Estimating the potential impact of a greening economy on job creation

Day Month Year

Green Economy SummitSandton, 19 May 2010

Jorge MaiaHead: Research & InformationIndustrial Development Corporation

Introduction to the IDC/DBSA research project

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• High expectations around green jobs:– Rapid growth sector with enormous multi-sectoral potential.– Determinant of future competitiveness.– Economic crisis imperative – one of the main solutions.

Need for greater clarity around job creating potential.

• Existing figures on green jobs:– High variability from one study to another - mainly sector- or technology-specific, no macro-economic estimates.– Often weak reliability / uncertainty about the sources.

Uncertainty = criticism = credibility issues.

• Inform optimal technology mix to meet energy demand, highlighting relative jobs potential:– Not “green jobs” in isolation, but strong employment emphasis/balance when greening the economy.– Policy trade-offs (long-term economic growth, emissions reduction, job creation, sustained competitiveness).– Acknowledge and face the various constraints.– Prioritise sectoral emphasis, sequencing policies over time.

Maximise job creation as we green the SA economy.

Moving away from an overwhelming dependency on fossil fuels (especially coal) for energy generation in SA, towards alternative energy

sources:

• Mining

• Transport (logistics)

• Environmental impact such as pollution levels (air, water, soil etc.)

• Economic linkages (GDP, jobs, investment, etc.)

• Impact on output levels, investment & jobs in coal mining (expansion at slower pace, substitution in the L-T)

• (New investment, jobs and output through alternative energy sectors, incl. const., manufacturing, O&M.)

• Improvement in soil and land quality

• Reduced economic activity in several sectors (e.g. machinery & equipment, chemicals etc.), via linkages, due to lower coal mining production over time

• Improved water and air quality• Increased water availability

• Increased economic activity due to linkages arising from expanding renewable energy sector & introduction of cleaner technologies .

• Potential growth of export sector associated with renewables & cleantech.

• Transportation of cleantech materials• Transport of export coal to ports. • Road usage: reduced congestion &

infrastructural damage.

• Transportation services activity (rail & road) from coal mines to power stations

• Regional shifts i.t.o. investment, GDP, jobs

- ve impact + ve impact

Introduction to the IDC/DBSA research project (cont.)

Estimating the economy-wide impact

Assessing the impact of introducing alternative/renewable energy sources & cleantech

New investment required

Demand for investment related

goods and/or materials during

construction phase

Increased construction activity, as well as higher production activity in

existing/new domestic supplying sectors (GDP, jobs, investment, etc.)

Adverse BoP implications due to increased import demand for

specialised goods not available in SA, particularly in the S-T, gradually +ve

Cleaner energy generation/technology

application and operational phase

Increased economic activity associated with cleaner energy generation /

technology application, with direct impact on job creation

Increased economic activity in associated industries through linkages /

multiplier effects (e.g. business services, components manufacture)

Adoption of “greener”

technologies

4

Export potential

Export potential

Process of determining employment potential

Technological application/resource management (energy generation, energy efficiency, emission control, biodiversity)

Construction Manufacturing Operation & maintenance

Short-term jobs opportunities

Local potential

Export potential

Local potential

Export potential

Local potential

Export potential

Medium-term jobs opportunities

Long-term jobs opportunities

• Technically, wind power has the largest RE generation potential after solar.

• Growth in global wind power generation capacity has been almost exponential.

• Some slowdown since late 2008 (with a few exceptions such as China).

• Significant contribution in more than 70 countries, both industrialised and emerging/ developing.

• Major challenges include: – Not yet competitive, although continuously improving;– Depend on available wind power, backup capacity

needed;– Logistics for construction; – Grid connection.

Case study – wind power generation: Growth and challenges

Cumulative global wind power generation capacity

0

100

200

300

400

Gig

awat

t

Cumulative capacityForecast GWEC scenario

Source: Global Wind Energy Council

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Case study – wind power generation: Potential and challenges

5.6 – 8.0

Average speed m/s

4.6 – 5.6

3.6 – 4.6

0 – 3.6

SA’s wind power potential:• Recorded potential is only moderate at best, though

data is insufficient ;• Potential contribution to power generation in SA may

be significantly higher – improved wind atlas being developed;

• Potential (average speed) directly affects unit cost;• Some areas in east and north Africa seem to have

higher wind power potential than South Africa.

Major challenges facing the domestic wind power industry:

• Transmission infrastructure / grid connection;• Regulatory framework, progress, support ;• Wind energy expected to be competitive by 2020.

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Case study – wind power generation: Opportunities and strengths

General opportunities & strengths include:

• Promising REFIT tariff, ‘free’ power source, little water needed.

• Tested technologies, improving competitiveness.• Commissioning – short period, generating units

separately completed.• Strong investor interest – many proposed projects in

pipeline, involving both global & local players.• Existing manufacturing capacity, demand-driven

expansion potential.• New components manufacturing potential.• African markets.• Support from global institutions (UNDP, GEF, IFC).

