Independent Power Purchase;
BID Windows One & Two
The Impact of Importing RE
Technology and Opportunities for
Localization
Energy Consultative Meeting:
Portfolio Committee on Energy (PCE)
Thursday 07 June 2012
• Why Local Content?
– The purpose of the local content requirements is to foster a local renewable
energy manufacturing sector and create `green jobs‘
– To promote skills development, tertiary education opportunities and small
business opportunities.
• Local Content Requirement; Windows One and Two
– The local content requirements in Windows One and Two specified
commitment to a minimum local content level of 35% for the initial roll-out of
renewable projects.
– However, with local content defined as the total costs attributed to projects,
this figure is not restricted to key plant components, but a range of products
and services needed when developing large-scale plants.
Value of Local Content Vs. Imported Content
Windows One and Two BID
The total investment of R75
Billion was received during BID
windows One and Two. Only
31% of this investment will go to
local content. The rest will be
imported.
The Imported content extends
to the entire project value chain.
Job Creation Impact
Windows One and Two
The job creation impact is good
during construction phase but
extremely low during
operational phase.
Most jobs to be created under
Windows One and Two will be
temporary jobs and might not
meet the log term goals of
providing sustainable jobs
What happens to the skills
developed during construction
phase? Mechanism for the
utilization of these skills in
further Bidding Rounds required
735 Jobs to be
created during
Operations
4%
Percentage of Megawatts
by Technology
Solar and Wind remains dominant
technologies and offers opportunity
for Local Content. These components
range from primary to secondary
components. They include.
•Trackers,
•Turbine Towers
•Pumps,
•Storage,
•Power Block,
•Mirrors and receivers
•Control System, etc.
However Waste to Energy
Technologies offers most
opportunity for job creation and
local economic development in the
semi-skilled and unskilled segment
of the economy.
Waste to Energy offers the most Significant Opportunity exists
for Job creation and local content because of the level of labour
intensity in the extensive waste to energy value chain.
• Renewable Energy Local Content Baseline in SA
– To date the true manufacturing potential in South Africa remains minimal. Currently, only
2 active Solar PV players who export the majority of their product to Europe.
• Solaire Direct has a 36 MW Solar Module Assembly Facility based in Cape Town South
Africa, which started in January 2009. Whilst Tenesol, who have recently strategically
merged with SunPower, has a Local Assembly Capacity of 800,000 solar panels a year.
Most of the components are still being imported
• To Achieve Increased Local Content Through Manufacturing
–
–
–
–
–
–
–
Brand South Africa Support Mechanism in the context of local content manufacturing
Well coordinated National Strategies for Industrial Development in RE space
Positive Policy Environment
Financial Reassurance
Market Longevity Guarantee
Intelligent Subsidies with limited lifespan
Comprehensive Assessment of the Readiness of the RE Technology Value Chain
Wind Technology Component Value Chain
PV Technology Component Value Chain
• Local Content Requirement used in other counties to facilitate
the creation of a local RE manufacturing industry
Region
China
Period
1996-2008
Brazil
2005-2009
India
2003
Quebec, Canada 2006
Content requirement
• Wind turbines under China's NDRC were required to
source at least 70 percent of content from local
manufacturers;
• Through this policy, Chinese firms have already built up
their technological know-how in renewable energy and
are now competing internationally with large established
wind turbine manufacturers, including Vestas, Siemens
and GE Energy
At least 60 to 90 percent local content for wind
development
Customs and excise duties favour local assembly and
manufacturing. Local production facility for wind turbines
was built in partnership with private sector.
At least 60 percent local content for wind development;
bids with larger amounts of foreign content are scored
higher
•
Socio-Economic Development
– Apart from local production in terms of manufacturing and job creation, it is also
noteworthy that RE project developers are required to implement socio-economic
development (SED) and enterprise development (ED) elements as stipulated by the
bidding process, targeted at local communities in the vicinity of the renewable energy
project
– The process lacks clarity on how these socio-economic development measures should
be implemented.
– There must be an effective mechanism to assist project developers in managing these
funds and ensuring that the development takes place in a sustainable manner.
•
•
SANEDI can develop training curriculum to assist the Energy SETA’s in the skills transfer process
Skills Development and Transfer
– Related skills shortages have been highlighted in the Sector Skills Plans (2011-2016)
recently published by merSETA (manufacturing and engineering related services) and
ewSETA (energy and water services). The requirement for addressing the skills required
for wind turbine service technicians is currently being addressed by merSETA as part of
its mandate.
Estimate of Jobs to be Created from
Renewable Energy Generation in the Short,
Medium and Long Term
The contribution made by a
progressively expanding
green energy generation
segment increases from 14%
of the total in the short
term, or just over 13 500
Jobs, to more than 28% in
the long term, by which time
some 130 000 Employment
Opportunities are, on
average, expected to be
associated with this type of
activity
Source; Green Jobs – Study by DBSA, IDC and
Trade and Industrial Policy Strategies
Job Creation Impact
Windows One and Two BID Process
The job creation impact is good
during construction phase but
extremely low during
operational phase
Most jobs to be created under
Windows One and Two will be
temporary jobs and might not
meet the long term goals of
providing sustainable jobs
735 Jobs created
during Operations
4%
• Observations
– The First and Second Bid Window focused primarily on price minimization
approach rather than job creation, local content and long term
sustainability issues. Its important to note that incremental costs will be
incurred over time and this cost could increase if stringent requirements are
not built in further rounds
– Critical Mass to drive local manufacturing is not possible at this point
because of the diversity of technologies.
– Lack of coordinated government effort to promote manufacturing activities
in the RE space
– Focus on short term benefits.
– No mechanism for coordinated implementation of socio-economic and
enterprise development under the IPP Bidding Rounds.
• Recommendation
– Training Curriculum to be developed by SANEDI in conjunction with the Energy SETA to
ensure that skills that could be developed in SA are not imported by the Project
Developers
– Subsequent Bidding Rounds/Windows should focus less on price and more on jobs and
local manufacturing of RE components.
– Local content requirement in subsequent rounds should be increased to between 60
and 90% local content.
– Subsequent IPP Bidding Rounds should focus more on RE Technologies with significant
Labour Intensive Value Chain. i.e. Rooftop PV and Small Wind could benefit from the
skills and local content of 1st and 2nd Windows. Other labour intensive technologies
such as Landfill, Biomass and Biogas should be promoted.
– DTI and other role players should develop incentive schemes to particularly promote
and facilitate financial investment in Manufacturing.
– Brand South Africa should be positioned as foremost promoter and supplier of RE
component for the rest of Africa