August 2014

Wind energy conference to focus on community benefit…

… and economic development.As the South African energy sector continues to look for injections of hope, the South African Wind Energy Association’s (SAWEAs) official conference ‘Windaba’ promises to be more popular than ever in its fourth consecutive year.

Already the wind industry is adding significant quantities of desperately needed electricity to the national grid. Now it promises to tackle the issues of rural development, job creation and community development.

While the conference will again focus on the full spectrum of topics important to wind power in South Africa, special attention will be focussed on socio-economic contributions and possibilities. 

The theme for this year’s conference, which will be held in Cape Town in November, is ‘Power2thePeople: Changing lives through wind energy’ and will highlight the significant benefits that developments will bring to neighbouring communities. More than ZAR5 billion has already been earmarked for social economic development from wind farms already in operation and those currently being built. A community trust ownership scheme is also part of the programme and local communities own up to five per cent of their local development in shares. How these financial benefits can be most effectively spent and distributed will form a major part of the debate at Windaba.

SAWEA already has an impressive list of prestigious speakers confirmed and expects the number of delegates to again exceed 500. Participants include the Energy Minister and Windaba patron Ms Tina Jomat-Pettersson, and key representatives of the Independent Power Producers (“IPP”) office administrating the very successful REIPPPP procurement program. There will also be an opportunity for direct engagement on the subject of local content between original equipment manufacturers (OEMs) and representatives from the Department of Trade and Industry, while the team of consultants leading the study into localisation of the wind energy sector in South Africa will also be in attendance.

Energy thought leader Mike Roussow  from Eskom and his colleague Keith Bowen, the utility’s modeller of the Integrated Resource Plan (IRP) will join Cas Coovadia, acting CEO of Business Unity South Africa (BUSA) to debate in the plenary session on ‘aligning the South African wind agenda with the broader policy objectives from Government’. A number of influential international speakers will also contribute, including the Danish Minister for Trade and Development, the Secretary General of the Global Wind Energy Council (GWEC) and the Executive Secretary of REN 21.

An organised visit to one of the Western Cape’s operational wind farms forms part of the agenda for delegates and media representatives. Participants will also contribute to a high level strategic planning session for South Africa’s International Renewable Energy Conference (SAIREC) which will be held for the first time in 2015, incorporating Windaba and that is expected to attract more than five thousand delegates from all over the globe.

For further information on Windaba and the current programme, please visit the Windaba website at www.windaba.co.za.  Booth space and sponsorship opportunities are still available.

New initiative boosts Renewable Energy Technology Transfer between China and Ghana and Zambia with UNDP and Danish Development Assistance as catalysts

A milestone partnership was forged today in Beijing between China, Denmark, Ghana, Zambia and UNDP with the signing of a project agreement for Renewable Energy Technology Transfer.

This project is one of the first examples of triangular South-South cooperation between China and Africa with support from a donor. Its objective is to ensure that Chinese renewable energy technologies are optimally responding to priorities and needs in Ghana and Zambia, and critical skills are also transferred and developed to make the technologies actually work on the ground. This approach will have a tremendous impact on increasing access to energy for the rural poor in the two countries, and for other developing countries interested in such cooperation with China in the future.

The project is part of the UNDP-China agreement for Strengthened Partnership signed in 2010 to promote South-South cooperation through innovative programmes. “UNDP is pleased to embark on this cooperation and is committed to making projects more impactful and more sustainable by providing ‘software’ support with the transfer of renewable energy technologies, rather than just relying on the traditional hardware of equipment or infrastructure,” said Xu Haoliang, UN Assistant Secretary-General, UNDP Director of the Regional Bureau of Asia and Pacific.

The Government of Denmark provided funding for the initial formulation of the project and a contribution of 29.25 million DKK, equivalent of US$ 5.4 million, to UNDP for its implementation in Ghana and Zambia. This implementation will be led by the Government of the two countries with the Ministry of Sciences and Technology as the Chinese counterpart institution, and support from the UNDP offices in Beijing, Accra and Lusaka.

 “It seems quite obvious for Denmark to enter in an innovative partnership like this. Denmark has a serious track record in setting high targets for use of renewable energy and meeting these goals by delivering commercially viable solutions to these challenges,” said Friis Arne Petersen, Ambassador of Denmark to China. “Together with Denmark’s involvement as a long term partner in development aid for Africa and Denmark’s increasing bilateral co-operation with China in a broad sense make it natural for us as a donor to engage in a project like this,” he added.

The project will help with achieving the objective of Sustainable Energy for All (SE4ALL) of the UN Secretary- General Ban Ki-Moon by increasing access to energy through off-grid and community-based electrification. Support will not be in the form of hardware transfer but instead will focus on creating conditions required to make adoption of renewable energy technologies more effective, removing barriers and strengthening local capacities to respond to national priorities and meet local needs.

The ceremony for the signing of the agreement held at the UN compound in Beijing was attended by Mr. Xu Haoliang, Director of UNDP Regional Bureau for Asia and the Pacific, Mr. Friis Arne Petersen, Ambassador of Denmark, Mr. Anani Demuyakor, Ambassador of Ghana, Ms. Getrude Kasuba Mwape, Ambassador of Zambia, Mr. Guo Risheng, Director-General of representative of China’s Ministry of Science and Technology (MOST), Mr. Alain Noudehou, UN Resident Coordinator and UNDP Resident Representative and Mr. Christophe Bahuet, Country Director of UNDP China.

