The Green Economy

Portfolio Committee on Economic Development Tuesday, 08 November 2011

Cape Town

Presentation outline

• Policy basis for greening the economy – NGP and IPAP2

• IDC Green Economy initiatives (overview)

• Key government priorities and IDC work on these

– Solar Water Heaters (SWH)– Biofuels– Renewable Energy Programme

• COP 17

• Top 10 projects

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The Green Economy in the NGP

• The New Growth Path targets 300 000 additional direct jobs by 2020 to green the economy, with 80 000 in manufacturing and the rest in construction, operations and maintenance of new environmentally friendly infrastructure.

• Additional jobs will be created by expanding the existing public employment schemes to protect the environment, as well as in production of biofuels. The IRP2 targets for renewable energy open up major new opportunities for investment and employment in manufacturing new energy technologies as well as in construction.

• The main strategies to achieve these targets are:– Comprehensive support for energy efficiency and renewable energy as required by the

IRP2, including appropriate pricing policies, combined with programmes to encourage the local production of inputs, starting with solar water heaters;

– Public employment and recycling schemes geared to greening the economy;– Stronger programmes, institutions and systems to diffuse new technologies to SMEs

and households;– Greater support for R&D and tertiary education linked to growth potential and

developing South Africa as the higher education hub for the continent; and– Continuing to reduce the cost of and improve access to broadband.

Source: The New Growth Path - The Framework 2

The Green Economy in IPAP2• Key Sectors

– Wind power generation– Photovoltaic power generation– Concentrated solar power generation– Industrial energy efficiency– Water efficiency– Waste management– Biomass and waste management– Energy-efficient vehicles

• Key action programmes– Roll-out of national solar-water-heating programme – manufacturing and installation capacity– Solar and wind energy– Development of an industrial energy-efficiency programme– Strengthen water-efficiency standards– Demonstrate viability of Concentrated Solar Thermal (CST) power as a major renewable energy

generation source– Biomass Energy– Clean and Multi-Energy Stoves– Water- and Energy-Efficient Appliances– Efficient Motors, Variable-Speed Drives, Energy Metering and Control and Electricity Storage

(Batteries and Fuel Cells)– Waste and Waste Water Treatment– The South African Renewables Initiative (SARi)

Source: Industrial Policy Action Plan 2011/12 – 2013/14 – February 2011

IDC Aligned its Sectoral Focus Areas with the NGP and IPAP2

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Green and energy saving

industries

Green and energy saving

industriesBio fuelsBio fuels

Agro- processing

Agro- processing

TourismTourismBusiness process services

Business process services

Craft and filmCraft and film

ICTICT

HealthcareHealthcareMining related technologies Mining related technologies

BiotechnologyBiotechnology

Downstream mineral beneficiation

Downstream mineral beneficiation

MiningMining

Industrial infrastructur

e

Industrial infrastructur

eLogisticsLogistics

Metals fabrication, capital and transport

equipment

Metals fabrication, capital and transport

equipment

Automotives, components, medium

and heavy commercial vehicles

Automotives, components, medium

and heavy commercial vehicles

Plastics and chemicals

Plastics and chemicalsClothing, textiles,

footwear, leather Clothing, textiles, footwear, leather

Forestry, paper & pulp, furniture

Forestry, paper & pulp, furniture

Advanced manufacturing

Advanced manufacturing

Pharmaceuti- cals

Pharmaceuti- cals

Oil and gasOil and gas

Grreen industry components

Grreen industry components

Other funding areas :Venture CapitalFunding to distressed companies

Other funding areas :Venture CapitalFunding to distressed companies

IDC investment in the Green Economy

The IDC’s role in growing the Green Economy would be through investments in:

1. clean production, 2. clean energy, 3. energy efficiency, 4. demand side management interventions, 5. emission and pollution mitigation, 6. waste reduction and 7. bio fuels.

A value chain approach will apply with the emphasis on industrial development (including localization) and job creation.