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Case study – wind power generation: Potential involvement of local industries

Local industries: Potential capacity to contributeIndustry Product Capacity

Construction & civil engineering Foundation laying, tower erection, housing SufficientManufacturing:

• Steel & metal products• Glass fibre & composites• Electrical equipment• Machinery

Towers, frames, hubs, brakes, other partsRotor blades, nacelle housingGenerators, transformers, cables, other partsShafts, bearings, gears

Very goodGoodGoodLimited

Electricity distribution Grid connection GoodElectricity generation Operation & maintenance GoodLogistics Transporting mega-parts on rough terrain Challenging

• Local manufacturing capacity (see next slide) can be promoted through engagement with established global manufacturers.

• Significant opportunity exists in construction and manufacturing activities targeting other African markets with higher/good wind power potential.

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Case study – wind power generation: Manufacturing wind turbines

Composition of typical 5 MW wind turbine in terms of cost sharePart Purpose % share Material usage

TowerRotor bladesGearboxPower converterTransformerGeneratorMain framePitch systemMain shaftRotor hubNacelle housingBrake systemYaw systemRotor bearingsScrewsCablesAll parts

Provide heightWind force surfaceIncrease rotational speedConvert to alternate currentIncrease voltage to grid'sConverts energy to electricitySupports entire turbine trainAdjusts blade anglesTransfer rotational forceHolds bladesCovers whole drive trainBring turbine to a haltRotates nacelle to face windCarry axesHolds components in placeLink turbine to sub station

29.424.914.5

5.64.03.93.13.02.11.51.51.51.41.41.21.1

100.0

Sections of rolled steel, lattice structure or concreteMoulded glass fibre/carbon & epoxy/pol. compositesSpecial steelVarious metals and other materials (electronics)Various metals and other materials (electronics)Various metals and other materials (electronics)SteelVariousSpecial steelCast ironGlass fibreSteel and compositesSteelSpecial steelMetalCopper and plastics

Source: EWEA 10

Case study – wind power generation: Estimating the job creation potential in SA

Job creation potential: A range of research resultsCountry / area Number of

jobs per MWNote

Global 3.3 Aggregate 400 000 jobs in a 120 GW industryUSA 3.4 Aggregate 85 000 jobs in a 25 GW industryEuropean wind industry 2.5 Aggregate 160 000 jobs in a 64 GW industryEurope (WWF) 0.4 Only operations & maintenanceLiterature averages (AGAMA)

• Manufacturing• Installation• O & M• Other

4.83.20.51.00.1

Derived from a range of sources

South Africa:DME / UNDP / GEFDME

3.1*3.6 - 7.4*

SA Wind Energy Programme, 2003Capacity Building in Renewable Energy, 2004

* Jobs per GWh including indirect jobs11

New capacity created in terms of wind farmsDomestic Other

Africanprojects

Conservative scenario

Optimistic scenario

Short-term 1 x 100MW 3 x 100MW 0Medium-term 4 x 150MW 5 x 200MW 3 x 150MWLong-term 7 x 200MW 9 x 300MW 5 x 150MWAggregate 2 100MW 4 000MW 1 200MW

01,0002,0003,0004,0005,000

O & M Con Man O & M Con Man

Conservative Optimistic

Num

ber o

f job

s Short-term job creationDomesticAfrica

01,0002,0003,0004,0005,000

O & M Con Man O & M Con Man

Conservative Optimistic

Num

ber o

f job

s Medium-term job creationDomesticAfrica

01,0002,0003,0004,0005,000

O & M Con Man O & M Con Man

Conservative Optimistic

Num

ber o

f job

s Long-term job creationDomesticAfrica

• Jobs estimates using employment intensity/MW of 3.2, 1.0 & 0.7 for manufacturing, construction and O&M, respectively.

• Manufacturing numbers based on:– Share of parts in turbine cost (see composition of parts table);– Competitiveness of their domestic industries (high, medium, low);– Increasing penetration of local manufacturing (40%, 60%, 80%).

• South Africa’s future capacity ceiling will determine – Depends on IRP, expectations being only 2 000MW – 2 500MW

Results:

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Case study – wind power generation: Estimating the job creation potential in SA

Number of jobs (conservative scenario)Short-term Medium-term Long-term

O & M 70 490 1 470Construction 120 890 1 890Manufacturing 92 1 081 3 626Totals 282 2 461 6 986

Number of jobs (optimistic scenario)Short-term Medium-term Long-term

O & M 210 910 3 010Construction 360 1 310 3 410Manufacturing 277 1 635 6 027Totals 847 3 855 12 447

Case study – wind power generation: Potential jobs estimates

Concluding remarks

• Substantial, yet preliminary, estimation work undertaken on :– Energy generation: solar PV; solar CSP; wind; hydro (small & large); wave and tidal;

landfills; pyrolysis; biomass combustion; biofuels; and nuclear.– Energy efficiency: solar water heaters; light bulbs; insulation; cleaner stoves.

• Estimation work yet to be undertaken on:– Emissions control.– Biodiversity.

Need for substantial testing with key role players.

Day Month Year

The Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone (011) 269 3000Facsimile (011) 269 2116E-mail callcentre@idc.co.za

Thank You