Southern Africa

1
Southern Africas Energy Needs The Status
QuoImportance, Opportunities and Constraints

• Ms Amanda Luxande
• REEEP Secretariat for Southern Africa
• International Symposium Rethinking Biomass
  Energy in Southern Africa.
• Bonn, 25 August 2009

2
Presentation Outline

• Introduction and background to REEEP.
• Making a case for the deployment of Renewable
  Energy
• Status Renewable Energy in Southern Africa.
• Opportunities for the Renewable Energy Agenda
• Policy Mechanisms and Options to accelerate the
  uptake of RE in Southern Africa
• Concluding Remarks

3
REEEP Vision and Focus

• REEEP acts as a market facilitator by reducing
  market barriers for renewables and energy
  efficiency systems, with particular focus on
  emerging markets and developing countries
• REEEP accelerates market development by
  addressing
• policy/regulation development and improvement
• finance and business models
• REEEP is driven by both a top-down and bottom-up
  approach to meet the real needs on the ground
• REEEP works with governments as well as with the
  private sector
• REEEP is committed to the achievement of MDGs and
  aims to improve access to sustainable clean
  energy for the poor

4
Well established regional and global networkthat
is growing continuously

• 270 partners including
• 42 governments
• all G7 countries
• 3 plus 5countries (Brazil, SA,
  Mexico)
• states and key agencies from China and India
  (NDRC, IREDA)
• development banks and international organisations
• 3000 friends of REEEP
• Currently funded by 13 governments
• Austria, Australia, Canada, Germany, EU,
  Ireland, Italy, the Netherlands, New Zealand,
  Norway, Spain, US, and UK (REEEPs major donor)

5
An independent Analytical and Synthesis Study
confirms the high effectiveness of REEEP
programmes

• 71 of projects rated highly successful or
  successful v. their stated objective
• REEEP developed good practices in providing
  renewable energy and energy efficient services to
  the poor
• Promotion of ESCO schemes and working with small
  and medium sized businesses are particularly
  effective
• Stakeholder participation is a central feature of
  REEEP projects and an instrumental factor in
  successes
• REEEP is a relatively small player in the
  countries and sectors where it acts, but has
  proportionally high results for the level of
  funds disbursed
• Projects often have the desired catalyst effect
  in market development.

Project success vs. stated objective
Source Consortium Le Groupe-Conseil baastel Itée
Econoler International
6
REEEPs innovative delivery
market creation
replication
policy
Brazilian Hydro FundHas been replicated into
an overall RES fund
China Wind Energy RoadmapPlanning support for
China Wind Market
Uganda SWHS PolicyIntegrated policy combining
buildings and power sector
EE Street Lightning in IndiaExtended from 3 to
10 cities and linked to CDM
Social Merchant BankInnovative End-User
financing of small RES
Argentina Energy PolicyStudy to establishRE
targets in Argentina
West Africa Modern Energy Fund12m in 76 SME
in Ghana, Mali and Senegal
Regional Policy for GuanajatoEnergy policy for
a Mexican state.
EE in Municipal Water SupplyTransfer of South
Africanexperience to India
7
Renewables and energy efficiency could
potentially account for nearly 80 of emission
reductions
Source World Energy Outlook 2008, IEA

• Although there is a strong emphasis on this in
  theory, practical implementation on the ground is
  still difficult.

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Why Support Renewable Energy?

• RE can aid security of supply.
• Small-scale RE projects can contribute to a
  governments agenda i.e. increasing access to
  energy esp. in rural settlements.
• Development of RE sector can create jobs and
  enhance technical expertise within industry.
• RE delivers additional local, regional and global
  environment benefits (Climate Change Challenge).
• Achieve MDG goals through energy access thereby
  contribute to poverty alleviation.

