Southern Africa’s Energy Needs: The Status Quo “Importance, Opportunities and Constraints”

1. Southern Africa’s Energy Needs: The Status Quo“Importance, 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 acceleratesmarket development by addressing: • policy/regulation development and improvement • finance and business models • REEEP is driven by both a top-down and bottom-upapproach 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 accessto 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 5”countries (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 (REEEP’s major donor)

5. An independent Analytical and Synthesis Study confirms the high effectiveness of REEEP programmes • 71% of projects rated highly successfulor 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. market creation replication policy REEEP’s innovative delivery Brazilian Hydro Fund:Has been replicated into an overall RES fund China Wind Energy Roadmap:Planning support for China Wind Market Uganda SWHS Policy:Integrated policy combining buildings and power sector Social Merchant Bank:Innovative End-User financing of small RES Argentina Energy Policy:Study to establishRE targets in Argentina EE Street Lightning in India:Extended from 3 to 10 cities and linked to CDM EE in Municipal Water Supply:Transfer of South Africanexperience to India West Africa Modern Energy Fund:$12m in 76 SME in Ghana, Mali and Senegal Regional Policy for Guanajato:Energy policy for a Mexican state.

7. 45 Gigatonnes 40 35 30 25 20 2005 2010 2015 2020 2025 2030 Reference Scenario 550 Policy Scenario 450 Policy Scenario Renewables and energy efficiency could potentially account for nearly 80% of emission reductions Although there is a strong emphasis on this in theory, practical implementation on the ground is still difficult. 550 450 Policy Policy Scenario Scenario Nuclear 9% CCS 14% Renewables & biofuels 23% Energy efficiency 54% Source: World Energy Outlook 2008, IEA

8. Why Support Renewable Energy? • RE can aid security of supply. • Small-scale RE projects can contribute to a government’s 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.

9. 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.

10. 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)

11. 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.

12. 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

13. 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.

14. 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.

15. 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

16. Renewable Energy Policy Options for Governments in SADC • Legislate RE support mechanisms (Feed-in tariffs, CDM, CER’s and VER’s 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.

17. Examples of Policy Mechanisms (1): Currently Deployed in Sub-Saharan Africa • Establishing standard power purchase agreements (PPA’s) 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.

18. 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.

19. 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.

20. 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 country’s 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.

21. 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.reeep.org/

22. 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.

23. REEEP –SA Contact Details THANK YOU REEEP Regional Secretariat for Southern Africa SANERI Offices Sandton Johannesburg Tel: +27 010 201 4703 E-mail: amanda.luxande@reeep.org www.reeep-sa.org