SOUTH AFRICA s RENEWABLE ENERGY INDEPENDENT POWER PROCUREMENT PROGRAMME (REIPPPP): A CASE OF LOCALISING THE RENEWABLE ENERGY INDUSTRY Dr. TIDINGS P. NDHLOVU MANCHESTER METROPOLITAN UNIVERSITY, UK VISITING RESEARCH FELLOW, GRADUATE SCHOOL OF BUSINESS LEADERSIP, UNIVERSITY OF SOUTH AFRICA Ms. NTOMBIFUTHI NTULI DIRECTOR:RENEWABLE ENERGY INDUSTRIES, INDUSTRIAL DEVELOPMENT & POLICY DIVISION, DEPARTMENT OF TRADE AND INDUSRTY (dti), SOUTH AFRICA
INTRODUCTION: Context Climate Change - alternative renewable and green economy approaches Reliance on fossil fuels, especially coal. Implications for social and ecological sustainability South African pledges: 34% emissions reduction below business as usual by 2020 and 42% by 2025 President Jacob Zuma: $100bn per year needed for low carbon development plus $100bn per year for adaptation Outline: Theoretical framework; Green Economy Accord; Renewable Energy Rollout Renewable Energy Independent Power Producer Procurement Programme (REIPPPP); Localisation of Renewable Energy; Evaluation and Challenges of Localisation; Evaluation of Job Creation via Localisation; Conclusion
MARKET VERSUS INSTITUTIONAL APPROACHES: TOWARDS A TRANSFORMATIVE APPROACH OF THE GREEN ECONOMY Market Approaches: - free market solutions - Marketization and commodification of nature Institutional Approaches: - State Planning and Regulation institution building; social cohesion - Transformative strand: ecological, social and political sustainability; role of developmental state; localization; democratization
Context - Energy 87% of primary energy supply from fossil fuels 86% of power generation capacity from coal 95% of crude oil requirement is imported 2006 data, Source: DoE 2011 data, Source: Eskom Electricity demand may reach 78000 MW with economic growth Demand @ 4% if GDP @ 6% Demand @ 2.3 % if GDP @ 4% Source: Eskom
Context Manufacturing Manufacturing declined by almost 20% from 2008 to 2009 and then recovered somewhat, showing growth of 5, 0% and 2, 5% in 2010 and 2011 respectively. manufacturing share of GDP 17.5 17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source
Context Unemployment Unemployment (25.5%) 4,2 million actively looking for work with an additional 2.5 million discouraged work seekers 1 350 000 Manufacturing employment 1 300 000 1 250 000 1 200 000 1 150 000 1 100 000 1 050 000 Source: 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Government Policy on Renewables IRP2010 17,8 GW of Renewable Energy 42% of new build capacity Failed REFIT Renewable Energy IPP Procurement Programme Green Economy Accord Local Procurement Accord
REIPPPP Renewable Energy Independent Power Producer Procurement Programme Initial Determination 3725 MW by 2016 Additional determination 3200 MW by 2020 Additional 6800MW committed.
REIPPP - Procurement
REIPPP- Procurement Government Framework Support Agreement
REIPPP - Evaluation Price 70 % 30 % ED
REIPPPP Economic Development Criteria
Technology Onshore Wind Solar Photovoltaic Solar CSP Without Storage Local Content Requirements Local Content First Bid Second Bid Third Bid Submission Date Submission Date Submission Date Current Current Target Threshold 25% 45% 25% 60% 40% 65% Threshold Target Threshold Target 35% 50% 35% 60% 45% 65% 35% 50% 35% 60% 45% 65% CSP with 25% 45% 25% 60% 40% 65% storage Biomass 25% 45% 25% 60% 40% 65% Biogas 25% 45% 25% 60% 40% 65% Landfill gas 25% 45% 25% 60% 40% 65% Small scale hydro 25% 45% 25% 60% 40% 65% 25% 45% 25% 60% 40% 65%
Progress in REIPPPP Rollout
Summary of BW1, BW2, BW3 & BW4 Total MW Allocated Total Project Cost (R Mil) Total Local Content Value (R Mil) Total Construction Jobs Total Operations Jobs BW 1 1416 MW R46 026 R11 419 13 420 419 BW2 1044 MW R29 321 R11 787 7 059 316 BW3 1456 MW R44 956 R16 228 7 915 18 229 (Person Months) BW4 1121 MW R23 410 R9 976 6 835 19 411 (person months Total 5037 MW R143 713 R49 410 35 229 735 (BW1 & BW2)& 37 640 (BW3 & 4 in person months)
Bid window 1 outcomes Technology MW Allocate d Price (fully Indexed) / MWh Total Project Cost (Mil) Local Content Value (Mil) Average local content Constru ction Jobs Operati onal Jobs Onshore wind 634 R1.14 R12 724 R2 766 21.7% 1869 128 Solar PV 632 MW R2.75 R21 937 R6.262 28.5% 10 386 221 Solar CSP 150MW R2.68 R11 365 R2 391 21% 1 165 70 Small hydro None None None None None None None Total 1416 MW R46 026 R11 419 13 420 419