UNDP partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain the kind of growth that improves the quality of life for everyone. On the ground in 177 countries and territories, we offer global perspective and local insight to help empower lives and build resilient nations. www.undp.org
– See more at: http://africanbrains.net/2014/08/20/new-initiative-boosts-renewable-energy-technology-transfer-china-ghana-zambia-undp-danish-development-assistance-catalysts/#sthash.67YQtBKP.dpuf

Will Nene lift SA out of Fragile Five? On these pronouncements, unlikely

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Funny how life works out. During his days as trade unionist, South Africa’s new Finance Minister Nhlanhla Nene reputedly organised the first ever strike in the country’s financial sector. Now he has to deal directly with consequences of a platinum mining strike whose knock-on effect hampers Treasury’s ability to meet commitments without increased borrowing or hiking taxes. Having served for five and a half years as widely admired Pravin Gordhan’s deputy, the initial reaction to Nene’s promotion was muted. He’s positioned as a “technocrat”,  a safe pair of hands.

 My own close-up experience with the new Minister left room for doubt about his assessment of the only people sector capable of lifting SA’s economy out if its self-inflicted funk. But for this capital hungry developing country, what we see from inside means little when compared with perceptions from abroad. South Africa is one of what Morgan Stanley’s James Lord famously dubbed the “Fragile Five” – the most economically vulnerable nations on earth. The key to exiting this dubious collection is clear: “We always look for the rise of new leaders with a pragmatic understanding of economic reform and a mass base to push it through.” Ahead of the Election, Morgan Stanley told its clients: “Among the five, the prospects for reform look particularly fragile in South Africa.”  In this segment from Friday’s CNBC Power Lunch, I asked two experts to assess Nene’s pronouncements in an interview with the channel. From their response, don’t bet on him delivering what the nation’s foreign funders are looking for. – AH

ALEC HOGG: The South African economy has been plagued by weak economic data, which has sparked fears that we’re heading into a recession. Well, whether that’s true or not, we’ll certainly be finding out in the next few minutes. We have the first, I suppose, public pronouncement since his appointment as Finance Minister on the economy, by Nhlanhla Nene, the new Finance Minister. To help us to interpret this, Chris Hart who is Chief Strategist at Investment Solutions and Rowan Williams, who’s Director at Nitrogen Fund Managers are with us in the studio. We’re going to then look at three clips, watch them with us and we’ll ask our two experts to give us some insights. Let’s take a look at the first of these, the reality of where the South African economy is right now. Nhlanhla Nene: this is his view.

MINISTER NHLANHLA NENE: Part of those realities is actually built on that situation because we actually are not fully recovered. We have seen a period of low employment in the country or rather, high unemployment. We also have had slow growth, and we’ve also seen challenges in our mining sector. We’ve also seen issue that relate to the rest of labour unrests, but it’s been a number of those challenges. However, we see all these things. We know what the problems are. How does this government respond to those problems?

BRUCE WHITFIELD: We see what these problems are. It’s ‘how does this government respond to those problems’.

MINISTER NHLANHLA NENE: Look, since the beginning of the previous administration, this government set about to put together the country’s plan, a long-term vision, a practical and workable intervention, so that plan is now in place. It has gone through and was accepted by everyone.

ALEC HOGG: All right, Mr Hart. ‘A period of unemployment’. How long is he talking about…20 years…15 years?

CHRIS HART: Unemployment is structurally high. It’s unusually high and it’s not because of outside factors. It’s because of inside factors. Our stagnation since 2008 is not because of the outside world. That obviously had an effect, but it’s because of internal factors. Whereas we’re trying to deal with poverty, inequality, and unemployment, what’s happening is government policy is dealing with poverty and inequality through the way they tax and apply the tax. In other words, if you earn well, your income is taken down and then we redistribute the actual in the proceeds. In that process, what you’re doing economically is you’re shifting resources to consumption. To deal with unemployment, which is then poverty reduction (not poverty alleviation) you need to be shifting resources to investment. When we look at the economy, we have the growth drivers in households very weak. The government’s finance is a little bit in tatters – that’s weak. The global economy’s cabinet’s not going to be a driver of growth internally in South Africa. The only strong lever you can pull is in fact, to drive investment to get us out of this hole.

ALEC HOGG: That’s really well put there, Chris. From your side Rowan, Bruce asked Nhlanhla Nene what the government’s doing about it and he reverted back to type on the National Development Plan. Now surely, there comes a time when people like you, who manage capital, say ‘look, we don’t actually buy this anymore. We’ve been hearing this. We’ve seen this movie too many times. Let’s rather look elsewhere’?

ROWAN WILLIAMS: You’re absolutely right, and I think what’s been happening from an investment perspective is we obviously go where the opportunities are. Chris was outlining how the government has really been focusing on consumption and fuelling that side of the economy. That’s where investors have been putting capital. If you look at the retail sector – the more consumer driven sector – those have until recently, with the more difficult environment we’re currently in – have performed exceptionally well. Compare that to for example, the sectors that would benefit from increased investments such as the construction sector. It’s had its ups and downs and I think a lot of optimism every time the government and Zuma make a State of the Nation Address but really, no delivery from the government. The capital and the investment opportunities are going where the money has been going. From an investment perspective again, people have disappointed on the construction side, because the capital’s not going there and I don’t think we see the government in the short-term really addressing the issue in terms of their capacity constraints.

ALEC HOGG: You’ve laid the table. You’ve now explained the rational response to it. Let’s get to our next clip because he spoke about current infrastructure plans. Remember, this is what government keeps telling us is going to drive the economy forward and what the impact of the ratings agency downgrading might have on this infrastructure plan. Here’s Finance Minister Nhlanhla Nene.

MINISTER NHLANHLA NENE: I don’t think it’s only talking, as I said. Implementation is actually being stepped up as we speak. If you look at the amount of infrastructure that has been rolled out in the past five years, it exceeds the infrastructure in this country that was rolled out in the past 20 years. That has made a significant and huge impact on the lives of the people. In creating an environment that is conducive for the private sector to come in as well. As you seen also with our energy program, the IPP’s… I keep saying that we’ve seen a tremendous amount of government working with business in something that is of mutual benefit to both the public and the private sector. That is being stepped up and a lot of money has gone into it. Three years going forward, we’re actually looking at close R1tr again, going into that infrastructure.