IDC Green Economy focus areas, cont

Energy efficiency

Heat, Electricity & building efficiency

Cleaner production / Industrial Efficiency

Transport Efficiency

Waste to Energy

Fuel Based Energy

Co-generation

Emission and pollution mitigation

Air pollution control

Water & treatment

Waste Management/ Recycling

Clean stoves

Bio Fuels

Bio Ethanol Bio Diesel

Renewable Energy: Non-Fuel Power

Wind Power Generation

Concentrated Solar Power

Solar Photo Voltaic Power

Services related to renewable

energy & energy efficiency

Local manufacturing

related to renewable

energy & energy efficiency

IDC Green Economy funding

Energy Efficiency:• IDC has created an enabling environment by

securing cheaper funding, with long debt tenures to act as a catalyst in the Energy Efficiency Markets.

• Green Energy Efficiency Fund was launched recently that offers the market debt at concessionary rates with debt tenures up to 15 years by partnering with the German DFI – KfW.

• IDC has structured the repayment of these loans to effectively match the savings profile of the technology installed. eg. On a Roof Top PV the savings over 15 years are equivalent to the debt service repayment and hence the facility of 15 years is then proposed. Hence not an out of pocket expense for the company.

Developing other sectors of the Green Economy through innovation ...

Green Energy Efficiency Fund (GEEF) –

Competitiveness through energy savings

Key government priorities

• Three priority projects

1. Solar water heaters2. Biofuels3. REIPPPP (Renewable Energy Independent Power

Producers Procurement Process)

• Solar water heaters key objectives:– Scale-up financial support for achievement of the target

of a million solar water heaters installed by 2014– Increase local production of components

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Implementation of SWH: the benefits

1. Reducing electricity demand – to ensure better utilisation of current electrical generation plant

2. Providing universal access to modern, affordable and environmentally beneficial SWH services for all households in South Africa on an equitable basis

3. Offset rising electricity cost to residential households through savings on water heating by coal generated electricity

4. Accelerated water heating service delivery, particularly to low income and indigent households utilising renewables

5. Achieving renewable energy targets of 10,000 GWh contained in the ‘White Paper on Renewable Energy’ of 2003

6. Contribute to South African Mitigation Strategy (LTMS) for climate change

7. Creating competitive and sustainable local SWH equipment manufacturing and installation/maintenance base in South Africa

8. Creating sustainable new livelihoods9. Correction of the energy mix, moving water heating from electricity to a

renewable energy

SWH implementation

• Project Steering Committee established (EDD, DOE, DTI, DPE, DST, DPW, Eskom, IDC, NT, DHET)

• Committee discussed the following issues/challenges:– Localisation plans– Even provincial distribution– Youth employment– Funding proposals– Amendments to regulations/regulatory

interventions– Guarantees for installed solar heaters (in

event installers go out of business)– Set-asides for cooperatives (installation)

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Rollout: SWH

• Intervention for low pressure (LP) and high pressure (HP) systems will differ

• LP intervention for low income households ~70% of rollout program - utilise a contractual model

• HP Systems are driven by a demand-side management agenda – Standard Offer Programme employed by DOE in REIPP

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Key issues: SWH cont

• Economies of scale of contract can stimulate localisation and investment interest

• Creation of demand and awareness across all spheres of users and households and beneficiaries

• Measures will be put in place to ensure equitable distribution across the provinces

• FET colleges to train artisans and technicians - qualified plumbers required to support the rollout plan

• Project finance leveraged from private sector including insurance and banking sector

• The contract process ensures the achievement of government’s socio-economic objectives - set asides for cooperatives, localisation

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IDC project example: Solar Water Heaters in rural areas• IDC is proud to be associated with the 1st Low Pressure Solar Water Heater

Programmatic CDM project to be registered worldwide at the UNFCCC.

• The project has resulted in excess of 500 jobs for the unemployed in these impoverished areas, the upliftment of these people lives who for the first time ever are enjoying running hot water on-tap.

