW) and Hydro (10 MW) technology.
6 5 4 3 2 1 0 Average delivery lead time Years 1.8 years Distribution of lead times Construction (in months) for completed projects SH PV OW CS 12141516171819202122242527281332333439 85 percent Energy supplied to grid Energy generated (GWh) average lead time for delivering 2 145 MW operational capacity Percentage of energy generated Percentage of the projected (P50 1 ) annual generation achieved from the 43 operational plants Construction duration As indicated previously, despite delays, the average construction lead time for the current portfolio is 644 days i.e. 2 145 MW generation capacity was delivered within 1.8 years. Based on the construction experience of the portfolio of technologies in the first three bid windows it is concluded that capacity (plant size) and construction duration do not have a strong correlation. When considering the distribution of lead times, the majority of completed projects (24 of 43) took between 15 and 21 months to be constructed. The cluster of projects that completed in the 15 21 month timeframe, delivered 1 183 MW, representing 55% of the 2 145 MW the operational capacity. To date, no projects were completed in less than 12 months. The graph to the left shows that CSP projects take longer to construct with the shortest lead time taking 27 months. As expected, this confirms that significant renewable capacity can be brought online within a short timeframe. Energy supplied The first IPP reached COD, supplying power to the grid, in November 2013. During the preceding 12 months (April 2015 to March 2016), 35 IPPs produced energy for a full year. The average operational period of the current portfolio of IPPs (43 operational) is 533 days (approximately 17.5 months). Since inception 2, 8 273 GWh of energy has been produced by renewable energy sources procured under the REIPPPP. Of this energy 1 405 GWh was generated during this reporting quarter. This is unchanged from the 1 408 GWh produced in the previous quarter. The energy generated over the last 12 months (April 2015 to March 2016) from limited operations was 5 003 GWh, and represents: 26 Projected (P50) 11,412 GWh/a Total Realised Past 12 month period 5 003 GWh BW 1 & 2 6880 GWh/a Q 1 405 GWh 85% of the annual projected energy production (P50 1 ) by the IPPs that are operational (P50 for the 43 operational IPPs is 5 917 GWh). 73% of the annual projected energy production (P50 1 ) from BW1 and BW2 (full portfolio: 6 880 GWh) and 44% of all active projects (i.e. includes BW3: total 11 412 GWh). Note 1. Refer to explanatory notes at end of this report for the definition. Note 2. Total renewable energy generated by the IPPs since the first project became operational.
Of the 43 projects that have reached COD, 35 projects have been operational for longer than a year. The energy generated over the past 12 month period for these 35 projects is 4 230 GWh which is 95% of their P50 projections of 4 451 GWh over a 12 month delivery period. Twenty of the 35 projects (57%) have individually exceeded their P50 projections. These are all for solar PV projects. 27 Percentage of energy generated Percentage 104 percent of projected (P50) annual generation achieved by solar PV plants operational for more than 12 months The majority of operational IPPs are solar PV plants with lower energy yields in the shorter daylight winter months. Of the 35 projects in operation for longer than a year, 25 feature PV technology. The 25 solar PV plants generated 2 159 GWh over the past 12 month period and exceeded their P50 projections of 2 073 GWh by 4%. Twenty of these 25 PV projects have individually exceeded their P50 projections. There is only 1 operational PV plant that has not generated energy for a full 12 month period. Based on this, it is fair to assume that energy projections for PV plants are being achieved. For onshore wind projects, of the 13 projects that have reached COD, 8 have been operational for longer than a year. Their combined energy generated over the past 12 month period is 1 780 GWh which is 90% of their 1 982 GWh P50 projection. No individual onshore wind project has exceeded its P50 projection over a 12 month period. Reserve margin 1 contribution Hourly energy profile Q4_2015/16 energy generated (GWh) The NDP targets an improvement in the reserve margin during the MTSF 2 planning horizon (until 2019) from 1% to 19% (Outcome 6). 120 000 100 000 80 000 60 000 40 000 20 000-14% of energy produced 0 2 4 6 8 10 12 14 16 18 20 22 Even though renewable energy production does not align directly with the defined system peaks, the current operational portfolio is contributing to the percentage buffer between the available supply and projected demand on the electricity system. A 24 hour profile representing the total energy produced by the complete portfolio shows that a 14% contribution was made during the morning and evening system peak periods 3 this quarter (15% since inception). As the energy mix diversifies with the inclusion of CSP with storage, biomass and landfill gas, the share of energy available during peak periods should increase. Note 1. Reserve margin is the measure of available capacity over and above the capacity needed to meet normal peak demand levels. Reserve margin and reserve capacity are synonymous. Note 2. Medium Term Strategic Framework. Note 3. As defined by the Megaflex tariff: 07:00 10:00, 18:00 20:00 excluding weekends, public holidays.
The REIPPPP contribution: Investment, economic and social footprint Outcomes 4, 5, 7, 8, 10, 11 and 14 28
29 Attracting significant investment into the South African economy Committed investments Bid window 1, 2, 3, 3.5, 4 & 1S2 (R billion) 194.1 Rand billion of which R53.4 billion Committed (total project costs 1 ) for IPP development in BW 1, 2, 3, 3.5, 4 & 1S2 from foreign investors and financiers Investment attracted The REIPPPP has attracted significant investment in the development of the REIPPs into the country. The total investment (total project costs 1 ), including interest during construction, of projects under construction and projects in the process of closure (BW3 4, BW3.5, BW4 and 1S2) is R194.1 billion (this includes total debt and equity of R192.9 billion, as well as early revenue and VAT facility of R1.3 billion). An analysis of the funding sources 2 and shareholding highlights how broad the participation and benefits are that result from this investment. Foreign equity and financing share Bid window 1, 2, 3, 3.5, 4 & 1S2 (percentage) Foreign 27% 27% Foreign share The REIPPPP has attracted R53.4 billion in foreign investment and financing in the six bid windows (BW1 BW4 and 1S2). Foreign equity in the REIPPPP (BW1 BW4 and 1S2) is R35.2 billion, equivalent to 56.8% of the inward FDI attracted into South Africa during 2014 (R62 billion) 3. Foreign equity and financing combined (R53.4 billion) would be 86.1% of FDI in 2014. Whilst retaining shareholding for South Africans is a priority, the associated influx of foreign investment and funding is also of significance to the economy. The NDP (Outcome 11) set a target of a R230 billion increase in FDI (facilitated by the dti) by 2019. Domestic 73% Financing and Investments (equity and debt), originate from a variety of countries across the globe, with Europe and the USA representing the largest sources of finance. Note 1. Total Project Costs: Total capital expenditure to be incurred up to the COD by the Seller in the design, construction, development, installation and/or commissioning of the project (inclusive of VAT and revenue). Note 2. This analysis is based on Financial Close for BW1, BW2 and BW3 and RFP for BW3.5, BW4 and 1S2. Note this may result in minor discrepancies with reported numbers elsewhere in the report. Note 3. South African Reserve Bank (SARB). 2015. Quarterly Bulletin March 2015:45. Pretoria: SARB. Note 4. One BW3 project still need to reach financial close.
Sources of foreign equity and debt UK, IRE + BVI 1 Debt: R - million Equity: R 329.7 million EUROPE* Debt: R 10 592.9 million Equity: R 25 149 million JAPAN Debt: R 127.6 million Equity: R 440.9 million 30 CHINA Debt: R - million Equity: R 1 014.9 million USA Debt: R 5 161.5 million Equity: R 2 068.4 million INDIA Debt: R - million Equity: R 757.5 million AFRICA Debt: R 1 473.1 million Equity: R 133.8 million KOREA Debt: R - million Equity: R 117.8 million SAUDI ARABIA Debt: R 814.3 million Equity: R 1 814 million * European countries of origin Denmark Debt: R 5 245.5 million Equity: - Germany Debt: R 2 775.4 million Equity: R 957.8 million France Debt: R1 250 million Equity: R2 143.6 million Italy Debt: - Equity: R 13 647.5 million Luxembourg Debt: R 560 million Equity - Netherlands Debt: R762 million Equity: R 2 648.1 million Norway Debt: - Equity: R 1 107.7 million Spain Debt: - Equity: R 4 643.7 million [Approximately R3.4 billion foreign equity not attributable to a single country of origin i.e. not shown] Investment share per bid window Bid window 1, 2, 3, 3.5, 4 & 1S2 (percentage) The FDI analysis identified at least 19 different countries including two from Africa that have participated in providing financing and/or equity to IPPs. 100% 80% 60% 40% Domestic Foreign The share of foreign investment and equity has remained consistent and even showed an increase in the most recent bid windows, suggesting that investor confidence in the REIPPPP continues to grow over time. 20% 0% BW 1 BW 2 BW 3 BW 3.5 BW 4 BW 1S2 Debt equity share of total project cost (R million) 100% 50% 0% Debt Domestic Equity Foreign Equity R 31 473 R 35 199 Debt R 109 306 R 18 169 47% Local equity secured Financing of investment South African private financial institutions 2 have financed R90.6 billion 3 or 46.7% of total IPP investment (domestic and foreign). Total funding exposure of South African DFIs and SOEs for BW1 to BW4 and 1S2 of the REIPPPP amounts to R31.6 billion 4. The IDC has the largest funding exposure accounting for approximately 45.7% of total SOE/DFI project investment exposure, while the DBSA has the second largest funding exposure equivalent to 42.3%. The remaining funding exposure is shared between the GEPF/PIC 5 (11.7%), CEF 5 (0.1%), and Transnet 5 (0.2%). Note 1. UK, Ireland and British Virgin Island. Note 2. Domestic financial institutions, excluding DFIs. Note 3. Direct South African debt, excluding early finance and VAT facility. Note 4. DFI and SOE funding exposure includes direct debt, equity, community trust funding and BEE funding. Note 5. GEPF/PIC = Government Employees Pension Fund (GEPF) managed by the Public Investment Corporation (PIC); Transnet = Transnet Retirement Fund; CEF = Central Energy Fund SOC Limited.
Ownership Actual % vs target and threshold (BW 1,2 & 3) 40% 30% 20% 10% 0% Shareholding (Black people total) Threshold Target Actual BW1 BW2 BW3 BW1-3 30% vs 30% target Shareholding (Black people in local communities) Threshold Target Actual 15.0% 11% 10.0% 5.0% 0.0% 25% 20% 15% 10% 5% 0% 25% 20% 15% 10% 5% 0% 100% 80% 60% 40% 20% 0% BW1 BW2 BW3 BW1-3 Black shareholding in EPC contractor Threshold Target Actual BW1 BW2 BW3 BW1-3 Black shareholding in operating company Threshold Target Actual BW1 BW2 BW1 & 2 Black Top Management Target Actual BW1 BW2 BW3 BW1-3 vs 5% target 17% vs 20% target 19% vs 20% target 60% vs 40% target South African citizen shareholding The importance of retaining shareholding in IPPs for South Africans was recognised and incorporated into the procurement conditions 2, requiring that at least 40% of each project should be owned by South African entities with level 5 contributor status. The South African (local) equity shareholding across BW1 to BW4 and BW1S2 equates to 47% (R31.5 billion) of total equity (R66.7 billion), which is substantially more than the 40% requirement. Foreign equity amounts to R35.2 billion and contributes 53% of total equity (refer to Debt equity share of total project cost graph on the previous page). South African debt across BW1 to BW4 and 1S2 equates to 85.7% (R109.3 billion, which includes total debt and equity of R108.1 billion and early revenue and VAT facility of R1.3 billion) of total debt (R127.5 billion). Foreign debt accounts for 14.3% (R18.2) of total debt. The REIPPPP contributes to Broad Based Black Economic Empowerment and the creation of black industrialists. Black South Africans own, on average, 30% of projects that have reached financial close (i.e. projects in BW1 BW3 1, this is directly in line with the 30% target. Shareholding by black South Africans has also been secured across the value chain. The REIPPPP has ensured that black people in local communities have ownership in the IPP projects that operate in or nearby their vicinities. On average, black local communities own 11% of projects that have reached financial close. This is well above the 5% target. In addition, an average of 17% shareholding by black people in engineering, procurement and construction (EPC) contractors has been attained in projects that have reached financial close under the REIPPPP. This is lagging slightly on the 20% target. Furthermore, shareholding by black people in operating companies of IPPs has averaged 19% (against a targeted 20%) for the 43 projects in operation (i.e. in BW1 and BW2, since zero IPP projects from BW3 onwards have reached commercial operations as yet). The target for shareholding by black people in top management has been set at 40%, with an average 60% achieved to date. 31 Note 1. 16 of 17 projects in BW3 have reached financial close and started construction. Note 2. As stated in the RFP Part B, bidders are required to have a South African Entity Participation of 40% and in order to be evaluated further, bidders are required to have a Contributor Status Level of 5 (this requirement is only in respect of entities that are based in South Africa).
