SA takes first bold step towards much-anticipated green energy

the Department of Energy’s announcement at the end of 2011 of the preferred bidders to become South Africa’s first Renewable Energy Independent Power Producers (IPPs) marked the start of an exciting new leg of the country’s journey towards a truly green economy. And the second phase of REIPPP bidding recently reinforced the momentum created by that announcement.

While the second phase is still in progress, the mere fact that 53 qualified bids were received in the first-phase bidding – representing about 2 100MW of potential renewable energy capacity – speaks volumes about South Africa’s readiness to enter the much-anticipated era of alternative-power provision.

As a partner to 11 of the successful first-round bidders, Nedbank Capital gained first-hand insight into the quality and depth of commitment in South Africa’s burgeoning renewable-energy sector.

Despite some lingering reservations about the REIPPP initiative’s economic viability and sustainability, all indications are the foundations have been laid on which a robust, green South African economy can be built.

The government, in collaboration with public and private sector stakeholders, is clearly committed to realising its vision of a future South Africa powered significantly by renewable energy, as set out in its blueprint for energy procurement under IRP2010.

But there is far more to such a green economy than the establishment of renewable-energy infrastructure and capacity.

So, the completion of this important phase of the government’s previously much-maligned REFIT programme represents more than just a first step towards so-called green-energy procurement – it has far-reaching long-term social and economic benefits for the country as a whole.

In particular, the confidence local and international stakeholders show in South Africa’s renewable-energy future augurs well for this sector’s future job-creation potential through the localisation of participation in the sector.

This confidence is evident in the vast investments many IPP bidders have made towards meeting local-content requirements.

Global manufacturers, too, have shown their commitment to invest in the country through the establishment of manufacturing facilities for renewable-energy components in South Africa, and numerous other upstream and downstream opportunities.

These manufacturing and infrastructure facilities will require manpower to operate, and that manpower will be sourced from South African communities.

Possibly more important, the vast majority of jobs the renewable-energy programme will create will not be on a short-term contract basis – as is so often the case with infrastructure projects – but will be jobs for life.

That is because, for the first time in South Africa, we see the realisation of a procurement process that extends way beyond a single finite project.

Unlike a typical infrastructure undertaking – like the building of a road or laying of water pipes – the provision of renewable energy has no end date.

In fact, the potential for investment and job creation will grow exponentially for many years to come as the government steps up its stated renewable-energy requirements in terms of its Integrated Resource Plan from the current 4 500MW to 9 600MW over the next 20 years.

After this progression to its logical conclusion, the amount of infrastructure and manufacturing capacity investment this type of government commitment will stimulate could very well see South Africa becoming a renewable-energy hub for Southern African Development Community countries and, eventually, the rest of the African continent.

But for now, the focus needs to be on working together to deliver on the REIPPP vision’s immediate objectives.

The opportunity exists for the South African government to be a significant driver of the country’s renewable-energy future simply by declaring its commitment to procure the remaining 4 500MW in a clearly defined time frame, as was done under REIPPP.

This will not only serve to further raise other stakeholders’ confidence levels, but will help to crystallise prospective energy developers and investors’ thinking and planning to ensure the necessary capacity is in place within the targeted time frames.

Public and industry support plays an equally important role.

While there is most certainly more than enough demand for energy to justify the provision of additional supply, making sure the weighting of renewable-energy sources over fossil fuels steadily increases requires public preference for ”green” energy should never be seen to wane.

Apart from many employment and economic benefits a growing renewable-energy sector presents to the country, immense benefits can be unlocked for South Africans, and our environment, if we are able to lessen our dependence on high-carbon, finite and often unreliable electricity sources, and step boldly into a new era of greener, cleaner and entirely sustainable energy.

The good news is the first confident step towards that future has been taken.

To learn more about these and other critical issues involving the water-energy-food nexus, be sure to attend the second South African Water, Energy and Food Forum at the Sandton Convention Centre on April 18 and 19. For more information go to www.sawef.co.za

Mike Peo is the head of infrastructure, energy and telecoms at Nedbank Capital.