Creating jobs, increasing GDP & de-risking the South African Economy Davin Chown, Managing Director...

Creating jobs, increasing GDP & de-risking the South African

EconomyDavin Chown, Managing Director

Mainstream Renewable Power South Africa

Presentation Outline• Introduction• Key success areas/ lessons• Threats, challenges and opportunities

for action• 5 Key thematic questions/issues• Policy and governance requirements• Concluding remarks• Recommendations for Green Economy

Plan

Introduction• The SA economy is bearing huge levels of risk given our

fuel mix and energy use patterns– Coal, oil, gas, nuclear : commodity price risk, fossil fuel

risk– Emissions profile: 12th highest globally– Unsustainable carbon intensive energy mix– Motorised transport patterns, fuel consumption & health

costs– Water usage for power– Health burden– Energy poverty

• High Risk = Lower GDP – someone pays the priceAwerbuch et al

Introduction & Context• We need clean energy for sustainable economic and

social development – we don’t have enough• In SA, coal fired power stations located mostly in

Mpumalanga - power is transported to every load centre in South Africa

• Considerable (10%-12%) electrical losses in the system

• Energy poverty– Cost of illegal connections– Health, safety costs (informal settlement fires, gas, paraffin)– Rural economic development & agriculture (dairy, fruit

farmers)– Basic needs in poor communities

Key success areas/ lessons• De-coupling the energy/growth trajectory

(Denmark)– Industrial energy efficiency– Domestic, commercial sectors follow

• Brazil– Bio-fuels as a transition mechanism: investment– Target: no energy from coal by 2020

• China – renewables growth• SA – PV manufacture & export to Germany, Europe

Threats, Challenges and Opportunities for action• Threats– Climate change– Energy security, non-diversification as a bad investment

strategy (all eggs in one basket)– Economic risk: we pay the long term price for wrong

investment strategy– Resource depletion

• A 1,000MW coal fired power station uses 8,935,000 cubic meters (m3) of water per annum

• Will deny 124 000 households basic water• Agriculture vs coal fired power plants

Threats, Challenges and Opportunities for action

Argentina’s Upsala Glacier. Receding 200m each year.


• China, India, Brazil attracting bulk of carbon financing – lost opportunity for SA

• Manufacturing opportunities to service African continental EE and RE uptake lost to other markets (R550m-70bn pa)

• Failure to act on LTMS– clean tech investment lost– cost of mitigation increases (e.g shift in farming,

fisheries etc)

Threats, Challenges and Opportunities for action• System losses – a real opportunity– A 150MW wind-farm in Eastern Cape = saving of more

than 11 million kilowatt hours annually– Sufficient to power up to 8,000 residential households for

one year– Saving on transmission losses could supply homes in areas

deficient in electricity = contribute to supplying the Free Basic Electricity commitments in SA

• Solar, wind, biomass , bio-energy– Local resource that can be harvested– Waste-to-energy????


• Breakdown of Wind Farm costs– 70% wind turbine contract (see pie chart)– 30% site costs (civil, electrical etc)

• Of the 70% wind turbine element, the domestic market could produce:

– Towers 26.3%– Blades 22.2%– Transformer 3.59%– Main Frame 2.8%– Nacelle Housing 1.35%– Bolts 1.04%– Cables 0.96%

• 58.24% of the turbine costs can be localised• Equates to EUR 1.83 Bn Local Manufacturing• All site costs are local (Civils, Electricals)• Equates to EUR 2.7 Bn Local Site Costs• Total Domestic Benefit = EUR 4.5 Bn (57 Bn Rand)• This excludes export potential and new services industries• Significant to boost to the national economy/ASGISA goals


• CSP and Solar – large scale industrialisation– 4 x 125MW units: 5000 construction & 500

operational– 16 x 125MW plants: 20 000 construction & 2000

operational– 80 x 125MW units (400km sq land): 100k

construction & 10 000 operational

• Steel, concrete, glass industries to gear up for local production


• Solar Water Heaters and job creation– technology : easy to replicate– Installers : training– manufacturing facilities– Skills for artisans, boiler-makers, financial

management, entrepreneurs, managers

• Support for governments 1 million SWH campaign

• Provincial markets not yet developed

5 Key thematic questions/issues• How do we……– introduce a portfolio based approach to energy

planning?– diversify the energy mix and diversify country

risk?– secure our share of the global investment into

clean technology, energy?– ensure we localise supply chains &

manufacturing of the full value chain in SA

Policy and governance requirements

• Strengthen LTMS and linkages to other policy mechanisms e.g. IRP2, IPAP

• Enforce energy efficiency & savings targets• Incentivise switch to cleaner technology– Behaviour change through fiscal interventions e.g.

tax policy, measures

• Set aggressive long term targets to stimulate industrialisation, set-up of local manufacturing

Concluding remarks• SA energy system is a risk – all the citizens

carry the ‘risk premium’ (carbon fines, water shortages, health problems, financial burdens)

• Energy efficiency must be mandatory – fines used to fund REFIT, clean tech financing

• Efficiency, industrial & domestic, used to spur on new employment intensive industries such as solar, biomass, wind

Recommendations• Short term (immediate – 18 months)– Develop long term energy vision & plan: 25% renewables

by 2025– Adopt LTMS as guiding document, actions for low carbon

economy– Stimulate energy efficiency incentives & scale up local

manufacturing opportunities e.g. SWH, heat pumps– Allow IPP’s to anchor next wave of power plant

investments. No capex requirement from government– IPAP to drive manufacturing of wind turbines and solar

components in automotive, construction sectors– Rural mini-grids to be expanded– Unblock bureaucratic processes that limit economic

development opportunities

Recommendations• Medium term (18-36 months)– Invest in additional electricity infrastructure:

employment intensive grid expansion for HVDC– Re-tool auto sector for CSP and PV manufacturing

long term– Ensure carbon taxes, incentives reward correct

behaviour e.g. rebates for investments in clean tech– Stimulate clean transport technology, mobility

solutions e.g. deployment of Joule, low carbon transport options such as BRT

– Develop infrastructure for new mobility :opportunities in developing service infrastructure

Recommendations• Long term (36 months onward)– Extend Smart Grids to all connected areas of South

Africa– All energy inefficient buildings to be retrofitted– Transport fleet: mix of mass transit (rail, road)

implemented; high taxation of polluting vehicles– City redesign and configuration to accommodate new

modes of transport and energy use– SA as a manufacturing & generation hub for clean

energy– SA exports clean energy via Southern Eastern and

Western power pools

THANK YOU

Creating jobs, increasing GDP & de-risking the South African Economy Davin Chown, Managing Director...

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