Community trusts Income and costs 1,2,3 Total project, gross income and debt costs 2 (Rand million) R 5 000 000 R 4 000 000 R 3 000 000 R 2 000 000 R 1 000 000 R - R -1 000 000 Key learnings R 50.1 billion R 20.9 billion R -2 000 000 2013 2017 2021 2025 2029 2033 2037 Gross Income Earned Debt Service Costs Community trusts Net income 1,2,3 (Rand million) R 4 000 000 R 3 500 000 R 3 000 000 R 2 500 000 R 2 000 000 R 1 500 000 R 1 000 000 R 500 000 R 29.2 billion R 1461 million average per year R 0 2013 2017 2021 2025 2029 2033 2037 Community Trusts - Nett Income Opportunities or alternate vehicles to be investigated that will enable a more even distribution of community trust cash flow and realising community benefits sooner. Community shareholding and community trusts A minimum ownership by local communities in an IPP of 2.5% is required as a procurement condition. In this way a substantial portion of the investments have been structured and secured as local community equity. An individual community s dividends earned will depend on the terms of each transaction corresponding with the relevant equity share. To date all shareholding for local communities have been structured through the establishment of community trusts. For projects in BW1 to BW4 and 1S2, qualifying communities will receive R29.2 billion net income over the life of the projects (20 years). The bulk of the money will however only start flowing into the communities from 2028 due to repayment obligations in the preceding years (repayment obligations are mostly to development funding institutions). N6 The figure shows the projected net income for the first six bid windows (BW1 BW4 and 1S2). If the net projected income was structured as equal payments over time, it would represent annual net income of R1.46 billion per year. It should be noted that for the small-scale RE projects, the minimum threshold (mandatory obligation) for local community ownership was removed. This is aligned with the current review of the procurement process to address the cash flow concerns (refer key learning). Small projects that selected to offer shareholding to the local community did however receive additional points during the tender evaluation. Four of the 6 small IPPs have structured their shareholding to include for community trusts. N3 Income to all shareholders only starts with operations. With only a few IPPs operational over a short period of time, revenue generated has been limited to R18 billion. 32 However, even with more projects operational and revenues growing, quarterly reports are unlikely to show large cash flows to communities until debt have been fully serviced. Note 1. Income and costs expressed in nominal terms. Net income in real terms equates to R12.2 billion (as opposed to R29.2 billion in nominal terms) under assumption of constant inflation rate of 5.7%. Note 2. For BW1 BW4 and 1S2. Note 3. Over the operational project life of 20 years.
Technology share of investment Total Project Costs (Rand billion) R73.7 billion 38% R53.3 billion 27% R2.8 billion 1% R63.1 billion 32% R1.0 billion 0.5% R0.3 billion 0.1% Average investment per MW for each technology group 1 Average investment cost (Rand million/mw) 22 89 55 27 51 16 Investment by technology type Wind, solar PV and solar CSP have attracted the most significant share of the investment in the first six bid windows. By comparison, solar CSP project costs per MW are higher, given the relatively small number of MW (600 MW) procured for the R53.3 billion spent (vs. 3 366 MW of wind and 2 322 MW of PV capacity at the indicated costs). However, it should be noted that CSP technology offers inherent storage capacity, allowing energy to be fed into the grid when needed after sunset. Similarly, landfill gas and biomass are less dependent on intermittent energy source availability. At the same time, energy available during system peaks (typically early morning and early evening) have a higher value, partially justifying the seemingly higher capacity cost associated with the renewable technologies that can also supply during these periods. The IRP 2010-2030 (2013 update report circulated for stakeholder consultation, but not promulgated) included an indicative R/kW overnight 2 capital cost per technology type (in 2012 Rand terms) 3. The average portfolio project costs and project value 4 per MW for each technology type are relatively well aligned with the 2012 costs anticipated in the IRP 2013 update report. Note this is not a direct comparison (refer respective definitions of Total Project Cost, Project Value and Overnight costs and the different dates of the reported values), but rather an indication of cost range magnitudes. 33 Tech IRP 2010 (2013) Rm/MW REIPPPP Rm/MW (Project Value) REIPPPP Rm/MW (Total project costs) 15 17 22 29 20 27 48 63 89 Note 1. It should be noted that the cost per MW is a simplistic measure and not an accurate comparison of the cost of generation technologies. Comparisons for energy costs and investment decisions are best based on the levelised cost of the energy (over the life of the asset) generated, as well as the key application purpose (base-load, mid-merit or peaking) of the technology. Note 2. The capital cost of a project if it could be constructed overnight. This cost does not include the interest cost of funds used during construction. Note 3. IRP 2010-2030, Updated Report, Technology costs input (tables 18-20) (as at 2012, without learning curves). Note 4. Refer IA definitions in Appendix A.
34 Broader economic and socio economic impacts Total procurement spend 1 (Rand billion) planned 2 actual 2 (inception to date + Q) 142.9 Rand billion planned 73 Rand billion Of which operations spend (Rand billion) planned 70 Rand billion 104.1 38.8 38.8 Of which construction spend 1 (Rand billion) actual (inception to date + Q) 36.2 37.0 37.0 actual (inception to date + Q) 67.9 44.4 Planned Active 5.0 Planned Active 39.4 1.8 1.8 Planned Active 2.7 Q 2.4 Q 0.27 Q In addition to the financial investments into the economy and favourable equity structures that had been secured, the REIPPPP is targeting broader economic and socio-economic developmental benefits. Bid obligations and minimum thresholds for preferential procurement, employment equity and socio-economic development contributions are utilised as mechanisms to capture a share of the value/prosperity from the programme for South Africans and local communities. Procurement spend Procurement spend constitutes a significant share of the total project costs for the portfolio of IPPs. The total projected procurement spend for BW1 to BW4 and 1S2 during the construction phase is R73 billion, more than that of the projected operations procurement spend over the 20 years operational life (R70 billion). The combined (construction and operations) procurement value is projected as R142.9 billion of which R38.8 billion has been spent to date. For construction, of the R37.0 billion already spent to date, R25.9 billion is from the 43 projects which have already been completed. These 43 projects had planned to spend R23.7 billion. The actual procurement construction costs have therefore exceeded the planned costs by 9% for completed projects. Construction procurement spend has grown steadily over time as the construction of the IPP portfolio advances. NOTE: Planned Refers to all projects procured i.e. currently BW1 BW4 & 1S2 Active Refers to all projects that have commenced construction i.e. currently BW1, BW2, and 16 of 17 projects in BW3 N4 Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does serve to highlight possible areas of risk. Refer to Interpretation notes for the definition of procurement spend. Note 2. Planned referring to all projects procured i.e. currently BW1 BW4 & 1S2 and Active referring to all projects that have commenced construction i.e. currently BW1, BW2 and BW3 (16 of 17 projects).
Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Construction spend 1 Actual vs projected per quarter (Rand billion) N4 9% above projected Whereas in previous quarters actual procurement spend lagged the projected spend for this quarter the reverse is true - actual procurement spend for the portfolio to date exceeds projected spend for projects which have completed construction. Preferential procurement 35 Planned BBBEE share of spend Actual vs target 100% 75% 50% 25% 0% Achieved Target Actual 89% 83% BW1 BW2 BW3 BW1,2 & 3 Construction BW1 BW2 BW1 & 2 Operations The share of procurement that is sourced from Broad Based Black Economic Empowered (BBBEE) suppliers, Qualifying Small Enterprises (QSE), Exempted Micro Enterprises (EME) and women owned vendors are tracked against commitments and targeted percentages. The IA target requirement for BBBEE is 60% of total procurement spend. However, the actual share of procurement spend by IPPs from BBBEE suppliers for both construction and operations is currently reported as 89%, which is not only significantly higher than the target of 60%, but also the 72% that had been committed by IPPs. BBBEE as a share of procurement spend for projects in construction is also reported as 89% with operations slightly lower at 83%. BBBEE spend 1 (Rand billion) planned actual (inception to date + Q) While this appears to be a positive preliminary response, the reported procurement numbers do not represent the final procurement spend and the data has not been verified by the IPPPP Office. Therefore, this achievement is reported with caution. N5 103.0 Rand billion BBBEE spend 1 Construction only (Rand billion) planned 50.7 Rand billion 68.4 34.5 34.5 actual (inception to date + Q) 17.7 33.0 20.8 Planned Active 6.4 26.6 Planned Active 89% of total procured 2.5 Q 2.3 Q 89% of total procured Preferential procurement commitments are expressed as a share of total procurement. Should the final procurement spend be below the projected spend (refer to tracking (first) graph on the left), the monetary value associated with the targeted percentage would also be lower. However, if the high reported preferential procurement share is confirmed, the reduced value of procurement spend should have a limited, if any, tangible monetary impact. As expected, the majority of the procurement spend to date has been for construction purposes. Of the R37 billion spent on procurement during construction, R33 billion has reportedly been procured from BBBEE suppliers, achieving 89% of total procured. Actual BBBEE spend during construction for BW1 and BW2 alone was R25.4 billion. The R33 billion spent on BBBEE during construction already exceeded the R26.6 billion that had originally been anticipated by IPPs. Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does serve to highlight possible areas of risk.
QSE & EME share of spend Actual vs target 50% 40% 30% 20% 10% 0% Target Actual 35% 21% BW1 BW2 BW3 BW1,2 & 3 Construction QSE and EME spend 1 Construction only (Rand billion) planned 4.6 Rand billion 8.2 4.6 10.4 2.5 Planned Active BW1 BW2 BW1 & 2 Operations actual (inception to date + Q) 1.0 Q x 2.8 targeted spend Total procurement spend by IPPs from QSE and EMEs has summed to R13.2 billion (construction and operations) to date, which exceeds commitments by 26% and is 34% of total procurement spend to date (while the required target is 10%). QSE and EME s procurement spend for construction is achieving 35% of total procurement to date and operations is less at 21% however this is still well above the 10% target. QSE and EME share of construction procurement spend totals R12.8 billion, which is 2.8 times the targeted spend for construction of R4.6 billion during this procurement phase. In contrast, procurement from women owned vendors is lagging, with only 3% (against a target of 5%) achieved to date for both construction and operations. When considering only construction spend of women owned vendors, R1.0 billion has been spent which exceeds the R0.9 million expected to be spent on projects that have reached financial close. 36 Woman owned share of spend Actual vs target 6% 4% 2% 0% planned Target Actual 3% 3% BW1 BW2 BW3 BW1,2 & 3 Construction Women owned spend 1 Construction only (Rand billion) BW1 BW2 BW1 & 2 Operations actual (inception to date + Q) 20 IPPs must still reach COD (19 in construction and 1 completed but requiring grid connection). For these 20 projects and those which have completed construction, procurement purchases from women owned suppliers have evidently presented a major challenge. The development of women owned businesses in the energy and construction industry is considered an opportunity for national (dti or similar) capacity building initiatives. Key learning Development of women owned businesses in the energy and construction industry may benefit from capacity building initiatives.! 1.8 Rand billion 0.8 0.1 1.0 0.9 Planned Active 3% of total procured 0.1 Q Note 1. Procurement spend and preferential procurement spend patterns are not linear, the ratios are therefore preliminary and indicative only pending the final procurement figures. It does however serve to highlight possible areas of risk.
Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Local content spend (Rand billion) planned 65.7 Rand billion Planned actual (inception to date + Q) 35.8 30.0 30.0 Achieved 9.4 Planned Active 30.0 Rand billion 2.1 Q 45% local content planned 50% local content achieved (actual) spend to date on local content Local content tracking Actual vs target and threshold (percentage) 100% 75% 50% 25% 0% Solar PV & CSP Threshold Target Actual Wind, Solar PV Hydro, & CSP Biomass & Landfill Local content Actual vs planned (BW 1,2 & 3) Wind, Solar PV Hydro, & CSP Biomass & Landfill BW1 BW2 BW3 Wind, Hydro, Biomass & Landfill Local content 1 N7 The REIPPP programme represents the country s most comprehensive strategy to date in achieving the transition to a greener economy. Local content minimum thresholds and targets were set higher for each subsequent bid window. For a programme of this magnitude, with construction procurement spend alone estimated at R73 billion, the result is a substantial stimulus for establishing local manufacturing capacity. This strategy has prompted several technology and component manufacturers to establish local manufacturing facilities. It is expected that greater certainty relating to subsequent bid windows and further determinations will continue to build on these successes. For the portfolio as a whole, the expectation would reasonably be for local content spend to fall between 25% and 65% of the total project value (considering the range of targets and minimum requirements). Local content commitments by IPPs amount to R65.7 billion, i.e. 45% of total project value (R145.2 billion for all bid windows). Actual local content spend reported for IPPs that have started construction (BW1, BW2 and BW3) amounts to R30 billion against a corresponding project value (as realised to date) of R59.4 billion. This means an over 50% of the project value has been locally procured, exceeding the 45% commitment from IPPs, the thresholds for BW1 BW4 (25% - 45%) 2 and the 45% target 2 of BW1. As for procurement, it should be noted that the local content commitments are expressed as a percentage of total project value. With lower procurement costs, total project value is reduced and therefore the total local content spend that is realised may also be less than planned. To date however, the R30 billion local content spend reported by IPPs in BW1, BW2 and BW3 is 76% of the R39.3 billion local content expected. This is despite only 43 of the 63 projects having reached COD (i.e. only 68% of the portfolio complete). 37 For the 43 projects that have reached COD, local content spend has been R20.3 billion, which represents 101% of planned local content spend of R20.2 billion. Note 1. Local content is expressed as % of total project value and not procurement or total project costs. Note 2. Thresholds and targets are bid window specific and technology dependent.
Q3_2013/14 Q4_2013/14 Q1_2014/15 Q2_2014/15 Q3_2014/15 Q4_2014/15 Q1_2015/16 Q2_2015/16 Q3_2015/16 Q4_2015/16 Local content Cumulative (Rand billion) (BW 1,2 & 3) 1 Active Procured 76% local content achieved against plan Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/13 2013/14 2014/15 2015/16 committed As for procurement, local content spend is not necessarily a constant percentage over the construction duration and depends on the specific materials and components that are locally sourced, as well as the timing of this procurement. Considering the cumulative trend of the build portfolio, local content share has tracked consistently towards the expected spend suggesting a relatively even distribution of local content share over time. Actual local content achieved for BW1, BW2 and BW3 totals 76% of the commitment for these three bid windows. 38 Construction vs operations Employment split (job years) 23 324 119% Of planned 1 640 Construction employment Actual cumulative (Job years) (BW 1,2 & 3) Procured Active Monitoring will continue to track the final share of local content for the portfolio of projects. Reported local content figures are also subject to verification. Leveraging employment opportunities Numerous employment opportunities are being created by the IPPP Programme. To date, a total of 24 965 2 job years 3 have been created for South African citizens, of which 23 324 were in construction and 1 640 in operations. N5 N6 Job years Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/13 2013/14 2014/15 2015/16 planned Even though BW3 projects have only just started construction, employment opportunities across all the three bid windows are 119% of the planned numbers during the construction phase (i.e. 19 523 job years), with 19 projects still in construction and employing people. The number of employment opportunities should therefore continue to grow beyond original expectations. Construction employment Actual vs planned (BW 1,2 & 3) Planned Achieved 69% More than planned By end March 2016, 43 projects had successfully completed construction and moved into operations. These 43 IPPs had planned to deliver 10 350 job years during the construction phase, but achieved 17 451. This is 69% more than planned. Note 1. Actuals are reported against BW1, BW2 and BW3 commitment, because BW3.5 and BW4 have not started construction phase. Note 2. Numbers are rounded. Note 3. The equivalent of a full time employment opportunity for one person for one year.
Local citizen employment Actual vs target and threshold 100% 80% 60% 40% 20% 0% Threshold Target Actual BW1 BW2 BW3 BW1-3 BW1 BW2 BW1-2 Construction Operations Employment thresholds and targets were consistently exceeded across the entire portfolio, but more so by BW2 IPPs. The average share of South African citizens of total South Africa based employees for BW1 BW3 was 89% during construction (against a target of 80%), while it was 96% during operations for BW1 BW2 (against a target of 80%). The construction phase offers a high number of opportunities over shorter durations, while the operations phase requires fewer people, but over an extended operating period. 39 Employment opportunities Actual (Job years) (BW 1,2 & 3) 23,324 Job years Construction Labour utilisation during construction typically shows a peak, and then decreases as construction activities finish up. This expected trend is visible in the reported numbers per quarter. Employment numbers during construction peaked in Q3 2013/14 and thereafter tapered off as more IPPs concluded construction. However, construction jobs rose once again in Q1 2015/16 as BW3 projects started construction. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/13 2013/14 2014/15 2015/16 To date, 43 IPPs have started commercial operations, with the average operating duration of IPPs to date approximately 17.5 months. As expected, limited employment numbers are therefore available for the operations phase at present. Operations employment Actual (Job years) (BW 1,2 & 3) 1,640 Job years Operations Employment opportunities for equity categories are being tracked for the programme. Equity categories with contractual commitments include employment secured for South African citizens, black South African citizens and local communities. Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012/13 2013/14 2014/15 2015/16 Employment equity Construction job years vs planned (BW 1,2 & 3) SA citizens 119% 154% 213% Black SA citizens Local community To date, 23 324 job years for SA citizens were achieved during construction, which was 19% above the planned 19 523 job years. These job years should rise further past the planned target as more BW3 projects enter the construction phase. Significantly more people from local communities were employed during construction than was initially planned. The expectation for local community participation was 6 462 job years, while 13 750 job years were realised (i.e. 113% greater than initially planned). The number of black SA citizens employed during construction also exceeded the planned numbers by 54%.
Employment equity share of persons employed in construction (% job years vs total) (BW 1,2 & 3) Data on priority employment categories as identified by national objectives and the NDP (e.g. youths, women, people with disabilities and rural communities) is also collected. 40 79% 1% 52% Where these were not included in bid criteria, no planned numbers were captured and hence tracking and reporting is not against commitments or targets. Black SA citizens Women 8% Disabled Youths 41% Local community During the construction phases, black South African citizens, youths and rural or local communities have been the major beneficiaries as they respectively represent 79%, 41% and 52% of total job opportunities created by IPPs to date. However, woman and disabled people could still be significantly empowered as they represent a mere 8% and 0.5% of total jobs created to date, respectively. Employment equity share of persons employed Actual % vs target and threshold (BW 1,2 & 3) 100% 75% 50% 25% 0% 100% 75% 50% 25% 0% 100% 75% 50% 25% 0% Black citizens as % of SA based employees Threshold Target Actual 79% 81% BW1 BW2 BW3 BW1,2 & 3 Construction Skilled black citizens as % of skilled employees Threshold Target Actual BW1 BW2 BW3 BW1,2 & 3 Construction BW1 BW2 BW1 & 2 Operations 65% 77% BW1 BW2 BW1 & 2 Operations Local community members as % of SA-based employees Threshold Target Actual 52% 67% BW1 BW2 BW3 BW1,2 & 3 Construction BW1 BW2 BW1 & 2 Operations Youth, women and rural employment numbers Youth, women and rural employment numbers, previously excluded from mandatory reporting requirements, will be included, as far as possible, for subsequent BWs. Nonetheless, the fact that the REIPPPP has raised employment opportunities for black South African citizens and local communities beyond planned targets, indicates the importance of the programme to employment equity and the drive towards more equal societies. The share of black citizens employed during construction (79%) and the early stages of operations (81%) is significantly exceeding the 50% target and the 30% minimum threshold. Likewise, the share of skilled black citizens (as a percentage of skilled employees) for both construction and operations is exceeding the 30% target and is at least 3.5 times more than the minimum threshold of 18%. The share of local community members as a share of SA-based employees was 52% and 67% for construction and operations respectively at least 4 times more than the minimum threshold of 12% and more than 2.5 times more than the target of 20%.
2012/2013 2014/2015 2016/2017 2018/2019 2020/2021 2022/2023 2024/2025 2026/2027 2028/2029 2030/2031 2032/2033 2034/2035 Socio-economic development (Rand billion) Committed Realised (ITD + Q) 2.2% of revenue R 19.3 billion R 19.3 billion ITD R 171.4 million 21% In last Q Q R35.6 million Socio-economic development (SED) contributions N5 N6 An important focus of the REIPPPP is to ensure that the build programme secures sustainable value for the country and enables local communities to benefit directly from the investments attracted into the area. As part of the bid obligations, IPPs had to commit to contribute a share of the revenue to community needs. These contributions accrue over the 20 year project operation live and are being used for housing and infrastructure as well as healthcare, education and skills development. 41 SED future contribution forecast (Rand million) R 1 800 R 1 600 R 1 400 R 1 200 R 1 000 R 800 R 600 R 400 R 200 R 0 R 19.3 billion R 964 million average per year IPPs are required to contribute a percentage of projected revenues accrued over the 20 year project operational life toward SED initiatives. The minimum compliance threshold for SED contributions is 1% of revenue with 1.5% the targeted level over the 20 year project operational life. A portfolio average within this range is therefore expected. However, for the current portfolio the average commitment level is 2.2% or 120% more than the minimum compliance threshold. Across the six bid windows, a total contribution of R19.3 billion has been committed to SED initiatives. Assuming an even, annual revenue spread, the average contribution per year would be R964 million. Of the total commitment, R15.2 billion is specifically allocated for local communities where the IPPs operate. As a percentage of revenue, SED obligations become effective only when operations commence and revenue is generated. Of the 63 IPPs that have started construction (BW1 BW3 1 ) 43 are operational (3 additional projects became operational in this reporting quarter). SED in local communities (Rand billion) R 15.2 billion committed to local communities With every new IPP on the grid, revenues and the respective SED contributions grow in substantial steps. Also, if it was to happen that in future no IPP comes on line, revenues will grow with inflation, resulting in ever increasing benefits to the communities. Already at this early stage, with a limited number of IPPs operational, SED contributions amount to R171 million to date. Of this, R35.6 million or 21% was spent in this reporting quarter. Note 1. 16 of 17 projects in BW3 have started construction, while 1 project still need to reach financial close.