BRUCE WHITFIELD: However, we get closer Minister, to ratings in downgrades to junk bond status. All of these plans come to nil, don’t they, if we can’t afford to borrow money?

The key graph from the Fragile Five report - The top left quadrant is where you DON'T want to be

Key graph from Fragile Five report – Top left quadrant is where you DON’T want to be – high inflation and big deficits.  SA is there alongside Turkey, India, Brazil and Indonesia

MINISTER NHLANHLA NENE: I don’t think they come to nil. I think they just present us with an opportunity of actually stepping it up. If you look at – as I said earlier – the areas of focus, it doesn’t matter how much our economy grows if we actually haven’t addressed the issues of energy. The economy will choke and therefore, we need to focus on the critical areas without necessarily chasing the numbers. The numbers will actually tell, once we have reached a point where… That’s why the acceleration and completion of Medupi is at the top of our agenda. The proper sequencing also of our entire energy mix, because it’s not only coal. We also need to look at renewable energy and that’s why I’m saying the IPP’s have been a major success. The rollout, unlocking the bottlenecks, roads infrastructure, the ports (as we speak), a number of our parastals have actually put in money where it matters most, and we are seeing significant investment going in that area. The consequences will actually show in due course.

ALEC HOGG: All right, well there’s quite a lot in that, Chris Hart. Let’s start off with the first one. He says we spent more in this economy in the last five years than in the previous 20 years.

CHRIS HART: Well, amounts of money is not particularly useful because when you start to get the financial repression that’s coming through with a lot of the so-called ‘investment-making Gautrain’ being one of them and World Cup stadiums being another: a lot of the investment is dead capital. In other words, you invested in something but if there’s no return on that capital to generate the next lot of investments to draw more money out. We are capital-deficient, so they’re not dealing with a macroeconomic mismatch of trying to invest at a rate much higher than what they are, and with the savings rate much lower than what we are. That macroeconomic mismatch has put us in the Fragile Five. The other problem with the investment is that it’s ‘one for the price of four’ or ‘one for the price of two’, which is a very bad deal. Whether it’s a Gautrain freeway and foot-proving program, which was a ‘one for the price of three’ kind of thing where you get one and pay three times the price of what it should be. Medupi, which is now how many years behind schedule, and we don’t know whether they’ve built a power station or a pipe bomb – one’s not sure in that sense – at huge cost overruns. It doesn’t mean that because we invested… What it means is that you’re actually taking scarce resources and pushing them in areas where it’s not optimal.

ALEC HOGG: Is this new Finance Minister deluded, is he just poorly informed, or does he not understand?

CHRIS HART: I don’t think he’s deluded, but these are problems that I don’t hear being debated.

ALEC HOGG: But he’s telling us everything’s cool. He’s telling us ‘we’re spending money and spending more than we did in the past’.

CHRIS HART: If you look at how South Africa’s underperformed since 2008, we’re making what I call the triple mistakes to deal with the triple problems. Triple mistakes of striking our way into prosperity, regulating our way into prosperity, and taxing our way into prosperity – there are your three mistakes. We cannot be taxing capital formation when you’re capital deficient with huge unemployment. You can’t be taxing investment viability. Investment is going to be…and it has to be properly directed investment – and I do apologise. There’s investment into what I call ‘the wealth-consuming sectors’ and there are ‘the wealth-producing sectors’. You can have teachers, nurses, and policemen, but only if you have manufacturing, mining, and agriculture to pay for it. Those are the wealth-producing sectors and the wealth-consuming sectors.

ALEC HOGG: Rowan, let’s pick up on a lot of those points. Perhaps the one specific there was that the IPP’s have been a great success.

ROWAN WILLIAMS: Yes, he’s clearly talking a political agenda. He’s obviously got to lay out the positive side.

ALEC HOGG: So this is a politician, rather than an economist.

ROWAN WILLIAMS: Yes, at this point. They obviously have to show that they are delivering. There’ve been little pockets of success, but if we look, we still have a major energy crisis in this county so they can’t really have been a success because we’re not filling the hole. Medupi’s been a major failure and if you look at the S & P commentary on the downgrade, the finance pressure that Eskom is putting in terms of government finances is creating some of the issues in terms of the downgrade as well. Obviously, in terms of the economy, it’s starting to have a major impact. This is part of the government’s lack of ability to deliver and these are structural issues, as Chris also mentioned.

ALEC HOGG: Let’s see our last clip, because this talks to the economic outlook for the next ten years. Can we believe the new Finance Minister perhaps a bit more on this one? Watch closely.

MINISTER NHLANHLA NENE: Well, that is explained by the fact that we are… At times, we would like to classify ourselves as a large economy, so those vulnerabilities actually also come from the size of our economy as well as our exposure to the global environment, but I would want to believe that our expedition of the implementation of our National Development Plan, – which I said earlier is not only a plan – it is at the implementation stage. It is key to actually addressing most of our challenges as we move forward.

ALEC HOGG: So we’re back to politics again – implementation of the National Development Plan. It’s a mantra that is being expressed by Zuma. Just one little point there: ‘as a large economy’. South Africa’s not a large economy.

Another telling table from the Fragile Five report showing how heavily SA has benefitted from foreign fund flows

Another telling table from the Fragile Five report showing how much South Africa (ZAR) has benefitted from foreign fund flows – and how much it needs them for economic growth.

CHRIS HART: We’re not a large economy and that’s a mistake. We’re deluded that we’re big fish in a small pond. We should be emulating Mauritius, to try to make ourselves the easiest place to do business, and not the most difficult. We’re not like China where you can put the barriers up but there’s such deep potential behind the barriers that people are prepared to climb those barriers. Our mistake is in the global context.

ALEC HOGG: If we were an American State Chris, do you know that we’d rate 17th?

ROWAN WILLIAMS: Seventeenth? I would not be surprised.

ALEC HOGG: We’re one-sixth the size of Texas.