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PRIMARY PRODUCT

• Ethanol for petrol blending at refinery or depot

MAIN BY-PRODUCTS

• DDGS (Animal feed component for grain and beet feedstock)

• Electricity (Co-gen for sugarcane feedstock)

POSSIBLE VALUE ADD • CO2

• Pectin from beet pulp• Waxes from bagasse• Ash

LOGISTICS AND PLANT

• Silos for grain

• Road and rail for others

• 1st Generation plant – Fermentation

• 2nd Generation plant – Many technologies being developed

The bio-ethanol value chain

FEEDSTOCK

• Grain Sorghum

• Sugar Cane• Sugar Beet

• Cellulosic materials (2nd

Generation)

AGRICULTURE

• Land

• Water

• Seed

• Fertilizer

• Pesticides

• Herbicides

Biofuels rollout• The Biofuels Industrial Strategy aims to facilitate job creation and

rural development

• Bio-ethanol - Cradock project – IDC partnership in pilot project– Phase 1 - 6000 hectares of grain sorghum and sugar beet (2nd phase) –

DRDLR land– Creation of in excess of 2000 jobs– Phase 2 – double capacity and create up to 20 000 in total

• Implementation issues– Feedstock – Regulations on blend mix published for public comment– Agricultural vs Industrial Water Licenses– Strategic support/subsidy measures for growers and refineries– Fuel levy exemptions for bio-diesel be increased and for bio-ethanol be

introduced– Streamlining licensing for small producers

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Fuel Based Green Energy Waste to energy and Co-generationTo achieve TARGET ZONE:

1. FEEDSTOCK (FUEL) SECURITY!– Feedstock security essential– Feedstock security means quantity,

quality, price– Opportunity for Job creation through

feedstock collection2. PROCESS/INVESTMENT options

– largely driven by FEEDSTOCK QUALITIES, QUANTITIES, TERM and OFFTAKE OPTIONS

– Typical R 15-35 mil per MW– High load factors eg 90 % (base load),

or peaking for gas, hydro

3. High RATIO of OFFTAKE:FEEDSTOCK prices

Project

- Low O&M, so capital can be repaid if Scale sufficient & Offtake/Feedstock price ratio strong

Fuel type Feedstock and Processes

Agricultural Origin

Industrial Origin Municipal Origin ProcessTechnologies

-Livestock manure-Agricultural residues-Animal mortalities-Energy crops

-Wastewater (organic)-Industrial sludge (organic)-Industrial by- products (organic)-Spent beverages-Biosolids

-Sewage sludge-Municipal solid waste (MSW) organic/wet-Food residues

Anaerobic digestion- Methane for power gen (mid-merit) with heat, or as transport fuel

-Alien vegetation removal-Forestry waste-Grown biomass

-Timber mills residue-Sugar mill residues

-Green waste, cuttings- MSW dry & mixed

Combustion for heat for steam turbinesGasification for syngas for engine gensets

-Waste gas (fuel)-Waste gas heat-Solid waste (coal fines dumps)

Cogeneration-steam turbines -direct firing in gas engines

Job creation expectation: High for feedstock collection & management,Low for Co-generation & O&M.

Renewable Energy (RE)

– Exciting time for Renewable Energy development in SA and throughout Africa

– Energy Crisis in South Africa and Region

– Opportunities both in South Africa and throughout the Region – significant investor interest

– SA need is for 50 000MW new generation capacity by 2030

– 19 000 MW to come from renewable technologies

– Launch of South Africa’s REIPPPP

– First round of bid submissions – 4 November 2011

– IDC targets a R14bn investment out of a total of R22bn

IDC investment in Green Economy over next five years

IDC funding possibilities for RE projects

• Project development through participation and cost sharing of bankable feasibility studies

• Equity participation– Minimum: Meaningful 10% with minority protection– Maximum: Not majority, 30%

• BEE and BBBEE funding– Lending to Community Trust or BEE shareholder to invest

in project– Repayment with dividends– Will allow 20-25% cash (trickle dividend) for community

trust / BEE shareholders– Favours community trust concept

• Debt participation– Senior debt with tenure of 15 years post commercial

operation date (COD)– Interest capitalisation during construction– Construction loan

Developing Renewable Energy in South Africa• IDC has pro-actively sourced and developed

projects for Renewable Energy

• Significant pipeline of projects that are bidding under the Renewable Energy Independent Power Purchase Procurement Program (REIPPPP) introduced by by the DOE on a capped tariff basis.