171 Rand million 1.1% of revenue (actual) contribution realised for socioeconomic development For the 43 projects that are operational the actual SED contribution of R171 million to date represents approximately 1.1% of total revenue generated to date. These 43 IPP projects had committed 1.3% over the 20 year project operational life. The variation is largely one of timing only, with IPPs that have made large commitments not yet operational. A slight shortfall compared to the actual commitment by the operational IPPs relates to : Accumulation of funds to implement or support larger SED projects; IPPs still in the planning phase of SED interventions; Difficulties to identify suitable projects in the area; and Lack of penalisation for under-expenditure (no deductions effected against nonperforming IPPs as yet). 42 SED contribution categories N5 Activity spread for ED and SED Projects spend reported to date (% of total) education social and welfare infrastructure 41% 15% 8% Enterprise and socio-economic development commitments have been made in six categories; namely, education and skills development, social and welfare, management and planning, healthcare, enterprise development and infrastructure. All operational IPPs are required to report on the initiatives they have engaged with to alleviate socio-economic challenges faced by the local communities in which they operate. The distribution of the combined ED and SED spend is shown across activity categories (refer left). Education, social and welfare, infrastructure and health care initiatives have a SED focus. health care management and planning enterprise development unallocated 2% 8% 20% 5% Management and planning is a cross cutting activity that contributes to either SED or ED. As shown, about 5% has not yet been allocated to one of the categories or is being withheld towards a future activity spend. The SED spend on education has been more than double the expenditure on enterprise development. This is despite enterprise development being a stand-alone commitment category in terms of the IA. This is, in part, due to the fact that some early childhood development programmes have also been incorporated in educational programmes. Enterprise development is the focal area that has received the second highest share of the contributions to date.
By province, the largest share of SED and enterprise development expenditure has been spent in the Northern Cape. This is unsurprising because the Northern Cape boasts the largest portfolio of operational, renewable energy IPPs. The Eastern Cape and Western Cape provinces follow as second and third, respectively. 43 Challenges with the existing SED contribution framework BW1 BW4 and 1S2 have indicated that financing committed by IPPs for SED could be improved. This is mainly because: Deficient coordination and alignment of IPP SED plans with other IPPs in the same localities and broader government development strategies leads to duplication, fragmentation and inefficient SED spend; Other than the provision of power and electricity access, IPPs are not in the business of community upliftment and thus often have difficulty in identifying areas that will effectively address SED in impacted communities; Sparsely populated areas have limited community absorption capacity; SED contributions from IPPs are concentrated within the vicinities of communities where IPPs operate, which implies that there is a lack of equity considerations across geographical areas (i.e. some communities benefit more than others); and IPP revenue projections and availability imply enhanced SED gains over the longer term, while short-term community gains are also required for increased social acceptance of IPPs. Currently, local communities are required to get a minimum of 2.5% equity share in IPP ownership (the target is 5.0%), which is paid into community trusts. However, this is mainly visible over the longer term since the majority of IPP nominal revenues in community trusts will peak in 10 to 15 years due to IPP debt repayments to finance institutions from the beginning of an IPP s operation or revenue earnings. Key learning IPP commitments for SED and enterprise development interventions need to be better coordinated, monitored and aligned to existing needs identification and financing mechanisms for improved effectiveness and societal upliftment.! As a result, the IPPPP Office is currently researching alternative ways to implement SED that could be considered to offer more immediate benefits to local communities, while dealing with the equity and effectiveness concerns raised by the current approach.
2012/2013 2014/2015 2016/2017 2018/2019 2020/2021 2022/2023 2024/2025 2026/2027 2028/2029 2030/2031 2032/2033 2034/2035 Enterprise development (Rand billion) Committed Realised (ITD + Q) 0.7% of revenue R 6 billion R 6 billion ITD R 53 million 14% In last Q Q R7.6 million Enterprise development contributions As with SED spend, enterprise development commitments are made as percentage of revenue, and as such, obligations are effective only once an IPP starts operations. The target for IPPs to spend on enterprise development is 0.6% of revenues over the 20 year project operational life. However, for the current portfolio, IPPs have committed an average of 0.7% or 14% more than the target. 44 ED future contribution forecast (Rand million) Enterprise development contributions committed for BW1, BW2, BW3, BW3.5, BW4 and 1S2 amount to R6 billion. Again, assuming an equal distribution of revenue over the 20 year project operational life, enterprise development contributions would be R301 million per annum. N6 R 600 R 500 R 400 R 300 R 200 R 100 R 6 billion R 301 million average per year Until the end of this reporting period, a total of R53 million has been contributed to enterprise development by the 43 operating IPPs. Of the R53 million, R7.6 million was contributed in this quarter alone. This is below the R9.8 million reported in the previous quarter. R 0 The previous quarter showed a significant quarter on quarter change in reported ED expenditure. This is attributed to adjustments to prior quarters resulting from clarifications resolved with IPPs post the June 2015 reporting date. The trend and reporting figures are now aligned with the expectation of steady growth associated with a increasing number of operational IPPs and growing revenues. Enterprise development in local communities (Rand billion) R 4.5 billion committed to local communities Of the total commitment, R4.5 billion is specifically committed directly within the local communities where the IPPs operate, contributing significantly to local enterprise development. A total contribution of R46 million has already been made to the local communities (i.e. 87% of the total R53.1 million enterprise development contributions made to date).
45 Contributing to cleaner energy Carbon emissions targets Outcome 10 Impact indicators 1 The National Climate Change Response White Paper outlines the national response to the impacts of climate change, as well the domestic contribution to international efforts to mitigate greenhouse gas emissions. As part of the global commitment, South Africa is targeting an emissions trajectory that peaks at 34% below a business as usual case in 2020, 42% below in 2025 and from 2035 declines in absolute terms. These commitments are incorporated into the National Development Plan in Outcome 10 and sub-outcome 3. The REIPPPP contributes constructively to economic stability, energy security and environmental sustainability. Outcome 10 Enhance our environmental assets and natural resources. Emissions factor Carbon emissions reduction is calculated based on a displacement of power, from largely coal-based to more environmentally friendly electrical energy generation, using a gross Eskom equivalent emissions factor of 1.015 1 tons CO 2 /MWh. A more comprehensive approach with regards to emission factors of specific technologies is to be done in consultation with the DEA. Impact indicator 1 Reduced total emissions of CO 2 (not specified, but DoE contributing to Environmental Affairs) Emission reductions achieved Using this approach, the emission reductions for the programme during the preceding 12 months is calculated as 5.1 million tonnes CO 2 (Mton CO 2 ) based on the 5 003 GWh energy that has been produced and supplied to the grid over this period. This represents 25% of the total projected 2 annual emission reductions (20.4 Mton CO 2 ) achieved with only partial operations. A total of 8.4 Mton CO 2 equivalent reduction has been realised from programme inception to date. Carbon emission reductions Projected using P50 (Mton CO 2 ) Projected (P50) 20.4 Mton CO 2 / annum Baseline Mitigation opportunities, DEROs to be developed, M & E system being developed. Relevant sub outcomes Sub Outcomes 2019 target 34% reduction from "Business As Usual" by 2020 and 42% by 2025 Sub-Outcome 3: An environmentally sustainable, low carbon economy resulting from a well-managed just transition Realised (12 month period) 5.1 Mton CO 2 25% Carbon emissions Baseline EF of national grid approx 1.015 ton CO 2 /MWh 2019 Target 0.65 ton CO 2 /MWh (assuming a direct translation of outcome 10 target) Note 1. Carbon accounting for South Africa, UCT, Energy Research Centre (ND). Note 2. Emission reductions associated with the projected, annual energy production (P50) for the total portfolio.
The REIPPPP contribution: Youth in clean energy Outcomes 5 and 14 Photo source: http://blacklion.randysogan.net
47 Photo source: www.youthvillage.co.za Empowering South Africa s youth to enter the green economy With the rapid growth in human population, the world has reached a record number of 1.8 billion young people on the planet today. Approximately 85% of this number are living in developing and emerging economies, as well as in fragile states. While roughly one third of today s youth most of them women are not in formal employment, education, or training, a billion more young people will enter the job market over the next decade. It is widely understood that youth unemployment and underemployment can predispose young people to other social problems; therefore, securing stable livelihoods for all is a critical objective. Notwithstanding, providing employment opportunities for this number of diverse young people presents a challenge of staggering proportions. We also know that hundreds of millions of young people are on the move: striving for better opportunities in cities or seeking refuge from conflict, war or disaster. As a result, the challenge lies not only in the scale, but also in the shifting geographic requirements for employment. These global trends are mirrored in South Africa where we are confronted by growing levels of youth unemployment exacerbated by large-scale rural-urban migration in the quest for ever-elusive employment opportunities.
Young people currently constitute 36.8% percent of the country s population. Such a large, youthful workforce (known by demographers as the youth bulge [evident in the Figure below]) presents a robust resource for the country because of the potential for economic and social progress, provided they are supported and able to become active members of society. South Africa population pyramid, 2014 1 A World Bank analysis completed in 2015, highlighted the economic growth opportunities that could be realised if South Africa s growing working population can be productively employed. Some societies such as the United States and Europe during the post Second World War baby boom were able to take advantage of a growing, youthful population by increasing the number of people entering the workforce to the extent that they eventually exceeded the number of dependents. Moreover, young people who are either without work or not studying (or engaged in irregular employment) are not achieving their full economic potential, thus presenting a missed opportunity for the country. challenges hampering young people from participating meaningfully in the mainstream economy. The second iteration of the National Youth Policy was published in 2015 to focus development efforts for the next fiveyear period. This policy is firmly rooted in the Constitution and informed by the United Nations World Programme for Youth, the African Youth Charter (2006) and the National Development Plan (2012), among others. The policy seeks to ensure that there are processes and opportunities that allow young people to develop and realise their potential. It seeks to develop capabilities as part of a long-term solution, which will open opportunities for the youth to participate in and take advantage of what South Africa has to offer. The plight of South Africa s youth Despite the policy framework reflecting the increased commitment to prioritised youth employment, young people still find joining the world of work particularly difficult in a jobscarce environment. According to Quarterly Labour Force data published by StatsSA 2, 35.8% of young people between the ages of 15 and 34 were unemployed in 2015, which is almost double the number (16.3%) of adults aged between 35 and 64 who are unemployed. The labour absorption rate 3 for adults (58.0%) is almost twice that of young people (32.2%). Young women face even higher levels of unemployment; 40.7% of young women are unemployed compared to 33.8% of young men. 48 Youth job creation and better education attainment are critical in realising this potential. The youth is the next generation of economic and social actors. Making sure that they are well prepared for their futures as workers, entrepreneurs, parents, citizens, and community leaders is therefore enormously important, both in terms of addressing poverty reduction as well as stimulating growth. Because human development is cumulative, missed opportunities to invest in and prepare this generation will be extremely costly to reverse, both for young people and for broader society. Youth development has therefore been incorporated as a key feature of South Africa s overall policy and legislative framework. It is recognised in the New Growth Path (2010), which identified joblessness, poverty, and inequalities as the core StatsSA s Social profile of youth report, released in April 2016, reiterated the severity of youth unemployment, indicating that levels of youth employment consistently declined 4 over the past five years. Among those unemployed, 57% have successfully matriculated. At the same time, data released by the Minister of Basic Education on educational achievement paints a bleak picture, showing a steady decrease in pass rates across all South African schools from 2013 to 2015. This alarming trend has been most pronounced by a significant margin among the country s poorest schools. Together with high youth unemployment, regressing educational outcomes mean that South Africa s youth are at risk of being trapped in the poverty cycle. Note 1. Source: CIA Factbook (updated 30 June, 2015) Note 2. QLFS Trends 2008-2015 Q4. Note 3. Employment to population ratio. Note 4. Declining from 34.2% to 39.5%.