Bid Window 2 Outcomes Technology MW Allocate d Price (fully Indexed )/ MWh Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Constru ction Jobs Operati onal Jobs Onshore 563MW R0.89 R10 897 R4 001 36.7 1579 65 wind Solar PV 417MW R1,65 R12 048 R5 727 47.5% 4 557 194 Solar CSP 50MW R2.51 R4 483 R1 638 36.5% 662 50 Small hydro 14MW R1,03 R631 R421 66.7% 261 7 Total 1044 MW R29 321 R11 787 7 059 316
Bid Window 3 Outcomes Technology MW Allocated Price (fully Indexed) / MWh Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Construc tion Jobs Operatio nal Jobs (person months over 20 yrs) Onshore 787MW R0.65 R16 969 R6 283 46.9% 2612 8506 wind Solar PV 435MW R0.88 R8 148 R3 969 53.8% 2119 7513 Solar CSP 200MW R1.40 R170949 R5 627 44.3% 3082 1730 Landfill Gas 18MW R0,83 R288 R88 41.9% 6 240 Biomass 16MW R1.24 R1.062 R261 40% 96 240 Total 1456 MW R44 596 R16 228 7915 18229
Technology MW Allocated Price (fully Indexed) / MWh Bid Window 4 Outcomes Total Project Cost (R Mil) Local Content Value (R Mil) Average local content Constructi on Jobs Onshore wind 676MW R0.61 R13 466 R5 146 44.6% 2831 8161 Solar PV 415MW R0.78 R8 504 R4 319 64.7% 3825 9273 Solar CSP n/a n/a n/a n/a n/a n/a n/a Small Hydro 5MW R1.11 R245 R80 40% 30 30 Biomass 25MW R1.45 R1 195 R431 47.8% 149 1947 Operation al Jobs (person months over 20 yrs) Total 1121MW R23 410 R9 976 6835 19411
Why Renewable Energy Localisation? Round 1,2, 3 & 4 = R144 billion Renewable Energy a new sector re-industrialisation and reskilling opportunities and address unemployment Existing industrial capabilities in a range of relevant areas e.g. engineering, metal fabrication, etc. Growing number of component suppliers into renewable energy and energy efficiency value chains
Government interventions for Renewable Energy Localisation Market creation - Local Content Requirements Trade and Investment promotion and support Export promotion Manufacturing Incentives Financing through the IDC and DBSA Import Tariffs Standards and testing facilities R & D and Skills Development support DST and DHET
Components earmarked for localisation Components earmarked for local manufacturing in the immediate to short term wind turbine blades and towers; PV modules; PV inverters; and the metal structures used in PV plants. Government would eventually like to see all of these components manufactured in South Africa but understands that a gradual roll-out may be necessary in order to build manufacturing capacity in South Africa.
Studies Supporting Localisation of Renewables Solar and Wind Strategy Solar PV Localization Roadmap Solar CSP Localization Roadmap Wind Industry Localization Roadmap
Investments in Local Manufacturing Name of Investor DCD Wind Towers Location Technology Investment Amount Jobs Created Total Capacity Coega (PE) Wind Towers R300Mil 150 150 towers/annum GRI Atlantis (CT) Wind Towers R237 Mil 160 150 Towers/ annum Concrete Units CT Concrete Towers SMA CT Inverters R30 Mil 15 ILB Helios Eat London IDZ Solar Modules R220 Mil 200 120MW/annum Jinko Solar Solar Modules R60 Mil 100 100MW/annum AEG Inverters ART Solar Durban Solar Modules Sunpower Cape Town Solar Modules
Summary A national commitment to renewable energy A national commitment to localisation (Green Economy Accord, Local Procurement Accord) Development of a strong, competitive domestic manufacturing industry, Establish capability to compete with imports from an already established global industry Focus on Exports What will it take for local manufacturing industry to scale up? Market size Economies of scale Long term visibility market certainty Incentives required to support industry development Policy support Alignment of government policy objectives
Conclusion: Impact of South Africa s approach on economic, ecological, social and political sustainability Renewable energy will contribute significantly to the future energy mix of the country 42% (17.8 GW) of the total new electricity generation planned for in the current Integrated Resource Plan will be renewable. The cost (excludes interest and inflation) of this is expected to be R400 billion plus. Therefore such a large renewable energy programme is expected to put electricity on the grid, support industrialization, local value add and jobs and make a significant contribution to address South Africa s climate commitments Transformative Approach is likely to produce greater results