• The Bid structure effectively was on a competitive bidding process whereby a TARIFF CAP was set for each technology. A total of 3 725MW will be available under the program with 5 bidding rounds.

• IDC’s portfolio of projects for round 1 (4 November) of this process was in excess of 800MW and ca R27 Billion project value.

Renewable energy and job creationJob creation estimates as per IDC projects:(Currently under development)

Concentrated Solar PowerPermanent: 0.9 job per MWConstruction 9.8 jobs per MW

WindPermanent: 0.3 job per MWConstruction: 1.4 jobs per MW

PVPermanent: 1 job per MWConstruction: 4 jobs per MW

IDCIDC’’s current pipeline:s current pipeline:•• 5 CSP5 CSP•• 19 Wind19 Wind ca R 62bnca R 62bn•• 18 PV18 PV (total project value)(total project value)

Total pipeline job creation expectation:5 500 jobs

Opportunities for job creation through Manufacturing of components for RE

REIPP Procurement Programme RfP Highlights

• Up to 5 Phased Bid process pending subscription by Bidders of total allocation of 3 725MW spread across renewable energy technologies;

• First phase: submission of bids by 4 November 2011;

• Key qualification criteria: Project Structure, Legal, Land, Financial, Environmental, Technical, Economic Development, Bid Guarantee;

• Proven technology - equipment must have been installed on two previous projects;

• Track record of contractor - must have constructed two similar projects;

• A bid bond of R100k/MW must be provided with the bid, increasing to R200k/MW when the Project is selected as preferred bidder;

• If Qualification is met the bid will be evaluated mainly against Price (70%) and Economic Development (30%);

• Price not to exceed price caps for each technology;

• Economic development matrix with focus on Jobs, local content, community and skills development.

REIPP Procurement Programme RfP Highlights

• Non-negotiable documentation include: PPA, Implementation, Direct and Connection Agreements;

• Bidders must provide confirmation that equity is fully underwritten and preliminary approval for debt;

• Bid must be accompanied by audited Sponsor and Banker Case Financial Model.

Gate Keeping Criteria Wind

Solar Photovoltaic

Concentrated Solar Hydro

‐ Project size (min 1MW)

< 140MW < 75MW <100MW <10MW

‐ Resource measurement

12-month on

site

Satellite data 12-month on site 10-years

Hydrology

Price Caps R1.15/kWh R2.85/kWh R2.85/kWh R1.03/kWh

‐ Environmental Approval

ROD required ROD required ROD required ROD required

‐ Commercial Operation Date (COD) for REPP 1

June 2014 June 2014 June 2015 June 2014

‐ COD for REPP 2-5

Dec 2016 Dec 2016 Dec 2016 Dec 2016

‐ Local content 25% 35% 25% -Storage

35% - No Storage

25%

‐ BEE/BBBEE Ownership

12% - 30% 20% - 40% 10% - 30% 20% - 30%

‐ Community Trust

2.5% - 5.0% 2.5% - 5.0% 2.5% - 5.0% 2.5% - 5.0%

UNFCCC - COP17• Durban 28th November to 09 December 2011• Minister of International Relations and Cooperation is

President of COP

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COP17- Key concepts• Adaptation

– Processes and activities addressing our ability to adapt to the effect of climate change (eg climate variability and extreme weather events) from the past and into the future

• Mitigation– Activities geared towards mitigating the effect of GHG

emissions and reducing global warming through alternative energy methods, reduced reliance on fossil fuels, rollout of new technologies