Renewable Energy Independent Power Producer Procurement Programme (REIPPPPP): a vehicle for youth development Young people play a pivotal role in building South Africa. However, enabling the youth to fully develop and realise their potential, requires appropriate processes and opportunities. In addition to expanding and improving education, large-scale, public infrastructure investment is most often cited as a key pathway for engaging an emerging workforce and realising the potential demographic dividend. The REIPPPP represents one of the biggest and most successful infrastructure investment programmes in the country. As such, it has the potential to support significant employment over the full life of the infrastructure (i.e. from manufacturing, construction, installation, and operation through to maintenance), offering an important opportunity for youth engagement and development. operations phases, were filled by the youth. This reflects the enormous potential the RE sector has for employment creation and youth development. The importance of infrastructure development to the labour market 2 is, however, not confined to direct employment opportunities, but should also be considered with respect of its contribution to driving longlasting growth and expanding economic opportunity across the entire workforce. Direct jobs reported for REIPP infrastructure investments themselves may, therefore, present only a small part of what is being realised throughout the economy as a result of the REIPPPP. Youth share of employment during construction and operation of REIPPs 46% as percentage of employment opportunities filled by South African Citizens 49 At a broader level of commerce, business, Government, labour, civil society and nongovernmental organisations (NGOs) have collaborated to develop the Youth Employment Accord (2013) and the Skills Accord (2011). These aim to improve the process of equipping and placing young people in jobs, and generally to make the economy sensitive to the employment needs of young people. While not specifically incorporated under the Skills Accord, the REIPPPP is demonstrating the benefit of a shared commitment between Government and business and how the intent and vision of this accord can be realised. Over the preceding five-year period, in accordance with contractual obligations, Renewable Energy Independent Power Producers (REIPPs) have deliberately and purposefully been investing in young people to acquire market-relevant skills, to gain work experience and develop their business and leadership abilities for meaningful employment in this sector. Young entrepreneurs rising While many Renewable Energy Independent Power Producers (REIPPs) don t have a long supply chain once their projects become operational, most go out of their way to empower young black entrepreneurs through related socio-economic community upliftment projects. A case in point is 28-year-old Gorden Rensberg (pictured), a budding Information By March 2016, REIPPs have reported an equivalent of 13 073 full time employment opportunities 1 for South African youths. In addition, they have reported that more than 46% of job opportunities for South African citizens, during the construction and Photo credit: Gorden Rensburg Note 1. Person months (i.e. the reporting unit of IPP agreements) converted to Full Time Equivalents (FTEs) as per the Extended Public Works Programme (EPWP) definition. Note 2. IFC Economics Notes; Note #4: The scope for an impact of infrastructure investments on jobs in developing countries. Estache, A and Garsous, G. April 2012
Technology (IT) specialist and businessman from Postmasburg (located approximately 170km east of Upington in the Northern Cape). Born and raised in Postmasburg, Gorden used to dabble in construction, but received a hand-up when a friend of his referred him to Masego Mogotsi, Economic Development Manager of Jasper Power, to date the largest operational Solar Photovoltaic (Solar PV) plant on the African continent. In addition, REIPPs have prioritised education and youth in socio-economic initiatives, with 41% of the socio-economic development contributions allocated for education and an additional 20% allocated for enterprise development. Many of these latter initiatives focus on youth-owned enterprises. National distribution of REIPP Education and Skill Development contributions Percentage contribution per province 50 He takes up the story: Jasper Power had donated four laptop computers, a printer and Wifi connectivity to the Tsantsabane Labour Desk in Postmasburg and also installed five desktop computers and a printer at the Danielskuil Municipal Library. Yet there was no one to service the equipment and IT systems when things went wrong. I saw an opportunity and, in March 2015, pitched for the contract. Today, Gorden is Managing Director of AGR Media Marketing and Advertising. IT services aside, his company specialises in online media and marketing and employs three nonpermanent staff (an IT System Support Engineer and two Microsoft Certified Information and Technology Professionals). Though the contract with Jasper is small, it provides me with a steady monthly income. I m unmarried but have two young boys to support, so the salary is not to be sniffed at. And I m looking forward to expanding the company in future; hopefully the contract with Jasper will serve as a stepping stone to bigger things. Masego confirms that Jasper Power is looking at ways of assisting Gorden in growing his business. We are working on something, perhaps towards the end of the year, though we re mindful of not wanting to impose a growth strategy on Gorden. The vision and drive has to come from him; if we think it s feasible, we ll support it. If the advent of Renewable Energy (RE) in the region has shown Gorden anything, it is that the community is getting new minds people are beginning to think in new ways. Before Jasper Power, the only industry in the area was iron ore mining; the arrival of RE has brought change, new employment opportunities and hope for the future. Driven by innovation, RE serves to inspire young entrepreneurs such as Gorden to be inventive themselves. 11 55 >1 16 Youngsters in service of their communities The aphorism a rising tide lifts all boats is associated with the idea that improvements in the general economy will benefit all participants in that economy. It is especially relevant in terms of Renewable Energy (RE) and the youth it empowers through socioeconomic upliftment intiatives. Take 21-yearold Chardin Booysen, for example. Born and raised in the northern Karoo town of De Aar, Chardin experienced what many matriculants are subject to: Little prospect of further education, and no jobs to secure their economic livelihood. Where many young people would flounder substance abuse, child neglect, crime and a host of other social ills plaguing previously disadvantaged communities throughout the country Chardin was fortuitously drawn into the Community Development Workers (CDW) Programme funded by Solar Capital. CDWs are public servants whose purpose is to strengthen the coordination between services provided by Government and access to these services by previously disadvantaged communities. There are many CDWs serving 7 10
the Emthanjeni Municipality where I live. We have meetings once a week and, on average, 24 people from the community, young and old, are in attendance. The meetings are co-faciliated by myself and my colleague Janet Mattee; to a degree, you can call it group therapy. As you can imagine, many issues arise, and where necessary we refer cases to social workers or psycohologists people who are more skilled or qualified than us to be of assistance. On a personal level the programme also aims to boost the self-confidence of the participants involved, as well as assist them in developing sought after workplace skills. 51 Having been a CDW since the start of 2015 it feels wonderful to be able to serve my community in this manner Chardin s own growth in confidence and progress serves as a shining example. I got to know the staff at Solar Capital quite well, including Abner Wagenaar, the Local Economic Development Manager at Solar Capital. Abner called me to see if I was interested in becoming an IT facilitator at the Solar Capital Community Centre in De Aar. Because I had taken IT at school through to matric, this was a great opportunity for me. Him and Janet, 23, originally chosen to become facilitators because of their leadership skills, were offered a month-long online computer and IT literacy training course through Vaal University of Technology. We completed this course and are now assisting anyone who comes to the Community Centre with any challenges they may have with using the computers or free Wifi at the centre. I can help people learn, improve their grades at school, and use the Internet to be creative, start their own initiatives or find jobs for themselves. It s very satisfying. Chardin Booysen. Photo credit: Solar Capital programme I learnt how to express myself and open up to people. I now know I m capable of not only changing my own circumstances, but also helping other people. All circumstances are changeable. Don t let yourselves drown in them. There is always hope. How does he view the future of South African youth? I think there is hope through education. Many young people I know just sit at home and don t even go to school, they use drugs and they rob people. Young people must first finish school to enable themselves to get into the working world, but they must also open up their minds to further information available to them on the Internet. You can learn just about anything online, including doing online tertiary courses, if you are given this opportunity. By being exposed to different viewpoints you are able to learn and improve your own life and be happier than you were before. Our youth need to learn that success is not easy, you need to work for it. If they are guided in the right direction, this generation will be able to achieve a lot more than they believe they are capable of. Doing the CDW training as well as the course made me look at the world differently. It taught me that you can t just wait for your circumstances to change, you have to get out there and make opportunities work for you. I also learnt a lot about myself and developed a greater sense of self-worth. I was shy before this and didn t enjoy discussing issues with strangers, but through this Enterprise development and education and skills development initiatives that are being supported by REIPPs span a broad spectrum of activities. By way of illustration, a selection of three youth orientated development initiatives supported or implemented by REIPPs are highlighted below.
REIPPs investing in youth development 1 Ya Rona Ke Temo Co-operative Description Ya Rona Ke Temo Co-operative is a community garden project concept developed to provide in the local community s need for fresh produce while creating employment and greener public spaces. The small-scale, community agriculture project is enabling the members of the co-op to cultivate and grow their own vegetables, creating employment and alleviating poverty and food insecurity in the local community. In the process, a neglected commonage has been converted into a flourishing community vegetable farm, contributing also to create an aesthetically pleasing public space. Beneficiaries Located in the Lejweleputswa District Municipality in the Free State, it consists of 15 youth members. The project has received support in the form of information sharing on topics such as seed classes, planting schedules and weed control. Further support will include the provision of additional infrastructure and skills development as well as guidance from agricultural and business mentorships. * This initiative is supported by Boshof Solar Park Tutor For The Future (TFTF) Description Tutor For The Future is an educational trust that makes educational programmes and tutoring available to struggling learners in underprivileged areas that would otherwise not have access to such learning support. The focus is on primary schools. TFTF helps schools to obtain access to the Internet and provides technology to facilitate learning. The focus is on mathematics, as this remains one of the largest areas of need in the school curriculum and the subject that is most required for future advancement. Tutoring is offered through various applications, concept videos and one-on-one tutoring made possible through digital connectivity technology. TFTF also trains and equips teachers to be hands on in the process. Beneficiaries The TFTF currently supports 512 pupils in 14 schools throughout the Capricorn District Municipality, Limpopo. Tutor For The Future (TFTF) (continued) The eight most improved students increased their marks for mathematics by an average of 38%, with the most improved achieving a 50% increase from 23% to a 73%. For these students, tutoring have made the difference between failing and passing and opening opportunities for further learning and education. * This initiative is supported by Soutpan Solar Park and Witkop Solar Park Kudomelo Bokamoso Leadership Description Kodumela Bokamoso Youth Development is a Non- Profit Organisation dedicated to the development of future leaders through leadership intervention programmes within education. The current programme runs the duration of 2016 and includes the following elements: Development and empowerment of school leadership, including principals, vice-principals and heads of department through workshops, resources (books, electronic equipment and tools) and advisory support. Development and empowerment of particularly mathematics, science and accountancy teachers in the circuits, by supplementing knowledge and content gaps, providing additional resources and teacher motivation support. Science and career expos to expose Grade 9 12 learners to opportunities and careers in mathematics, science, engineering and technology. Winter schools offered to Grade 12 students during the June/July holidays, with the focus on mathematics and science in preparation for the matric exams. Beneficiaries Since its inception in 2007, Kodumela Bokamoso s programmes have reached out and impacted the lives of roughly 11200 rural learners in schools throughout the Capricorn District Municipality (specifically in the Bahnanwa and the Maleboho Central Circuits), Limpopo. * This initiative is supported by Soutpan Solar Park These examples and statistics further confirm the success of the partnership between Government and the private sector and the widespread benefits possible arising from shared interest in this priority development area for the country. 52 Note 1. Information provided by EDPlatform, service provider to REIPPs (representing IPPs with ~1.6GW combined generation capacity across the first four bid rounds) for the facilitation of enterprise and youth development initiatives
