South Africa has one of the most carbon-intensive economies in the world due to its heavy reliance on coal for energy generation. This makes the greening of its energy mix a national imperative.
According to the Integrated Resource Plan (IRP2010), the South African government envisages that renewable energy will contribute 42% of the total generation capacity of the country by 2030. The New Growth Path contributes to this goal by endorsing a considerable amount of clean energy infrastructural investment.
According to research conducted in 2011 by the IDC’s Research and Information Department, the Development Bank of Southern Africa and research group TIPS, greening the local economy could potentially create more than 460 000 direct jobs by 2025.
As South Africa transitions to a low-carbon economy, IDC has earmarked R25 billion over the five years to 2015/16 for the development of green industries within the country. The bulk of this funding will be disbursed by the Green Industries SBU.
The objective of the newly created Green Industries SBU is to develop, grow and invest in green industries by focusing on investments that enhance environmental protection and support the reduction of carbon emissions. Investments will further aim to establish and build a local green industry value chain.
Ensuring an enabling regulatory environment is key to meeting the objectives of the Green Industries SBU. The Department of Energy’s (DoE) Renewable Energy Procurement Programme (REPP) was launched in August 2011 to administer five procurement rounds which aim to see a total of 3 625 MW of generation capacity being created by 2013. The Green Industries SBU has played an active role in the REPP process as a development partner and financier.
The SBU has committed R5.2 billion to REPP’s first round of bidding. This represents two concentrated solar projects, four wind projects and six photovoltaic projects. The target date for starting construction on these projects is late 2012. In the second bidding round, after year end, seven projects with a total capacity of 380 MW and funded by the IDC were awarded preferred bidder status. This represents an additional R2.3 billion investment. In total, the Green Industries SBU has committed R7.5 billion worth of investments in green industries, of which R1.5 billion goes directly to local B-BBEE communities.
Status and scope for energy efficiency measures in SA
In partnership with KfW, a German development bank, the Green Industries SBU launched the R500 million Green Energy Efficiency Fund (GEEF) to stimulate investments by local entrepreneurs focusing on energy efficiency of at least 20%, as well as self-use renewable energy projects. During the period under review, R96 million (19%) of the R500 million fund has been allocated, representing eight projects ranging from co-generation to waste-to-energy (bio-gas from abattoir waste), solar water heating and rooftop photovoltaic. Demand-side energy management and energy usage concerns will be addressed by funding energy servicing companies (ESCOs) responsible for the mass roll out of energy efficiency
An impact assessment and monitoring tool will be developed to monitor the energy efficiency and carbon saving on an annual basis.
This is part of technical assistance from KfW and will be executed by the Post Investment Monitoring Department.
The SBU continued to chart new frontiers in the area of solar water heaters (SWH) through innovative funding structures. These combine carbon finance and rebates offered under Eskom’s Integrated Demand Management (IDM) programme. As an example, the IDC provided finance to the Solar Academy of Sub-Saharan Africa (SASSA), a local solar water heater company. SASSA has since rolled out more than 80 000 Low Pressure Solar Water Heaters (LPSWH) and 2 500 High Pressure systems nationally. In total, 200 000 solar water heaters will be installed covering nine sites and creating over 800 jobs.
Solar water heater roll outs of this kind, both small and large scale, have great potential as carbon trading projects either under the Clean Development Mechanism (CDM) – formulated as part of the Kyoto Protocol in 1997 – or through voluntary markets. The CDM allows developed nations to purchase carbon credits through approved renewable energy projects in developing countries to offset their own emissions. The SASSA project will sell carbon credits on the voluntary market through Verified Emission Reductions (VER). To date, SASSA has the only registered CDM project for Low Pressure Solar Water Heaters (LPSWH) in the world. This makes SASSA’s LPSWHs eligible for an additional revenue stream from the carbon credits, thus improving the sustainability of the SASSA business model.
The SBU continues to engage government and other key stakeholders in support of the development of a sustainable market for bio-ethanol. Following the approval of the emission and pollution mitigation strategy by IDC’s Executive Committee in early 2012, the SBU will develop funding options for waste management and recycling technologies.
The SBU will continue exploring opportunities to expand South Africa’s capacity in the green energy arena with projects including renewable energy capacity, fuel-based green energy, energy efficiency, waste management, waste recycling and the expansion of biofuels. Recent budgetary announcements in support of the roll-out of SWHs are a positive market signal for energy efficiency and demand-side management interventions. In evaluating future prospects, increased focus will be on the contribution to local production, broad-based BEE participation and job creation.