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COP17- some proposals

• A Green Climate Fund to house the international management, deployment and accountability of long-term funds for developing country support

• A Technology Mechanism to get clean technologies to the right place, at the right time and to best effect

• An Adaptation Framework to boost international cooperation to help developing countries protect themselves from the impacts of climate change

• A Registry where developing countries will detail their voluntary plans to limit greenhouse gas emissions and the support they need to achieve them

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COP17 – CCR Expo

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Conference Area

Sustainable CitiesRoadshow

Kids Drawing Gallery

Local Government exhibits

Local Government exhibits

Local Government exhibits

Local Government exhibits

Top 10 Projects

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PROJECTS DEPARTMENTS

MASS ROLL OUT OF SWHS [RESEARCH, AWARENESS, CREATION/MARKETING; TRAINING AND SKILLS DEVELOPMENT 

SPECIFICALLY TO THE SWH PROGRAM; MASS ROLL OUT OF SWHS AND ENERGY EFFICIENT LIGHTING FOR LOW INCOME 

HOUSEHOLD AND RURAL COMMUNITIES; MASS ROLL OUT OF LOW‐PRESSURE SWHS IN LOW COST HOUSING; ROLL OUT OF 

SWHS; EKURHULENI SOLAR WATER HEATING

& EDD PROJECT TO BE INCLUDED]

Economic Development Department

COMPREHENSIVE COMMUNITY SOLAR ENERGY PROJECT, NORTHERN CAPE Department of EnergyCERES WIND Department of EnergyENERGY EFFICIENT LIGHTING [ETHEKWINI MUNICIPAL STREET LIGHT PILOT PROJECT & MUNICIPAL ENERGY EFFICIENCY AND 

DEMAND SIDE MANAGEMENT (EEDSM) PROGRAMME]Department of Energy

LARGE SCALE PV DEVELOPMENT; SOLAR ENERGY PARK CONCEPT & EKURHULENI SOLAR PV Gauteng Dept of Economic Development

JOULE Department Science and TechnologyNATIONAL CLIMATE INNOVATION CENTRE  Gauteng Economic Development Department

EDUROUTE HOUSE (MZANSI GREEN) Department Science and TechnologyLOW ENERGY MODULAR LOW COST HOUSING & EKURHULENI LOW CARBON LOW COST HOUSING Ekurhuleni/ Department of EnergyFOOD AND ENERGY CENTRE OF EXCELLENCE [HOUSEHOLD FRUIT TREE ESTABLISHMENT IN MASS LOW‐COST HOUSING 

DEVELOPMENTS, FOOD AND ENERGY CENTRE OF EXCELLENCE & COMMERCIAL PRODUCTION OF GOURMET AND MEDICINAL 

MUSHROOMS AND THE INTRODUCTION OF BAMBOO AS A LONG TERM COMMERCIAL CROP & A SOUTH AFRICAN HUMAN 

CAPACITY DEVELOPMENT PROGRAMME IN SUPPORT OF ENVIRONMENTALLY SUSTAINABLE PRACTICES]

DEA/Department of Agriculture

WASTE MANAGEMENT [SUSTAINABLE WASTE MANAGEMENT SERVICES; THE MANAGEMENT AND OPERATION OF GREEN 

WASTE FACILITIES & BUILDING OF A WASTE TO FUEL/ELECTRICITY PLANT THAT TAKES 1 TON OF BIOMASS (ANY WASTE) AND 

TURNS IT INTO 1 BARREL OF DIESEL AND 0.5 MWH OF ELECTRICITY A DAY]

DEA

HYDROGEN BICYCLE Department Science and TechnologyBIOGAS PROJECTS Department of EnergyGREEN CLASSROOM EXHIBIT CONCEPT Indalo

YethuGREEN CAPE Green CapeTHE LIVING BEEHIVE Department Environmental Affairs: SANBI

Siyabonga