53 Photo credits: Saretec (www.saretec.co.za) Opportunities in the broader Renewable Energy (RE) sector Happily, opportunities are not confined to the REIPPPP. The emerging RE sector offers numerous opportunities to effectively employ South Africa s talented youth, harnessing and channeling this growing reservoir of human capital towards a productive sector of the economy. Direct employment creation estimates for the RE sector vary from 36,400 new jobs 1 to 78,000 2 and up to 462,000 3 with consideration of indirect and induced employment opportunities. The rapid evolution of RE is giving rise to a new marketplace one in which innovative and profitable business models continue to develop and new businesses are incubated to become major industrial and manufacturing players and employers of the future. This is, in turn, creating supply chains that provide further entrepreneurial and employment opportunities for the previously disadvantaged as well as procurement opportunities for micro and small businesses. Because of its tremendous growth and employment potential, the green economy is one of the priority sectors recognised by both the Industrial Policy Action Plan and the New Growth Path, enabling prioritisation of youth in job creation and the strengthening of entrepreneurship As the sector evolves, it is demanding a new skill set 4. Consequently, a growing offering in industry-related training and development opportunities is already evident in the country. The South African Renewable Energy Technology Centre (SARETEC) an initiative of the Department of Higher Education and Training (DHET) 5 is the first national RE technology centre in South Africa. It has been established at the Cape Peninsula University of Technology (CPUT) 6 in Cape Town and consists of a state-of-the-art centre with a turbine hall, auditorium, laboratories, workshops, lecture theatres and offices. SARETEC offers specialised industry-related and accredited training for the entire RE industry, along with tailored short courses and workshops. The purpose of the centre is to train technicians to service the growing number of RE projects in the country. SARETEC qualifications enjoy international recognition and accreditation, in so doing providing young, qualifying South Africans with the opportunity to gain work experience abroad. Severe global shortages of technicians 7 allow easier entry into the job market while providing new graduates with critical work experience one of the primary hurdles for new graduates to finding employment. In response to the growing skills requirement, RE learning is being incorporated into curriculums at all Technical Vocational Education and Training (TVET) Colleges. Note 1. AGAMA Energy. 2003. Employment potential of renewable energy in South Africa. Note 2. Rutovitz, J. 2010. South African energy sector jobs to 2030. Prepared for Greenpeace Africa by the Institute for Sustainable Futures, University of Technology, Sydney, Australia Note 3. Maia, J et al. 2011. Green jobs: An estimate of the direct employment potential of a greening South African economy. IDC. Note 4. European Commission International Labour Office (ILO), Skills and Occupational Needs in Renewable Energy, 2011. Note 5 DHET funding via National Skills Fund with substantial support from the German Ministry for Economic Cooperation and Development through the South African-German energy programme (SAGEN), implemented by by GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit), the South African National Energy Development Institute (SANEDI) and Green Cape. Note 6. Bellville campus, Cape Town, South Africa. Note 7. As an example, a shortage of 7,000 qualified personnel was reported for the European wind energy sector in 2013; this figure is projected to increase to 15,000 by 2030. European Wind Energy Technology Platform (TPWind). Workers wanted: the EU wind energy sector skills gap. 2013
As part of the national rollout, TVET Colleges introduced the Renewable Energy Technologies (RET) elective, along with the first intake of students, in 2015. 54 Leading up to 2015, significant effort was focused on the professional development of TVET lecturers to enable the promotion and introduction of these new, green skills at college level. Teacher training and study tours were made possible by the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) and Department of Higher Education (DHET). Photo credit: Athule Nojahola Bright young leaders in green skills Renewable Energy Technologies (RET) learnerships, introduced countrywide through Technical and Vocational Education and Training (TVET) Colleges, is unearthing many young gems such as Athule Nojaholo (pictured), a 16-year-old student from KwaZakhele. She may be the youngest of her class in RET at the Port Elizabeth TVET College, yet is making an outsized impression considering her precocious age. Having registered at the Iqhayiya Campus in Struandale with only Grade 9 passed this access qualification is the lowest entry requirement she became the top student, against all odds, with an 82% pass rate in RET Level 2. I used to be enrolled at Kwezi Lomso Comprehensive School in Zwide and Natural Sciences was my thing, says Athule. At that juncture I was totally unaware of Renewable Energy; it was very different to my previous school subjects. But having moved to the college, things fell in place: I found that I loved all aspects of RET and the practical application of the various technologies. In my first year (Level 2), we studied Solar Photovoltaic (Solar PV) systems; levels three and four cover Solar Water Heaters and Wind Turbine Services. I feel motivated to study hard and become a top technician, because RET offers something new to the world. Once I pass Level 4, my wish is to continue studying other subjects in the RET field and, through it, to eventually explore my country and perhaps the world. Because of the history of this country, black people haven t had much opportunity to move around and follow their dreams. I want a dynamic career that takes me places. Athule s mother, Andiswa, originally suggested she should enroll at the college. My mother is a single parent who supports myself, my older sister, my younger brother and one of our nephews. She generates a modest income by running a crèche for toddlers at our home. So her suggestion that I go to the TVET College was both for financial and purely practical reasons, as Iqhayiya Campus is a 30 minutes walk from our home. I can t thank her enough. George Chase (pictured on the next page), senior RET lecturer at the TVET College who is at the verge of retirement, beams broadly when reflecting on the prospects of his top student. I see great potential in Athule and her fellow students to become leaders in green skills, and the the development thereof. Opportunities to become, for example, Solar PV technicians, Wind Turbine Service Technicians or Solar Water Heater Technicians are great, as the curriculum
for RET lays a solid foundation for these career paths. RET is still in its infancy and I feel so excited about its future potential that it s become difficult for me to contemplate retiring. But it s also satisfying to know that youngsters like Athule will carry the torch of my passion for RET, into the future. 55 Likewise, interest in the sector and clean energy solutions has prompted industry-led training initiatives outside the formal skills development and education framework. The South African public, and youth in particular, are increasingly demonstrating an interest and demand for practical, RE related knowledge. A solar power visionary from the Eastern Cape Technology suppliers and solution providers, such as the George-based Specialized Solar Systems (SSS), are giving training and technical support to aspiring start-ups in the mould of Yonela Rosinamba [(pronounced Ghosinamba), pictured on next page]. An enterprising 26-year-old from Mqanduli near Elliotdale in the former Transkei, Yonela has a striking vision: My passion is to light up the Eastern Cape with solar power. I want my company, Nella Solar, to become the leading solar solutions business in the region. Yonela s story makes for captivating reading. Having studied Logistics at Nelson Mandela Metropolitan University in Port Elizabeth, she gave up her dream of gaining a degree in favour of pursuing a modeling career in Johannesburg. When that didn t work out she fell ill and had to undergo a stomach operation the bird of inspiration alighted on her shoulder. During my convalescence, I became fascinated by solar power. I saw an opportunity in the rural Eastern Cape, chiefly because there was no competition in the area. Having registered my company in 2014, I was quite idealistic, but as soon as it became operational in 2015, I immediately encountered challenges. For instance, in pitching for a contract through the Department of Human Settlements to fit 1,000 solar power units to former RDP houses, I realised I didn t have the financial capacity to live up to their expectations. So I started researching the service providers in the field. Photo credit: George Chase, senior RET lecturer, Port Elizabeth TVET College. The quality of the systems offered by SSS attracted me and I went to see them in George. Jonathan Hodgson [the Chief Executive Officer and one of the owners of the company] was extremely generous and even went so far as to offer me financial support for my return journey. He recognised my ambition and said he wanted to empower me, providing technical support and training, but he demanded my commitment in return. SSS gives me their systems on credit and the skills transferal process has been fascinating I ve learned to scale ladders and work on rooftops, doing installations and understanding the operational system because, back home, me and my staff have to teach people how to use their new solar systems efficiently so they don t shorten the lifespan of the storage battery. Picture this: From being a commercial and photographic model, suddenly I found myself on rooftops making solar panel installations! She laughs heartily. The first time it happened, I thought: If you can do this, you can do anything! And so can others; it doesn t matter whether you re male or female.
Yonela is unmarried and has no children. I m not even thinking of having a boyfriend. My sole focus is on getting my company off the ground and getting it recognised. At the moment I employ four technical staff, three of whom are female, and a secretary. By city standards this is a small beginning and, to be honest, I haven t yet broken through the rural areas are different; some municipalities out there don t even know there is funding available for solar power conversion, so a constant process of education and lots of patience are required. 56 Also, you have to bear in mind that most of the rural Eastern Cape households survive on government grants. I would say the average household monthly income is about R2,000, which is why Government subsidies for solar power conversion are so critical to get the ball rolling. Most rural people are not used to solar being able to run a number of household appliances such as radios, fridges or DStv; they think it can only drive a few light bulbs. Once they realise they can get free energy, clean energy, from the sun, and don t have to look to their pockets for fuel like paraffin, which has become so expensive [and is quite smelly in a confined space like a hut], the penny begins to drop. In the rural areas, there is a high crime rate because there is no street lighting in towns and villages. Yet there are affordable solar street lighting systems available on the market. Also, I believe that the pass rates of rural Eastern Cape students are so low because, in many households, the kids can t study into the night because of insufficient lighting. If the Department of Economic Development lend a helping hand to small and medium enterprises (SMEs) such as my own company, we can achieve amazing breakthroughs; it s a question of will and application. Other Government departments ought to play a role, too: Human Settlements and even Health: So many clinics in the Transkei, for instance, can do with solar power installations. And I m not only appealing to Government: if companies with a social responsibility ethos would like to lend a hand, I d welcome that. While Yonela s plea for support is understandable in the circumstances, she s not expecting any handouts. She has, for instance, forged a relationship with 30 co-op members who, funded by the Department of Trade and Industry, have a five-year contract with Mbashe Municipality for the maintenance Photo credit: Yonela Roshinamba of 2,000 solar systems. They told me their challenges and asked me to support them. So in future they ll buy stock from me for maintenance and I ll also supply them with appliances. I m happy to support and empower them the way SSS has empowered and supported me. Having been favoured by SSS, it feels right to favour the co-ops in return.
57 Photo source: www.mydreambuilders.org Unlocking our youth s potential Renewable Energy is serving as a catalyst for bigger change South Africa s youth unemployment statistics and trends paint a dire picture. To change this, it is critical for the country s social and economic future that opportunities are created to enable and empowers our youth if they are to act as key agents for social change, economic expansion and innovation. South Africa s transition to a diversified and sustainable energy country presents a critical window of opportunity for youth-targeted interventions that addresses education, work experience and entrepreneurial development. The REIPPPP is already, and deliberately, serving as a platform for youth development, providing a springboard for youth employment and entrepreneurship that is enabling young South Africans to actively participate and engage in society and the economy. The achievements are testimony to the broad benefits reaped by all South Africans, resulting from the effective, longterm, working partnership forged between Government and the private sector through the REIPPPP. Even so, the RE sector offers much greater potential as a platform for skills and youth development in our country. In addition to expanding the number or opportunities for young South Africans to secure gainful employment, the sector is stimulating entrepreneurship, allowing young people to create their own jobs. Entrepreneurship afford young people the autonomy that they desire in determining their destiny, while generating further jobs that can help accommodate the large numbers of youth graduating from high school each year. Such enterprise and innovation are not just important for the sake of employment, but also to enable the economy to thrive and grow at the pace needed to achieve our development goals The clean energy sector provides attractive opportunities for meaningful employment and career development for South Africa s youth. Evidently, RE is already inspiring young people to find solutions for their personal development and making a difference in the lives of their communities. RE may just be the catalyst that can transform the promise of a youthful population into the driving force of South Africa s fast-emerging green economy, not to mention the economy at large. Initiatives by various areas of Government, including those of education, energy and trade and industry, are being designed to support this natural progression. Yet, it is not solely a responsibility of Government it is the collective responsibility of all sectors of the South African society. The shared future of all South Africans depends on how well the entire country can meet the needs and aspirations of its young people.
The REIPPPP contribution: Provincial analysis Outcomes 2 and 9 58
59 Provincial contribution Capacity development at a glance Provincial snapshot The IPP projects of the first six bid windows (BW1, BW2, BW3, BW3.5, BW4 and BW1S2) were distributed across all 9 provinces of South Africa. A per province view is provided later in this section and provincial reports with a detailed analysis of the level of participation and contribution in each province are available. In the next map a quick view of the distribution of number of projects, capacity, technology types, size of projects, project status as well as the capacity share contributed from the respective bid windows per province is provided. The objective of this map is to provide a comparison of the provinces in terms of the energy capacity build portfolio. Other developments at a glance The second map shows the distribution of a selection of economic and socio economic contributions resulting from the REIPPPP commitments.