CHRIS HART: The big thing is in the National Development Plan, one of the things that I think is a good thing because you don’t get growth without investment; they need to raise the investment rate from 19 percent currently, to 30 percent. Nineteen percent will buy you a two-and-a-half to three percent long-term growth rate. Thirty percent can get you to five or six percent or even more, but how do you fund it? You won’t do it unless you get your savings rate up to a similar order. If you don’t that, the macroeconomic mismatch will get wider, our credit ratings will continue to go down, we’ll become more fragile – the most fragile in the fragile five -, and that’s the critical thing: to get the savings rate up, to actually fund the investment rate. That’s critical. I don’t care what political party it is. Anything else is a magic wand.

ALEC HOGG: It sounds, from what Chris has said now – well, unpacking this – that this really is a lot of politics, but what about this mantra: the National Development Plan? It’s almost ‘well, abdicate responsibility for everything because it’s in the National Development Plan’. Is it being implemented, and is it being implemented in its entirety?

ROWAN WILLIAMS: Yes, they’ve been talking about the plan for the last five years. Certainly, for the first part of Zuma’s term and the second part. What we are seeing is an increase in terms of its profile in terms of some of the government commentary, so I think it gives you some optimism that they will now be following through with it. I think to date it has been a plan and is a plan. Some of the aspects in terms of Medupi and the big power plants…I think they were part of the National Development Plan, so they would argue that although they’re not complete, they have started some implementation.

ALEC HOGG: But if we implement as poorly in other areas of the plan as we’ve done – and Medupi is a great example – then my goodness, this 2030 deadline that we’re looking at Chris Hart, might be, maybe in 2060.

CHRIS HART: The National Development Bill failed on one ground. There are two aspects. There’s the economic ground and there’s a social ground. If they tried to lead the National Development Plan with the social side, you won’t have the resources to pay for the social side. It has to be led by the economic side.

ALEC HOGG: Is there a realisation of that?

CHRIS HART: I don’t think so, because the loony left. Remember, this National Development Plan: if you put it into a European context, is a social democrat plan. It’s a centre-left plan. Economics in South Africa is discussed between the centre-left and the loony-left. Fortunately, with the loony-left exiting the government, the government can actually start shifting more to the centre, but that’s part of our problem in the last five years. There hasn’t been a single bit of legislation that has been investment of business-friendly. It’s all been anti-business and anti-investment, which is why we with the problem here.

ALEC HOGG: And then we saw in the State of the Nation Address where President Zuma talks to business. ‘Come, we have to pull together in the same way’. I suppose that if you beat your dog for long enough, one day he’s going to bite you.

ROWAN WILLIAMS: I think government is missing a major opportunity. If you look at the private sector and the business sector, there’s a deep well of skills there. If you look at the success I’ve had not only in South Africa, but on the global stage as well, I think the government could do very well to tap those resources and that skill set, because that’s one of the things we lack – and clearly, the government also lacks – is that ability to deliver.

ALEC HOGG: Business plays nice. Business plays too nice maybe, and then quietly takes its business elsewhere.

ROWAN WILLIAMS: We have seen business voting [unclear 0:16:18.5] and then taking its skills offshore, as you say. That is, I think, a lost opportunity for South Africa.

ALEC HOGG: Yes, but this is really frustrating. A last word from you, Mr Hart.

ROWAN WILLIAMS: That’s a myth. South African business has been leading investment in this country for the last 20/30 years. Two-thirds of all investment that takes place in South Africa, is private sector that you can get out of the Reserve Bank Bulletin for nothing. The government thinks they’re the leading investor. They’re the ones who led us to electricity shortage and rail shortage etcetera because the private sector investment overtook their lack of investment.

ALEC HOGG: Fascinating insights. Thank you for once again being so diplomatic, Chris Hart and Rowan. It’s good to have you in the studio for giving us the investment side. Chris is the Chief Strategist at Investment Solutions and Rowan Williams is the Director at Nitrogen Fund Managers. There were also snippets from an interview that Bruce Whitfield did with the Finance Minister, Nhlanhla Nene.

 

Inspirational – SA is on the forefront of renewable energy internationally, the possibilities are endless

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South Africa is the place to be right now if you are in the renewable energy sector. Renewable energy, is one of the government projects that is being applauded universally. Wind Lab Africa’s, Peter Venn, and Kevin James, the Lead Strategist at GCX Africa joined Alec in CNBC Africa’s Cape Town studio, to discuss the groundbreaking advances in South Africa’s renewable energy space.

The price is right, the resources are plentiful, and Kevin James summed it up perfectly, ‘We’ve gone from zero to hero in terms of the top ten utility renewable energy suppliers in the world… Here’s a massive opportunity to create clean, free energy and create many, many jobs… Let’s look at this as an opportunity to increase GDP growth.’ If you’re looking for a good news story about South Africa that will inspire you – this is it. – LF

ALEC HOGG: Welcome back. Well, there’s no finer place than being in the Cape Town studio when you’re talking about something like renewable energy.  In the studio with us is Peter Venn, who’s with Wind Lab Africa as well as Kevin James, who’s the Lead Strategist at GCX Africa. Peter, just help me out here. Everyone I talk to, from the construction industry to people, who are watching government, say ‘if you want to find a government project that has worked, renewable energy is it’.

PETER VENN: That’s 100 percent correct. It’s been a massive success. I think we’ve seen over R100bn committed to the program over the last three years. The tender requirements from the government are extremely strict, but fair and these projects have been adjudicated appropriately. We’ve seen 64 projects get away to date, so you distributed that risk across private enterprise and as I say, R100bn with about half of it coming from foreign income.

ALEC HOGG: And your business…

PETER VENN: Our business: we’re focused on wind energy and we’ve been very successful with two projects. One of them will be delivering electricity to the grid this year, and one next year – so 230-odd megawatts.

ALEC HOGG: Are these the huge wind….

