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

1. Creating jobs, increasing GDP & de-risking the South African Economy Davin Chown, Managing DirectorMainstream Renewable Power South Africa

2. 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

3. 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

4. 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

5. 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

6. 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

7. Threats, Challenges and Opportunities for action Argentina’s Upsala Glacier. Receding 200m each year.

8. Threats, Challenges and Opportunities for action • 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)

9. 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????

10. Threats, Challenges and Opportunities for action • 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

11. Threats, Challenges and Opportunities for action • 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

12. Threats, Challenges and Opportunities for action

13. Threats, Challenges and Opportunities for action

14. Threats, Challenges and Opportunities for action • 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. THANK YOU