Provincial capacity at a glance Where: BW bid window; Pre-FC before Financial Close; COD Commercial Operating Period; EOP Early Operating Period; Construct Under construction; No GC Complete No Grid Connection Note: Capacity shown refers to contracted capacity. To date there has been a variation of 13 MW in the actual operating capacity delivered to the grid on completion. The actual operational capacity achieved is shown in the detail on each province. Pre-FC 20MW 9% Construct 79MW 36% Project status COD 124MW 55% 60 Pre-FC 1 554MW 43% COD 7MW 3% Project status Project status Pre-FC 268MW 97% COD 937MW 26% Construct 1 090MW 31% BW share BW 1 7 MW 3% BW 4 268 MW 97% 275 megawatts procured Technology type Solar PV 275 MW 100% 223 megawatts procured 118 megawatts procured BW 1S2 15 MW BW 4 7% 5 MW 2% BW 3 75 MW 33% BW share Solar PV 118 MW 100% BW 1 64 MW 29% BW 2 64 MW 29% Hydro 9 MW 4% Solar PV 214 MW 96% Technology type Construct 60MW 51% BW 3 60 MW 51% Project status COD 58MW 49% BW 1 58 MW 49% BW 1S2 15 MW BW 4 1% 1 339 MW 37% BW 3.5 200 MW 6% Hydro 10 MW 0% Solar PV 1 512 MW 42% Solar PV 134 MW 22% BW share Technology type BW 1 682 MW 19% BW 2 330 MW 9% BW 3 1 015 MW 28% CSP 600 MW 17% Wind 1 459 MW 41% Biomass 5 MW 1% Technology type Wind 467 MW 77% 3,581 megawatts procured Northern Cape 51 projects Western Cape 14 projects 606 megawatts procured North West 5 projects Free State 8 projects Eastern Cape 17 projects 1,509 megawatts procured Limpopo Gauteng project projects 1 3 Mpumalanga project KwaZulu Natal 1 project 2 17 megawatts procured Biomass 17 MW 100% Technology type 30 megawatts procured Landfill 18 MW 100% 18 megawatts procured Technology type BW share Technology type BW 1S2 5 MW 17% Biomass 30 MW 100% BW share Project status BW 4 25 MW 83% Pre-FC 30MW 100% BW 1S2 14 MW BW 4 2% 140 MW 23% Construct 75MW 13% BW 3 75 MW 13% Pre-FC 154MW 25% BW share Project status BW 1 133 MW 22% BW 2 244 MW 40% COD 378MW 62% BW 4 429 MW 28% BW 3 197 MW 13% Construct 330MW 22% Pre-FC 429MW 29% BW share Project status BW 1 481 MW 32% BW 2 402 MW 27% COD 655MW 43% No GC 95MW 6% Solar PV 70 MW 5% Technology type Wind 1 440 MW 95% Technology type BW share Project status BW 3 17 MW 100% Pre-FC 17MW 100% BW 3 18 MW 100% Constru ct 18MW 100% BW share Project status
Provincial economic and socio economic development at a glance 61 Commitments for bid windows 1, 2, 3, 3.5, 4 and 1S2 R7.0 billion R349 million R601 million 2 832 job years R5.8 billion R824 million R157 million 7 405 job years R3.6 billion R284 million R929 million 2 917 job years R126.9 billion R11 902 million R18 256 million 66 191 job years Northern Cape 51 projects Western Cape 14 projects North West 5 projects Free State 8 projects Eastern Cape 17 projects R1.5 billion R196 million R133 million 2 709 job years Limpopo Gauteng project projects Mpumalanga 1 3 project KwaZulu Natal 1 project 2 R0.3 billion R40 million R26 million 246 job years R14.3 billion R1 109 million R33.7 billion R 4 489 million R1.1 billion R78 million R55 million 336 job years R1 636 million R 7 434 million 11 067 job years 18 132 job years
Province Eastern Cape Surface area footprint in country GDP 1 Contribution to GDP in country Province Free State Surface area footprint in country GDP 1 Contribution to GDP in country 62 14 percent 8 percent 11 percent 5 percent 12 40 Population home to % of the country population people per km2 Employment 4 out of five EAP is employed 17 projects 1,509 MW Population 5 22 home to % of the country population people per km2 Employment 3 out of five EAP is employed 8 projects 223 MW Solar PV 70MW Hydro 9MW 4% Solar PV 214MW online 5 5% Wind 647 MW online 5 121 MW 1 440MW 96% 95% 2,750 GWh 481 GWh generated 4 generated 4 Technology type Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) Realised (R12.2 billion) Realised (R2.4 billion) R 33.7 billion 2 17% of total country Q (R0.7 billion) R 7.0 billion 2 4% of total country Q (R0.3 billion) Realised (R35.7 million) Realised (R13.8 million) R 4 489 million 2 23% of total country Q (R8.6 million) R 349 million 2 2% of total country Q (R1.2 million) R 7 434 million 2 25% of total country Not reported on a quarterly basis R 601 million 2 2.1% of total country Not reported on a quarterly basis Realised (4466) Realised (1592) 18 132 job years 2 16% of total country Q (312) Job years 2 832 job years 2 3% of total country Q (254) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2014 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW1, 2, 3, 3.5, 4 and 1S2) and progress is monitored against total project value, not total project cost. Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.
50.0 40.0 30.0 20.0 10.0-50.0 40.0 30.0 20.0 10.0 - Province Gauteng Province 720 Surface area footprint in country 1 35 percent 24 Population home to % of the country population people per km 2 GDP 1 Contribution to GDP in country percent Employment 4 out of five EAP is employed 1 project 18 MW Province KwaZulu-Natal Surface area footprint in country 8 16 percent 113 Population 20 home to % of the country population people per km2 GDP 1 Contribution to GDP in country percent Employment 4 out of five EAP is employed 1 project 17 MW 63 Landfill 18MW 100% Technology type committed 0 MW online 5 0 GWh generated 4 actual 3 (ITD + Q) Biomass 17MW 100% Technology type committed 0 MW online 5 0 GWh generated 4 actual 3 (ITD + Q) R 0.3 billion 2 0.1% of total country Realised (R0.06 billion) Q (R0.02 billion) R 1.1 billion 2 1% of total country Project in bid window 3 has not commenced Realised (R0 billion) Q (R0 billion) R 40 million 2 0.2% of total country Realised (R0 million) Q (R0 million) R 78 million 2 0.4% of total country Project in bid window 3 has not commenced Realised (R0 million) Q (R0 million) R 26 million 2 0.1% of total country Not reported on a quarterly basis R 55 million 2 0.2% of total country Not reported on a quarterly basis 246 job years 2 0.2% of total country Realised (3) 6 Q (3) 6 Job years 336 job years 2 0.3% of total country Project in bid window 3 has not commenced Realised (0) Q (0) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2014 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW1, 2, 3, 3.5, 4 and 1S2) and progress is monitored against total project value, not total project cost. Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP. Note 6. Numbers rounded.
50.0 40.0 30.0 20.0 10.0 - Province Limpopo Surface area footprint in country GDP 1 Contribution to GDP in country Province Mpumalanga Surface area footprint in country GDP 1 Contribution to GDP in country 64 10 7 percent percent 6 percent 8 percent 10 44 Population home to % of the country population people per km2 Employment 4 out of five EAP is employed 3 projects 118 MW Population 8 56 home to % of the country population people per km2 Employment 4 out of five EAP is employed 2 project 30 MW Solar PV Biomass 118MW 58 MW online 5 30MW 100% 100% 0 MW online 5 213 GWh 0 GWh Technology type generated 4 Technology type generated 4 committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) R 3.6 billion 2 2% of total country Realised (R1.8 billion) Q (R0.1 billion) R 1.5 billion 2 1% of total country Project in bid window 4 has not commenced Realised (R0 billion) Q (R0 billion) R 284 million 2 1% of total country Realised (R9.2 million) Q (R1.9 million) R 196 million 2 1% of total country Project in bid window 4 has not commenced Realised (R0 million) Q (R0 million) R 929 million 2 3% of total country Not reported on a quarterly basis R 133 million 2 0.1% of total country Not reported on a quarterly basis 2 917 job years 2 3% of total country Realised (946) Q (85) Job years 2 709 job years 2 2% of total country Project in bid window 4 has not commenced Realised (0) Q (0) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2014 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW1, 2, 3, 3.5, 4 and 1S2) and progress is monitored against total project value, not total project cost. Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.
50.0 40.0 30.0 20.0 10.0 - Province North West Province Surface area footprint in country GDP 1 Contribution to GDP in country Province Northern Cape Surface area footprint in country GDP 1 Contribution to GDP in country 65 9 percent 6 percent 31 percent 2 percent 35 Population 7 home to % of the country population people per km2 Employment 4 out of five EAP is employed 5 projects 275 MW Population 2 3 home to % of the country population people per km2 Employment 4 out of five EAP is employed 51 projects 3,581 MW Solar PV 275MW Hydro 10MW 0% Solar PV 1 512MW 42% CSP 600MW 17% Wind 1 459MW 41% 7 MW 100% online 5 935 MW online 5 29 GWh 3,520 GWh generated 4 generated 4 Technology type Technology type committed actual 3 (ITD + Q) committed actual 3 (ITD + Q) Realised (R0.1 billion) Realised (R36.9 billion) R 5.8 billion 3.0% of total country Q (R0 billion) R 126.9 billion 65% of total country Q (R1.2 billion) R 824 million 4.3% of total country Realised (R1.2 million) Q (R0.1 million) R11 902 million 62% of total country Realised (R87.7 million) Q (R17.9 million) R 157 million 0.5% of total country Not reported on a quarterly basis R18 256 million 62% of total country Not reported on a quarterly basis Realised (119) Realised (15333) 7 405 job years 7% of total country Q (8) Job years 66 191 job years 59% of total country Q (1144) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2014 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW1, 2, 3, 3.5, 4 and 1S2) and progress is monitored against total project value, not total project cost. Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.
Province Western Cape Surface area footprint in country GDP 1 Contribution to GDP in country 66 11 percent 14 percent 47 Population 11 home to % of the country population people per km2 Employment 4 out of five EAP is employed 14 projects 606 MW Solar PV 134MW 22% Technology type committed Wind 467MW 77% 377 MW online 5 1,280 GWh generated 4 actual 3 (ITD + Q) Realised (R5.9 billion) R 14.3 billion 2 7% of total country Q (R0.2 billion) Realised (R23.8 million) R1 109 million 2 6% of total country Q (R5.9 million) R1 636 million 2 6% of total country Not reported on a quarterly basis Realised (2505) 11 067 job years 2 10% of total country Q (115) Job years Note 1. All economic data = IHS Global Insight Regional explorer 744 (2.5q), 2014 Estimates. Note 2. IPP data reflects cumulative values over the construction phase and projected operational life (production phase) of the projects (i.e. 20 years). Note 3. Actuals Inception to Date (ITD) shown against total committed (BW1, 2, 3, 3.5, 4 and 1S2). Note 4. Cumulative energy as at end of quarter. Note 5. Online in this instance refers to capacity of projects that reached COD, and is excluding projects in EOP.