PETER VENN: Yes, 100-metre towers going ahead, but the price point of view…currently, wind is around the 70 to 80 cents per kwh point, where the estimates for Medupi and Kusile are somewhere around R1.00/R1.50, depending who you’re talking to and because of the delays and the debt requirements due to the delays. So, about half price.

ALEC HOGG: Kevin, as far as you’re concerned, your analysis…this is more of a consulting business.

KEVIN JAMES: A little bit of both. We’re involved with certain utility supplies, such as Wind Lab on the carbon trading side, which is becoming another big topic in South Africa. In addition, we assist large complex organisations with their own energy challenges, and that’s the other side of renewable energy that isn’t really as prominent as the utility side. That’s the distributor/generation side where there are rooftop solar panels on top of carports and decentralised wind turbines. That’s another topic entirely, and that’s being treated very differently from the utility side of things. On the utility side, I agree with Peter and yourself. It’s been a huge success. I think it could have been an even bigger success if they opened it up to more players, they did things slightly differently, and they pulled back a little bit on the fossil fuel coal-powered strategy.

On the distributor/generation, I do believe they could have greater incentives to companies to be able to generate their own electricity on site. I think they could also make those incentives, which do exist under the DTI; a little bit more…create a little more awareness around that.

ALEC HOGG: There’s always room for improvement. If you contrast it with some of the other projects that haven’t even gotten off the ground… We have an infrastructure project, generally, in the country that we’re hoping one day is going to kick into gear. It does appear as though things have gotten going here. There was a plan. It’s happened. There is going to be electricity coming into the grid. What’s different? What happened here that we could learn as a nation?

KEVIN JAMES: I think certainly, the fact that we’re dealing with independent power producers, and I think that really is the big outcome of this process – the efficiency and the ability to produce and implement successful projects at a very cost effective price. Eskom really needs to learn from that because the struggles and the challenges they’re having with Medupi, Kusile, and the proposed Coal 3 is certainly as a result of them not having the proper management skills potentially, or certain other factors coming into the procurement space that wouldn’t ordinarily creep into the independent power producer space. I think that’s definitely one aspect that is a major differentiator and part of the success of the renewable energy program.

ALEC HOGG: Peter, it also appears as though the local content side is working out pretty well.

PETER VENN: Absolutely. On the wind side, we have a threshold of 40 percent of your project and these projects are normally in the region of R2bn to R4bn. Forty percent threshold of local content and a target of 60 percent local content, and you have to meet the target to be part of the tender. You put up massive bid bonds. In our case, normally a bid bond is R14m.

ALEC HOGG: What is that?

PETER VENN: You put up R14m.

ALEC HOGG: Before you can bid.

PETER VENN: Before you can bid.

ALEC HOGG: So it’s only serious players.

PETER VENN: It’s only serious players, but that allows government to know that if you’re successful – and then your bid bond doubles to R28m – which means you’re actually going to get this project away. As I said, it’s a R2bn to R3bn project that one needs to get away at the end of the day. Government has done this appropriately. They used a reverse auction method where the cheapest price gets away and thus, price for wind has come down 42 percent over three years. In the first round to the third round, there was a reduction of 42 percent because of the reverse auction.

ALEC HOGG: What’s likely to happen in the future with prices on renewables?

PETER VENN: They’re going to come down I think, particularly on the solar PV side there’s going to be better and better technology, so we’ll see the prices coming down. In America now, we more or less have parity between wind and solar and we’re going to attract more and more foreign players into the market that will be on the construction/manufacturing side, as well as on the debt side. I think we’re in for another ten to 20 percent price reduction over the next two to three years.

ALEC HOGG: Public/private partnership.

KEVIN JAMES: Well, that certainly does make sense, but if you look at local government – and there are challenges around that –, I think one of the major factors affecting deals happening between the public and the private sector is the Municipal Finance Act. This is a massive issue in terms of being able to go into longer-term contracts. When I say longer, I mean longer than three, years, which is really the threshold under the MFC. We need a longer-term outlook and we need municipalities who require energy to make money, because they sell the energy on to their customers. We need to start engaging with local government and doing those kinds of deals. Actually, entering into public/private partnership.

ALEC HOGG:  It’s almost like we’ve taken the first steps well, but there are obstacles that need to be addressed.

KEVIN JAMES:  There definitely are, we spoke about local content, it is part of the criteria, part of the criteria for accessing funding which is available in the country. Local manufacturing is another thing. We don’t have critical mass in the local market which means prices are…

ALEC HOGG: You’re a gloomy guy, you’re kind of finding problems here and I get the feeling from Peter that he’s looking for the solution.

KEVIN JAMES: No, I think I’m realistic. I think there are a lot of players in the utility renewable energy space that haven’t been successful. They have tried numerous rounds with compliant bids, that’s a huge loss. I’ve certain players come in and be massively disappointed. So, you know Peter and his company Wind Lab have been tremendously successful, and kudos to them.

ALEC HOGG:  But why have they been successful? What have they done differently?

PETER VENN:  I think one thing is that we brought our global experience to the local market, we understand that and also understanding the wind better than anybody else. The normal story I say, is that government mustn’t tell us where the wind is. It’s like telling De Beers where the diamonds are. They must create a framework – a policy framework -, which I believe they’ve done through the RFP that allows us to find the best resources because it’s a combination of wind, finance, grid, and a number of other factors that allow you to create a great wind project and bring the lowest tariff to the company.

ALEC HOGG: Where is the best wind?

PETER VENN: There’s great wind all over the country and I really do mean that. South Africa has some of the best wind resources in the world.

ALEC HOGG: Where are we going to see these windmills come up?

PETER VENN: They’re northern, eastern, and western Cape…there are great projects throughout and the beauty of that is that’s not where our current coal base load is located. We’re distributor/generation far away from the base load, which is good for the electricity grid to give us security of supply.

ALEC HOGG: I would guess Kevin, that solar (we talk about sunny South Africa) would also be an opportunity.