10
Why the slow uptake of RE?

• RE technologies relatively new therefore compete
  with more established conventional technologies.
• No level playing field in treatment of
  conventional vs RE technologies. E.g. fossil
  fuels heavily subsidised by some governments
  therefore costs for RE higher.
• Different operating characteristics of RE e.g.
  intermittency of wind can conflict with more
  predictable output of conventional systems.
• Financial risks associated with RE to investors
  still high esp in the absence of legislated
  support mechanisms such as feed-in tariffs i.e.
  limited guarantee on returns.

11
Global Outlook and Trends on RE

• Deployment of renewables necessary to avoid
  irreversible climate change (acting now would
  cost 1-2 of Global GDP in coming decades this
  will rise to approx. 15-20 of GDP (Stern
  Report).
• RE and EE are playing an important part in the
  stimulus package being implemented by the USA.
• Stimulus packages need to concentrate funds on
  investments in low carbon growth.
• 400 billion spent by governments globally on
  green policies and investments would revive
  global economy and lay foundations for a solid
  future (400 billion is less than 20 of the
  2,259 billion spent on stimulus packages so far,
  Stern Report February 2009)

12
Barriers to the deployment of Renewable Energy in
Southern Africa

• Poor quality of long-term energy planning.
• Insufficient financing and investment to support
  long-term energy planning.
• Poor infrastructure, skills and capacity to
  implement RE programmes in the region.
• Poor regional Co-ordination i.e. regional
  outlook on energy issues lacking therefore
  benefits of regional integration not maximised.

13
Barriers to the deployment of Renewable Energy in
Southern Africa

• RE Market feedback mechanisms not well
  understood.
• Patchy and uneven development across Southern
  Africa and within countries different RE sectors
  fare better than others.
• Low levels of access to modern energy services.
  60 of Southern African population rely on basic
  energy services (biomass).
• Energy intensity and carbon footprint is high due
  to heavy reliance on coal.
• Approx. 80 of energy produced in South Africa is
  coal.
• Most SADC countries source additional energy from
  South Africa.
• Electricity Supply Crisis

14
Status of Renewable Energy in Southern Africa

• Structure of the Southern Africa Economy
• Minerals Energy Complex large intensive users
  (industry)
• Large numbers of unemployed and low income
  citizens.
• All intolerant of high energy prices,
• tariffs for conventional energy too low i.e. cost
  of coal produced electricity too low for RE to
  compete.

15
Status of Renewable Energy in Southern Africa

• The Political Economy of RE in Southern Africa
• Institutional Inertia to RE as it entails a
  fundamental restructuring of the economies of
  Southern Africa.
• weaker SADC vs. strong states therefore,
  national interests prevail as opposed to efforts
  to create regional markets to trade RE and
  skills/technological transfers between SADC
  countries.

16
The Context for Renewable in Southern Africa

• Key challenge Increasing access to energy while
  mitigating against the economic costs of a supply
  crisis
• Opportunities for the following
• Public and private sector investments in energy
  infrastructure in anticipation for economic
  development (estimated at 360 billion ZAR
  committed in 2008)
• Global climate change challenge opportunity for
  creative solutions
• Load-shedding major catalyst in raising the
  profile for alternative options
• Scale-up investments in energy infrastructure
  through securing international partnerships

17
Renewable Energy Policy Options for Governments
in SADC

• Legislate RE support mechanisms (Feed-in tariffs,
  CDM, CERs and VERs etc)
• Stability in investments governments required to
  provide long-term confidence for investments
  (subsidies etc) into RE i.e. long-term energy
  planning crucial.
• Energy Services decisions must be integrated into
  the planning and budgets of all line ministries
  and departments.
• Increased funding into RE Research and
  Development Skills development for and by
  government necessary to ensure there is a
  regional skills base for RE production,
  installation, Operations Management and
  administrations of energy services.
• Aggressive Marketing of Renewable Energy
  Technologies and services Public awareness and
  change of perceptions towards RETS.