A Appendix A Reference component
A1 Interpretation notes These notes document the reporting conventions and terms as defined and practiced by the IPPPP Office, and are important for interpreting the reported numbers and statistics. A concept used in the report that corresponds with an interpretation note here has the following notation indicating the number of the relevant note. N# N1 e.g. would refer to Note 1: Note 1. National targets N1. National targets for renewable energy have been set in the National Development Plan (NDP) as: Total renewable energy capacity developed by 2030: 17 800 MW (Outcome 10, sub-outcome 2) Signed renewable energy deals for 7 000 MW by 2019 (Outcome 6, Sub outcome 2, item 18) RE generation commissioned: 5 000 MW by 2019 (Outcome 6, Sub outcome 2, item 26) RE generation capacity commissioned: 7 000 MW by 2020 (Outcome 6, Sub outcome 2, item 26) The Green Energy Strategic Infrastructure Project (SIP), that operationalises the NDP, sets the target to deliver 6 725 MW RE through IPPs by 31 March 2019. To date, the Minister of Energy has determined in three Ministerial determinations i.e. 2011, 2012 and 2015 that 13 225 MW are to be procured from renewable energy IPPs. In terms of progress towards these targets: The Ministerial determinations represent approximately 74% of the 2030 target of 17 800 MW. The combined capacity procured in BW1, 2, 3, 3.5, 4 and 1S2 (i.e. 6 376 MW) represents approximately 91% of the 2020 target (i.e. 7 000 MW or 5 000 MW in 2019 plus 2 000 MW in 2020) for renewable energy deals. The combined capacity of BW1, BW2 and BW3 (already commissioned or in construction phase) represents approximately 78% towards the 2019 target for capacity commissioned. Note 2. Activity and reporting cycles IPPPP activity and reporting cycles are directly informed by ministerial determinations, bid windows and IPP implementation schedules. The following principles should therefore be noted with regard to reporting periods, reporting frequency and expected rate of change: - Ministerial determinations effectively translate development plans and country energy requirements into instructions for the IPPPP Office to procure. Determinations inform the procurement targets that the office aims to deliver on. Ministerial determinations and therefore procurement targets are done on an ad hoc basis and typically relevant (static) to a two or three year window period. Note 1. Notation indicates additional notes and observations available in Appendix.
- Bid windows with a specified technology mix and capacity target implement the procurement tranches and, once signed, establish the planned capacity and development delivery timelines. Bid windows have been rolled out more or less annually, increasing incrementally the planned capacity development targets. Delivery targets will only change with the closing of new bid windows (+/- annually). - Capacity delivery schedules for the respective IPPs vary depending on the size and technology type of each plant. The respective IPPs become commercially operational as they complete construction, incrementally adding capacity to the IPP portfolio in every quarter. Targets for new generation capacity to start operations are informed by the IPP construction schedules (i.e. Scheduled Commercial Operation Date (SCOD) and increase quarterly in accordance with construction project plans. Tracking, and therefore reporting, is done against these respective targets. Note 3. Dynamic, slow-changing and static reporting parameters Where relevant and required under the IA, bidders are held to specified commitments and required to provide quarterly performance reporting against these commitments. This reflects what is reported as realised (actual costs, labour requirements, energy generated, etc.) Data so collected is considered actual. Actual data is collected as part of the monitoring and evaluation function provided by the IPPPP Office. Note 5. Unaudited data Reported (actual) data will be subject to audit by independent auditors to ensure compliance with commitments and accurate reporting. Unless otherwise specified, actual data reported are as provided by IPPs and still subject to verification in the next quarter. SED and ED figures may vary from quarter to quarter due to the tight deadlines from receiving the information from the Sellers and producing this report. Some verifications and clarifications only take place after this report is produced. The main area for amendments could be the SED & ED contributions and the categorisation of the contributions. A2 It should be noted that some data points and parameters will not change at all or will not change significantly from quarter to quarter. As an example, unless a subsequent bid window was finalised during the reporting quarter, procurement progress will remain static from the previous quarter. Future reporting will track slow changing parameters, but will focus on dynamic parameters that show quarter on quarter progress. Note 4. Planned vs actual data Bidders are required to indicate project details relating to costs, cost structures, equity and developmental thresholds as part of their bids. Submissions are based on projections and estimates are made for the construction period (typically 2 4 years) as well as for the 20 years operation periods. These projections are based on a range of forecasts related to technology performance, weather conditions, equipment cost trends, operational costs, performance and revenue. It is therefore referred to as planned or committed. Depending on the signed Implementation Agreement (IA) some commitments are contractually binding (bid obligations) while others are indicative only. Note 6. Construction vs operations period and spend patterns The durations of the construction and operations phases are very important for the correct interpretation and drawing of conclusions. The duration of the construction periods typically range between 2 and 4 years, while the planned operations period of the plants is 20 years. Where projected numbers are stated as cumulative over the total periods, the order of magnitude of the numbers should be considered in this context. Attention should be paid to: where numbers are stated as cumulative totals over extended periods and where annual figures are used. how the numbers will accumulate over time i.e. whether it will be a linear or average distribution or whether there will be concentrations or spikes (e.g. back- or front-loading). whether the reporting parameter will be relevant during the construction phase only and/or over the extended operations phase.
Year 1 Year 2 Year 3 Year 4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Job years Note 6. (continued) Two important examples are highlighted for clarification: 1. Spend/income patterns. Anticipated cash flows (e.g. project costs, revenue, community trust income, development spend, etc.) are captured for an entire project, differentiating only between construction and operations periods, and stated as single values, targets or commitments as relevant. Timing of cash flows will however vary significantly over the project life. Project costs, including procurement spend, are likely to be incurred/concentrated during the initial construction phase. Project construction expenditure will therefore be characterised by short periods (2 4 years) of variable, but typically high spend that will taper off, commensurate with the coordination, delivery and completion of plant construction on site. A typical spend pattern for the construction phase is illustrated below. Typical construction spend profile numbers are reported by the IPPs in the smallest unit i.e. person months (in compliance with EDD requirements). This allows for reporting of activities of various durations including specialist or ad hoc activities, and casual labour used during construction versus permanent employment for the life of the plant. During construction there will be periods when large numbers of people are on site at a given time, but it is anticipated that employment numbers will taper off by the end of the construction period. As for spending patterns, labour activity will be more intense (i.e. more people for shorter durations of time) during construction phase as illustrated by the construction employment forecast profile for bid window 1 and 2 projects in the Northern Cape below. Typical construction employment profile across portfolio (two bid windows) A3 R million R million/annum 58 Total Project Cost The spend (and labour) requirements of the operations period are expected to have a more steady pattern related to production and maintenance of the plant, sustained over 20 years. Revenue will also accumulate over 20 years as power is generated and sold. Similarly, development spend (a committed percentage of revenue) and community trust income (percentage of revenue) will accrue over time, starting only after operations have commenced. Labour requirements. Employment 3 28 21 6 During the operations period it is anticipated that employment numbers will remain relatively constant, longer term employment prospects will be offered, but that job opportunities / employment will be relatively low in relation to the construction period. Reporting by the IPPPP Office is currently done in job years i.e. the equivalent of one person full time (i.e. defined in the IA as 174 hours per month for BW1 and BW2 and 160 hours per month for BW3, BW3.5, BW4 and 1S2) 1 employed for 12 months. Any interpretation of reported employment numbers in terms of jobs or number of new positions created and the sustainability of these positions over time should be done with caution. For example when comparing construction phase employment numbers (job years) with accumulated job years (translated into employment numbers) over the full 20 year operations phase. Note 1. The IA definitions differs from the definition used by the Expanded Public Works Programme (EPWP) i.e.: a Full Time Equivalent (FTE) as one person-year of employment where one person year is equivalent to 230 person days of work.
Note 7. Local content Local content percentages should also be considered in the context of the spend patterns described above. Local content is reported as a percentage of project value and is achieved by procuring from local suppliers. 3. For this bid window the average portfolio price is therefore calculated as: Price per technology weighted by the relative share of the total annual energy (R3.10 x 35%)+(R1.30 x 51%)+(R3.02 x 13%) A4 However, dependent on the procurement strategy and the components that have been earmarked to be sourced from local suppliers, the local content share need not be a constant throughout the construction period provided it constitutes the required share of project value when construction completes. Note 8. Average bid window price calculation The IPPPP Office has consistently calculated and reported on the average, indexed price per technology per bid window. This reported value is a simple average of the RFP submission price expressed in 2015 terms. In this quarterly report a portfolio average per bid window is shown as an indication / illustration of the price trends between bid windows and an indicative price comparison with new coal fired power alternatives. R2.15/kWh (note a small rounding error in the example) Should the entire portfolio generate power exactly as projected (P50), the average price paid for all energy generated in a year will be R2.15/kWh. 4. The CSP price in BW3 onwards has a base rate and peak rate component. The BW3 rate has therefore been adjusted to incorporate an estimated share of energy generated during contracted peak for which the peak rate will be payable. This remains only an estimate as: 1. Projections of annual energy production are only projections dependent on a range of variables and are by nature uncertain. Since the prices between the various technologies vary significantly, the portfolio average considers the volume of energy that is expected to be purchased from each technology type and has weighted the average price accordingly. The projected energy contribution per technology was then determined as follows: 2. The technology price average is a simple average, without consideration of per IPP energy contribution. 3. The relative share of base: peak energy that will be supplied by the CSP IPPs (share to which peak rate will apply) is an estimate. 1. Using BW1 as example, where the average technology pricing was reported as: PV R3.10/kWh Wind R1.30/kWh CSP R3.02/kWh (base rate only) 2. For this bid window, the projected share of the annual energy production (using the P50 projection) per technology is: PV 35% Wind 51% CSP 13% Note 9. Quarter convention Quarter 1, 2, 3 and 4 are used to refer to quarters of the relevant financial year i.e.: Quarter 1 April June Quarter 2 July - September Quarter 3 October December Quarter 4 January March Where reference is made to a calendar quarter, such exceptions will be indicated as such.
Capacity, energy and capacity factors clarified A megawatt hour (MWh) measures or describes the amount of power produced or consumed in a certain amount of time. If a 1 MW p 1 wind turbine runs for 1 hour x = it produces a total of 1 MWh of energy 1 MW 1MWh 1 hour Operational time for different generation technologies vary, depending largely on the availability of the energy resource. For example, wind turbines will only generate power when the wind blows and solar PV plants will only generate while the sun shines. Over a full year, different technologies are projected to be operational for an average percentage of hours. This depends on various factors including geographic location and the availability of the energy resource, but also operational efficiencies, down-time required for maintenance, etc. A capacity factor (that considers the availability of the technology and energy resource type) is typically used to project the annual energy production of a particular technology or plant. A capacity of 1 MW p for one technology is therefore not necessarily equivalent in energy output to that of another technology. However, because the availability of energy resources (e.g. sun or wind) also varies in different locations and because operation and maintenance requirements may vary, the energy output from different projects using the same or a similar technology but located in different areas of the country may also have different energy outputs per year. Similarly, on the consumer side, the energy consumption differs amongst households. If a 1 kw appliance runs for 1 hour x = it uses a total of 1 kwh of energy 1 kw The more appliances a household has and uses, the higher its energy consumption is likely to be. High energy use is therefore typically associated with higher LSM 2 households. The following scale represents an indicative range of energy use in different South African household types 3. Average annual energy use kwh per annum per household type Free Basic Electricity 1 kwh 1 hour High - income To estimate an average number of homes that can be powered with a given amount of energy, the annual usage for an average South African home (indicated in the frame above as 3 319 kwh), is used. Then 600 3 319 9 288 11 697 average 1 GWh Mid - income will provide power to approximately 301 households A5 Note 1. Subscript p refers to the peak rated capacity i.e. the maximum capacity the specific generator can produce if all other variables are optimal e.g. wind blowing steadily at a suitable speed. Note 2. Living Standard Measure, most widely used market segmentation tool that considers households according to their living standards using criteria such as degree of urbanisation and ownership of e.g. cars and major appliances. Note 3. Free Basic Electricity (FBE), www.energy.gov.za; Average household use based on Eskom residential consumption and Amps data for number of electrified homes (2013); Mid-income usage data as published by City of Cape Town, Smart Living Handbook; High income household usage from SWH and heat pump monitoring data, http://www.environment.co.za/environmental-issues-news/measuringresidential-electricity-savings-in-south-africa-after-solar-or-heat-pump-installations-a-simple-reliable-method.html; Referenced against World Energy Council data for household electricity consumption in South Africa(4 389 kwh/year) in 2010.