KEVIN JAMES: When it comes to solar or wind, we have massive resources. Forgive me for sounding a little bit gloomy, but it’s just that the potential is so massive in South Africa…

ALEC HOGG: So it frustrates you that we can’t get there quicker.

KEVIN JAMES: Exactly. You see companies with far less resources in Europe for example, making massive gains with renewable energy because of political will and because of appropriate policies coming in. For me, renewable energy, despite its massive success in South Africa – and don’t get me wrong. It has been a massive success. We’ve gone from zero to hero in terms of the top ten utility renewable energy suppliers in the world, but the potential is so massive that to be dead frank, our coal-fired energy strategy, which is very entrenched, is going to take us to a situation where we’re even more carbon-intensive than we are. We’re in the top 15 carbon emitters in the world – probably the highest per unit of GDP in the world – and focus is on us to do something about it. Here’s a massive opportunity to do that.

Here’s a massive opportunity to create clean, free energy and create many, many jobs. Let’s take a look at that. This initial process is creating – in the build – about 20,000 or 35,000 jobs; twenty thousand where it’s actually ongoing jobs. When we talk about the green economy, rather than pay lip service, let’s look at this as an opportunity to turn this economy around. Let’s look at an opportunity to increase GDP growth, take a look at it, and look at it seriously rather than an offset and lip service to a strategy that is more entrenched, if you know what I’m saying.

ALEC HOGG: Very briefly: when is it going to make sense for me to put a solar-powered facility in my home?

PETER VENN: If we talk about distributor generation, which is what we’re referring to, when individuals can own they can put solar panels on their roofs like in Germany. We need a feeding tariff. At the moment, we see hints of something called nett metering. Nett metering is happening I think, in the Nelson Mandela Bay. It’s the first municipality there where companies, individuals, or farms who are producing more than they require in terms of energy can feed into the grid and they can use the grid as a storage capacity to access at times when there is no sunlight or there is no wind, for example. That’s a great first step and that is essential before companies start investing seriously. If we had a feeding tariff like in Germany and other parts – that’s when it makes huge financial sense. That’s actually when the private sector can become big participants in the actual provision of large-scale energy.

ALEC HOGG: We look forward to that. Kevin James and Peter Venn – our guests here in the Cape Town studio. It makes me feel a lot happier. Sometimes we get used to failing…to missteps, but this is one where the missteps have been few and the opportunities are enormous. We are very blessed in South Africa with our natural resources, and not just under the ground. That was Kevin James. He’s the Lead Strategist at GCX Africa and also in the studio was Peter Venn from Wind Lab Africa.

 

Nordex donates wind turbine to help CPUT address climate change

On 7th August, 2014, a Nordex wind turbine was lifted for training purposes at the Cape Peninsula University of Technology (CPUT) campus in Bellville, Cape Town – as part of a cutting-edge development agreement to support renewable energy in South Africa.

This follows a strategic partnership between Nordex, German International Cooperation (GIZ) and CPUT, to support the establishment of the South African Renewable Energy Technology Centre (SARETEC.)

Anne Henschel, Managing Director of Nordex South Africa, said, “Nordex has significant expertise in the renewable energy sector. We are bringing new clean wind technologies to South Africa and also we are investing in the renewable energy education and innovation. This is one of the ways in which we can facilitate knowledge transfer and empowerment.”

“By helping South Africa to expand its use of renewable energies, we are also jointly helping to address the global climate challenge, and create secure jobs for the future.”

In terms of the partnership, Nordex will provide some of the wind turbine components that will be used to train future South African wind turbine service technicians at SARETEC. “The students learn to maintain, operate and install a wind turbine,“ says Howard Fawkes, Project Manager of SARETEC.

“We value the partnership of Nordex to donate the decommissioned wind turbine so that students can study the technological design of the nacelle, drive train and hub,“ concludes Fawkes.

This significant event will be attended by representatives of CPUT’s executive management team including the vice chancellor, Dr Prins Nevhutalu, Anne Henschel, and Howard Fawkes.

In 2013, key players in the renewable energy (RE) sector participated in a signing ceremony, emphasising the importance of RE education and expertise growing from SARETEC’s mission to provide skilled South Africans for RE projects

Cutting RET could bankrupt wind farms, energy companies warn

Government has been told it may face legal action if it cuts target, as it considers options presented by review

Cutting the renewable energy target could bankrupt existing wind farms and lead to legal action against the commonwealth government, energy companies have warned.

The government has long been divided over whether to pare back the scheme or close it down to all new entrants – the two options being considered by its review, headed by the businessman and self-professed climate sceptic Dick Warburton. The review delivered its report on Friday.

Supporters of the “paring back” plan, understood to include environment minister Greg Hunt, have presented the “paring back” option as a compromise plan, which would allow some new investment and existing projects to continue, and would also have a better chance of passing the senate because it could be argued that it was in line with the original intent of the RET policy.

The plan is also supported by fossil fuel energy companies whose profits would be boosted by at least $10bn by the policy, according to new research.

But some parts of the renewable industry says paring back the RET would be almost as devastating to their existing investments – made at a time of clear bipartisan support for a RET targeting 41,000 gigawatt hours of renewable energy by 2020.

The “paring back” option would also devastate the solar PV and solar hot water industries, according to the Solar Council, which has begun a marginal seat campaign to rally support.

The campaign begins with a public meeting in the Liberal’s most marginal seat of Petrie on Thursday night, but local MP Luke Howarth, who was consulted before the meeting date was set, is now not attending. Guardian Australia understands the government has taken a decision that local members should not attend the rallies.

Howarth told the Courier Mail “we’re not slashing the RET at all it’s just plain false” and told Guardian Australia last month he was a big supporter of solar power and renewable energy. “There are obviously mixed feelings about it, but I think renewable energy is a good thing,” he said.

But the Solar Council says even the “paring back” option would cost 8,000 jobs.

