Smart money, good governance drive renewables

4th October 2013

By: Creamer Media Reporter


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By Peter Venn

It may have mostly escaped the spotlight because it was hard slog rather than fireworks, but South Africa’s burgeoning renewable-energy sector has run on minimal sleep over the last three months. The long days were required to finalise the documentation to be submitted in the third bidding window of the Department of Energy’s (DoE’s) Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Each bid in the REIPPPP requires tens of thousands of documents to be submitted within a strict deadline in order to fulfil the DoE’s rigorous requirements and it helps to explain why the REIPPPP is regarded as one of the most sophisticated and stringent programmes of its type in the world.

The innovative multibillion-rand programme was recognised by the Global Infrastructure Leadership Forum when it was named the Green Infrastructure Project of the Year earlier this year.

In addition, based on the success of the REIPPPP, South Africa was invited to join an exclusive group of ten countries that have established a Renewables Club, which aims to boost renewable-energy deployment as an essential element of a sustainable and more prosperous future.

The investment committed by private power producers under the REIPPPP has made South Africa the fastest-growing clean-energy market in the G20, according to the Pew Institute – investment grew from less than $30-million in 2011 to $5.5- billion in 2012.

There should, of course, be no less of a sense of urgency about energy security now that spring is here. Just because we have avoided rolling blackouts during winter does not mean South Africa has not been load-shedding.

When South Africa has such razor-thin ratios of supply and demand, it means we are already load-shedding, whether it is by paying heavy users like smelters to shut down or running massively expensive diesel generators to make up our energy shortfall.

The lights have mostly stayed on in suburbia, but Eskom – and by extension you and I – pay heavy industry such as mines to not use power.

Load-shedding has effectively gone on since the crisis of 2008 through buy-backs. That cost is passed on to taxpayers and all South Africans suffer because it is revenue that cannot be used for, say, infrastructural development. Unserved electricity – the cost to the economy of not having power – is around 100 times costlier than the current cost of generating electricity.

It is recognised that Eskom’s rising power costs are hammering South Africa’s competitiveness.

South Korea, for example, is happy to run its power utility at a loss so that it has power to drive its enviable economy. The South Koreans know that an energy deficit and slow economic growth are evil twins, each driving the other. We know South Africa lost around R50-billion during the 2008 blackouts. This year, the country has seen a decline in demand for power, at a time when we should be capitalising on a weak rand and the country’s position as an African powerhouse and a cornerstone of the Brazil, Russia, India, China and South Africa, or Brics, grouping.

We urgently need power on the grid and, currently, renewables are leading the charge. We have found the REIPPPP process to be meticulous and utterly professional. Exhausting, yes, but exhaustive – just as it should be. The DoE and the National Treasury, which was instrumental in the development and success of the programme, have so far been exemplary.

If all procurement processes were run in this way, expenditure on development would be far more effective.

Whatever its other faults, the South African government must get kudos for propelling the country from a nonentity in renewable energy to tenth in the world in terms of solar photovoltaic energy generation and sixteenth in wind. The REIPPPP has facilitated R74-billion in private investment in renewables in two years. So, while there is still debate about the National Development Plan (NDP), the REIPPPP is one part of the NDP that is a big success already.

It also highlights renewables’ role in South Africa’s energy mix. Nuclear lobbyists argue that only nuclear power can save South Africa. This ignores the fact that South Africa is in energy crisis right now, and that no new nuclear facility will start generating power for another 15 years, even if construction started immediately. Contrast this with wind farms, for example, which can be running in under two years and deliver cheap, efficient power for around 20 years.

Wind has come firmly of age, driven by excellent technology, such as Windlab’s WindScape wind-mapping technology. Renewables can easily comprise 40% of South Africa’s energy mix over the next 30 years, and wind could end up providing about 20%. It is the cheapest form of new energy, with none of the downsides of long lead times and environmental impacts of fossil fuels. The REIPPPP specifies job creation, local ownership, the development of local industries and socioeconomic and enterprise development investment in the tender requirements.

If we in the renewables sector get REIPPPP right, it will deliver real development, while avoiding the pitfalls of enriching a few. It will be a boon for rural economic development and the engineering, construction and transport sectors.

In the South African context, we are seeing a solid blend of equity investors for renew- ables: foreign, local, black economically empowered and rural communities.

Investors have clearly seen renewables’ potential. Warren Buffett has poured $5.4- billion into wind energy in Iowa alone, and Google has invested $110-million. Renewables offer high upfront investment and solid long-term returns, making them the ideal investment for pension funds, for example.

Obviously, such major investment opens broader horizons. In the twenty-first century, one in three Africans still has no electricity. Electrifying the continent will be a big game-changer and we have the workforce and the raw materials to make the continent every success we Afro-optimists imagine it can be. US President Barack Obama’s plans for electrification in Africa will help, but it is a future that will be driven mainly by sound investment, entrepreneurship, good science and solid returns.


Venn is MD of Windlab Africa

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor



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