18
Examples of Policy Mechanisms (1) Currently
Deployed in Sub-Saharan Africa

• Establishing standard power purchase agreements
  (PPAs) to ensure Green IPP integrated into grid.
• Ensuring long-term electricity generation
  licences and PPAs.
• Developing favourable tariff setting and
  adjustment formula.
• Setting explicit targets for the share of RE in
  the electricity generation mix.
• Enacting explicit legislations to encourage local
  private participation in renewable energy
  development i.e. incentives for industry.
• Providing subsidies to renewable energy-based
  power systems especially those located in rural
  areas.

19
Examples of Policy Mechanisms (2) Currently
Deployed in developed countries.

• Feed-in tariffs (such as in Germany) - guaranteed
  price for output or a premium rate on the market
  price of RE produced.
• Quota mechanisms (UK) - Also known as renewable
  portfolio standards (RPS). Obligation for
  electricity suppliers to take a certain amount of
  sustainable power or for customers to source a
  proportion of their power from renewable energy
  sources.
• Tender Schemes (Ireland) - under a tendering
  scheme, competitive bids are put forward to
  government for individual renewable energy
  projects following a call for tenders launched by
  governments.

20
Examples of Policy Mechanisms (2) Currently
Deployed in developed countries.

• Voluntary mechanisms such as green certificates
  (Netherlands) - such as green certificates
  (Netherlands) green certificates can be used to
  support renewable-based generation. Certificates
  can be traded to consumers who are willing to pay
  the additional cost to support sustainable
  energies.
• Various hybrid schemes that may involve any 2 or
  more mechanisms mentioned above.
• Providing subsidies to renewable energy-based
  power systems especially those located in rural
  areas.
• Traditionally, these mechanisms have been used in
  electricity systems (Power Gen and Distribution)
  however, they can be used to drive capacity
  increases for electricity from renewable energy
  sources.

21
RE Policy Mechanisms Some considerations.

• Descriptions focus on general characteristics per
  mechanism deployed however due to differences in
  markets, energy systems and political intentions
  in different countries specifics in terms of
  implementation therefore, need to be country
  specific.
• Each mechanism has different strengths and
  weaknesses and will likely encourage sustainable
  energy development in a particular manner.
• As assessment of an individual countrys
  capacity markets, skills base, governance
  perhaps necessary prior to the selection of
  appropriate policy mechanisms.
• Extent to which a weakness of a mechanism can
  become a defect primarily depends on the
  interaction between the mechanism deployed and
  other policy efforts e.g. availability of RE
  finance (capital grants or soft loans) and
  broader measures such as those affecting changes
  to energy planning within a country.

22
Concluding Remarks

• Most of these mechanisms are relatively new in
  Southern African markets therefore, evidence of
  performance not definitive.
• Individual countries to select mechanisms
  appropriate for their climates.
• Failure of a particular support mechanism in one
  country does not mean that the actual mechanism
  is defective or is not a viable way of promoting
  sustainable energy practice.
• There is a need for energy ministries in Southern
  Africa to be aware of the different support
  mechanisms available to accelerate the uptake of
  RE in Southern Africa.
• More information available at http//toolkits.reee
  p.org/

23
Concluding Remarks

• International commitments required to support RE
  deployment in developing countries and emerging
  economies.
• Well co-ordinated plans and integrated actions
  amongst relevant stakeholders involved in RE in
  Southern Africa.
• Introduce concepts of productive energy not
  just increasing access to energy i.e. ways to
  generate income from RE.
• Governments ultimately play a crucial role in
  setting the legal, policy, trade and finance
  conditions necessary to encourage the uptake of
  RE and EE.
• Policies are about making choices If governments
  prioritise RE then various actors would find a
  way to finance that agenda.

24
REEEP SA Contact Details

• THANK YOU
• REEEP Regional Secretariat for Southern Africa
• SANERI Offices
• Sandton
• Johannesburg
• Tel [phone]
• E-mail amanda.luxande_at_reeep.org
• www.reeep-sa.org