And according to Miles George, the chief executive of Infigen, which has invested $1.2bn in Australian renewable projects, even the “mild” option of paring back the RET would drastically reduce the value of the renewable energy certificates that are traded on the market created by the renewable energy target.

“If you lower the target the value of renewable energy certificates will remain very depressed. Investments have been made on price assumptions based on what was bipartisan policy. If you lower the target their value will be enormously depressed. Without some specific policy to protect existing investments, that means it will only take a short time before our debt covenants kick in and we will go bankrupt,” George said.

“Of course we would look at our legal options if that happened, we have a responsibility to our shareholders. That is exactly what happened in Spain when they retrospectively changed policy.”

Pacific Hydro spokesman Andrew Richards said reducing the RET would but renewable businesses “under duress”.

“Reducing the RET will reduce renewable energy certificate prices by between 50% and 60%. Investments have been based on the previous bipartisan policy, so existing assets that have not got long term contracts will be under extreme duress and other assets will be under duress when they have to refinance – that is almost the dictionary definition of sovereign risk.”

Andrew Thomas, chief executive of Acciona, said the impact would depend on the policy detail, but if companies did not have long term power supply contracts “some existing assets could come under extreme pressure and whether companies can withstand that or not is the question”.

The option of closing the scheme to new entrants was widely seen as having the most support in government, including long standing and strong support from the prime minister, but Hunt, is understood to have favoured paring back the RET.

After the Palmer United party said in June that it would not pass any changes to the RET in this term of government, the “paring back” option gained ground as more politically realistic, because it could be argued the original intent of the policy was to deliver 20% of energy from renewables by 2020. Because of falling electricity demand, the RET’s designated 41,000 gigawatt hours will represent closer to 28% if the policy is left unchanged.

Palmer reiterated on Monday that he would not support any changes to the scheme during this parliament.

As well, several modelling exercises – including one done for the review itself – showed that closing the RET to new entrants would not reduce electricity prices, which was the reason given by the prime minister for reviewing the program in the first place.

“We have to accept that in the changed circumstances of today, the renewable energy target is causing pretty significant price pressure in the system and we ought to be an affordable energy superpower … cheap energy ought to be one of our comparative advantages,” Abbott said last year.

But according to sources, as the review process reached its conclusion and began providing briefings to the prime minister’s office, with the “paring back” option appearing to be the most likely, the office intervened to insist on more work on the policy of closing the RET to new entrants.

If it was reduced to a “real 20%” under the “paring back” option it would deliver around 25,000 gigawatt hours. If it was closed to new entrants it would deliver 17,000 gigawatt hours.

Locals are key to a greater energy windfall

Getting surrounding residents to take ownership of wind energy projects is essential to their long-term viability, writes Jo Reeves.

With wind energy projects in South Africa set to generate more than R5 billion in revenue for local socio-economic development over the next 20 years, along with urgently needed, affordable electricity, the broad benefits to the country are clear.

From an environmental angle, dual questions arise: What is the environmental balance of advantages and disadvantages of wind farms, and how can the public engage with emerging wind farm developments to ensure that the final product adds environmental sustainability to the benefits of wind power?

When developed responsibly, the environmental balance of wind farms is undoubtedly positive: many international environmental and conservation groups strongly support wind power. They believe climate change to be the biggest threat to birds and wildlife – a threat that wind turbines are designed to help combat.

Developers work closely with conservation groups and carry out rigorous environmental impact assessments (EIAs) before any work begins. Wind farm developers must often make special arrangements for wildlife in order to be given permission to build their wind farm.

Responsible development is greatly facilitated by the in-depth involvement of local people, usually referred to as interested and affected parties (I&APs). Wind energy projects need the input of their neighbours and communities. This is demonstrated by Denmark and Holland, where many residents have taken part ownership of wind farms and attitudes to wind energy are overwhelmingly positive. In the UK and the US, with communities often less proactively involved in the process, attitudes are more mixed.

There have been cases of lengthy delays and even refused development in some cases. Putting wind turbines in the right place is critical, and community engagement is a key element of achieving this: the most successful developments align their technical and environmental planning processes with public participation programmes, ensuring their proposals are seen as beneficial by all I&APs.

The EIA, which is carried out by the proposed developer, documents key information about the location and its suitability, including wind speeds, geography, species present, and electricity grid connectivity and availability. It also takes into consideration the location of nearby residents and communities and any other I&APs.

Every EIA takes about 15 months and costs about R1 million. It is led by an independent consultant and involves an array of independent experts dealing with factors such as birds, bats, agricultural land, geography, biodiversity, sense of place, heritage, and sound effects.

The final reports can be 500-1 000 pages.

All comments made by I&APs are considered.

If any issues of real concern emerge that cannot be mitigated, the EIA (and therefore the wind farm) is unlikely to be approved.

Projects that pass all of the above do so because they show a high level of sustainability with advantages significantly outweighing challenges.

Officially, public participation forms part of the planning process at every stage in South Africa. From scoping (initial site investigations) to final EIA submission, local people must be kept informed about the programme and progress of the proposal.

Comments must be recorded and summarised, and acted upon where possible.

However, community engagement is about so much more than this fixed and often one-sided dialogue.

Residents and stakeholders have something of real value for the development process: local knowledge. Sharing this knowledge not only informs the planning process and helps to ensure wind farms are built in appropriate locations, but empowers communities.

There are many ways residents can get involved in the development process, including attending public meetings, learning about the project, and meeting the development team.

They can also get involved early in the process to ensure their contribution can shape the project where appropriate, and engage with developers, asking questions and increasing understanding of wind energy technology and the details of the project.

And they can submit comments and share local knowledge, enabling developers to act on relevant information, as well as give information about the area, wildlife sightings, community groups, socio-economic challenges, agriculture and more.

Contributing to the process of nearby wind projects and seeing how their knowledge shapes the EIA is empowering for residents, ensuring they feel engaged with plans for the wind farm and what is happening in their environment.

Wind farm developers in South Africa are choosing to work with locals throughout the planning and development process, and use their local knowledge as well as offer them tangible benefits delivered directly by wind power.

As an example of this, one wind farm completed this year is providing insulation improvements and solar geysers to the homes of economically disadvantaged families in a nearby town. This is providing a real difference to many local lives, based on the results of a two-day dialogue between the developer and residents to determine what is needed most in that area.

The invitation and challenge to local residents is to fully engage in joint problem-solving mode so that the process can be enriched and local people feel a real sense of ownership which will improve their environment.

*Jo Reeves is with the South African Wind Energy Association. For more information visit www.sawea.org.za

** The views expressed here are not necessarily those of Independent Newspapers.

Cape Argus

IEP should unequivocally prioritise renewables, energy expert argues

Describing South Africa’s Integrated Energy Plan (IEP) as lingering in a state of limbo, energy policy expert Richard Worthington said on Friday that any long-term energy plan should “immediately and ambitiously” prioritise the deployment of renewable-energy (RE) technologies in the short term and increase the share of renewable resources in the energy mix as extensively as possible in the long term.

“There is no other decision for which there is such a compelling case, with such a broad range of benefits and no downside.

“Over the long term, we will have to phase out fossil fuel use and, while there are difficult questions regarding the optimal timing and course of such a phase-out, it is clear that the sooner we get started, the less disruptive and costly the transition will be,” he said at the launch of his report titled ‘The Tyranny of Realism: Integrated Energy Planning in South Africa in 2014’ at the University of the Witwatersrand.

The World Wildlife Fund Climate Change Programme manager added that developments complementary to renewables were needed over the medium term and required more detailed planning in the IEP.

These included determining the optimal role for gas as a "bridging energy carrier" in the country’s future energy mix, the development of storage technology industries and the introduction of smart grid technologies.

“These can safely proceed in parallel with growing local RE industries, including sustained and accelerating procurement of RE electricity generation and a programmatic approach to decentralised deployment of RE technologies through community-driven energy access projects,” he outlined.

Among his recommendations, Worthington argued that the IEP report should identify key interventions that could advance the realisation of energy policy objectives, going beyond the specifics of energy sources, carriers and infrastructure.

“For example, in seeking to manage full economic costs over time, decarbonise energy supply and promote regional cooperation and water security, it would make sense to develop a regional biomass energy strategy,” he commented.

While he considered the IEP largely stalled, Department of Energy demand modelling specialist Dr Rebecca Maserumule said in June that the final plan would be published by March next year.

This followed Cabinet’s endorsement of a draft IEP report in July last year, providing the basis for a series of public engagements which began soon thereafter in Johannesburg and was subsequently taken to Cape Town and Durban before closing on December 15.

Engineering News Online reported in June that, while the publication of the IEP was a requirement of the National Energy Act, South Africa had, hitherto, not developed a fully consulted IEP, despite having published an Integrated Resource Plan for electricity, the IRP2010, in early 2011.

Maserumule explained that the IEP would be a multifaceted policy aimed at designing the country’s energy pathway, or energy sector roadmap, to guide the development of energy policies and, where relevant, set the framework for regulations in the energy sector.

Among its objectives was to guide the selection of appropriate technology to meet energy demand, thus also guiding the investment INand development of energy infrastructure in the country.

“Importantly, the plan will take into account existing policies, such as the planned Carbon Tax policy and the National Climate Change Response policy, while being led by overarching plans, such as the National Development Plan and the New Growth Path,” she noted at the time.

President Jacob Zuma placed the “growth-sapping” issue of electricity insecurity at the centre of his post-election State of the Nation Address to lawmakers earlier this year, promising to respond “decisively to the country’s energy constraints to create a conducive environment for growth”.

He argued that a radical transformation of the energy sector was required to develop a sustainable energy mix comprising coal, solar, wind, hydro, gas and nuclear energy.

Video Clip: Energy expert Richard Worthington discusses the role of renewable energy in the Integrated Energy Plan.

 

IDC funding for green projects totals R14bn

Since the inception of the New Growth Path in November 2010 – in which South Africa’s renewable energy ambitions are defined – development finance institution, the Industrial Development Corporation (IDC), has funded 54 green projects in the solar, wind, renewable energy and green technology sectors, committing some R14-billion to these emerging industries.

In a written response to a question by Democratic Alliance Member of Parliament Gordon Mackay last month, Economic Development Minister Ebrahim Patel outlined that 22 of these projects fell within the funding structure of government’s Renewable Energy Independent Power Producer Procurement Programme, receiving R13-billion, of which R4.2-billion had thus far been disbursed.

Thirteen of these projects were located in the Northern Cape and received total IDC funding of R11.2-billion, while five projects in the Eastern Cape received R1.65-billion, three projects in the Western Cape received R436-million and one North West-based project secured funding of R101-million.

The bank had, thus far, also approved R201-million in funding for 18 energy efficiency projects, eight of which were located in Gauteng and were allocated R82.7-million, while five Western Cape-based projects received R14.5-million.

A further two energy efficiency projects in KwaZulu-Natal were allocated R21.8-million, as well as two projects in the North West and the Free State, which received a total of R31.9-million.

One national energy efficiency project had, meanwhile, been awarded R50-million.

Patel noted that projects qualifying under the energy-efficiency category were required to leverage one of several technologies, including rooftop photovoltaics; energy efficient lighting; solar water heaters; energy efficient refrigeration; variable speed drives; load controllers and heat pumps; and energy recovery turbines.

The IDC had, meanwhile, also approved R699.5-million in funding for 14 fuel-based renewable energy projects, five of which were located in KwaZulu-Natal and received R349-million.

A further five Gauteng-based projects received R140-million, while two projects in the Northern Cape were allocated R194-million, one project in the Western Cape received R10-million and a single North West-based project received IDC funding of R6-million.