IDC’s approach in developing the Green Economy Towards a green future …

IDC’s approach in developing the Green EconomyTowards a green future …

Presented by:

Rentia van Tonder

Head: Green Industries SBU

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Contents

– IDC’s alignment with IPAP2 and NGP;

– Sectoral focus areas;

– The Green Economy in the NGP and IPAP2;

– IDC Green Economy focus areas;

– Non-fuel based green energy;

– Energy Efficiency:

– Fuel based green energy

– Conclusion.

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IDC Aligned its Sectoral Focus Areas with the NGP and IPAP2

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Green and energy saving

industries

Green and energy saving

industriesBio fuelsBio fuels

Agro-processing

Agro-processing

TourismTourismBusiness process

servicesBusiness process

services

Craft and filmCraft and film

ICTICT

HealthcareHealthcareMining related technologiesMining related technologies

BiotechnologyBiotechnology

Downstream mineral beneficiation

Downstream mineral beneficiation

MiningMining

Industrial infrastructure

Industrial infrastructure

LogisticsLogistics

Metals fabrication, capital and transport

equipment

Metals fabrication, capital and transport

equipment

Automotives, components, medium and heavy commercial

vehicles

Automotives, components, medium and heavy commercial

vehicles

Plastics and chemicals

Plastics and chemicalsClothing, textiles,

footwear, leatherClothing, textiles, footwear, leather

Forestry, paper & pulp, furniture

Forestry, paper & pulp, furniture

Advanced manufacturing

Advanced manufacturing

Pharmaceuti-cals

Pharmaceuti-cals

Oil and gasOil and gas

Grreen industry components

Grreen industry components

Other funding areas :Venture CapitalFunding to distressed companies

Other funding areas :Venture CapitalFunding to distressed companies

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Sectoral focus areas (continued)

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Sectoral focus areas (continued)

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The Green Economy in the NGP

• The New Growth Path targets 300 000 additional direct jobs by 2020 to green the economy, with 80 000 in manufacturing and the rest in construction, operations and maintenance of new environmentally friendly infrastructure.

• Additional jobs will be created by expanding the existing public employment schemes to protect the environment, as well as in production of biofuels. The IRP2 targets for renewable energy open up major new opportunities for investment and employment in manufacturing new energy technologies as well as in construction.

• The main strategies to achieve these targets are:– Comprehensive support for energy efficiency and renewable energy as required by the IRP2, including

appropriate pricing policies, combined with programmes to encourage the local production of inputs, starting with solar water heaters;

– Public employment and recycling schemes geared to greening the economy;– Stronger programmes, institutions and systems to diffuse new technologies to SMEs and households;– Greater support for R&D and tertiary education linked to growth potential and developing South Africa as the

higher education hub for the continent; and– Continuing to reduce the cost of and improve access to broadband.

Source: The New Growth Path - The Framework

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The Green Economy in IPAP2

• Key Sectors– Wind power generation– Photovoltaic power generation– Concentrated solar power generation– Industrial energy efficiency– Water efficiency– Waste management– Biomass and waste management– Energy-efficient vehicles

• Key action programmes– Roll-out of national solar-water-heating programme – manufacturing and installation capacity– Solar and wind energy– Development of an industrial energy-efficiency programme– Strengthen water-efficiency standards– Demonstrate viability of Concentrated Solar Thermal (CST) power as a major renewable energy generation source– Biomass Energy– Clean and Multi-Energy Stoves– Water- and Energy-Efficient Appliances– Efficient Motors, Variable-Speed Drives, Energy Metering and Control and Electricity Storage (Batteries and Fuel Cells)– Waste and Waste Water Treatment– The South African Renewables Initiative (SARi)

Source: Industrial Policy Action Plan 2011/12 – 2013/14 – February 2011

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IDC focus areas: Green industries

Energy efficiencyEnergy efficiency

Heat, Electricity & building efficiency


Cleaner production / Industrial Efficiency


Transport EfficiencyTransport Efficiency

Waste to Energy Waste to Energy

Fuel Based EnergyFuel Based Energy

Co-generationCo-generation

Emission and pollution mitigationEmission and pollution mitigation

Air pollution controlAir pollution control

Water & treatmentWater & treatment

Waste Management/ Recycling


Clean stovesClean stoves

Bio FuelsBio Fuels

Bio EthanolBio Ethanol Bio DieselBio Diesel

Renewable Energy: Non-Fuel Power Renewable Energy: Non-Fuel Power

Wind Power GenerationWind Power Generation

Concentrated Solar PowerConcentrated Solar Power

Solar Photo Voltaic PowerSolar Photo Voltaic Power

Services related

to renewable

energy & energy

efficiency

Services related

to renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

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Non-fuel based green energy Renewable Energy

– Exciting time for Renewable Energy development in SA and throughout Africa

– Energy Crisis in South Africa and Region

– Opportunities both in South Africa and throughout the Region – significant

investor interest

– SA need is for 50 000MW new generation capacity by 2030

– 19 000 MW to come from renewable technologies

– Launch of South Africa’s REPP

– IDC targets a R14bn investment over 5 years

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IRP2010

33% of new capacity from wind and solar19GW = R500bn

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Wind Other Solar CSP Solar PV Total20112012 4 500 2 000 10 500 17 0002013 6 000 500 10 500 17 0002014 6 000 5 000 10 500 21 5002015 6 000 5 000 10 500 21 5002016 6 000 5 000 10 500 21 500Total R28 500m R2 500m R15 000m R52 500m R98 500m

Investment R'million

IRP2010 - Investment requirement – 5 Years

The total investment up to 2030 = R500bn

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IDC Funding possibilities for RE projects

• Participation and cost sharing of bankable feasibility studies

• Equity participation– Minimum: Meaningful 10% with minority protection

– Maximum: Not majority, 30%

• BEE and BBBEE funding– Lending to Community Trust or BEE shareholder to invest in project

– Repayment with dividends

– Will allow 20-25% cash (trickle dividend) for community trust / BEE shareholders

– Favours community trust concept

• Debt participation– Senior debt with tenure of 15 years post commercial operation date (COD)

– Interest capitalisation during construction

– Construction loan

Target investment of R14bn over 5 years.Projects under consideration: CSP - 4; Wind - 12; PV - 18 ; Hydro - 3

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Current IDC initiatives to respond to demand

Streamline IDC processes;

Resource support – internal REFIT forum;

Panel of technical advisors;

Portfolio approach through partnering with other funders;

Standardised IDC documents

• Senior Debt Term Sheet

• Sub-debt Term Sheet

• Equity Term Sheet

• BBBEE Pref Term Sheet

• BEE Term Sheet

• Trust Deed

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Industry associations

• SAPVIA– Founding member

– NERSA presentations on revised REFIT

– Sponsored launch event

– Elected to Management Board and alternate nominated

– Association has appointed admin manager

• SASTELA– Founding member

– IDC is hosted Special GM

– IDC has Exco Seat

• SAWEA– IDC to become a member

– Association has appointed CEO

• Associations co-operate well especially on liaising with government and legal opinions

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IPP Procurement Programme RfP Highlights

• Up to 5 Phased Bid process pending subscription by Bidders of total allocation of 3 725MW

spread across renewable energy technologies;

• First phase: submission of bids by 4 November 2011;

• Two phased selection process – Qualification and Evaluation;

• Key qualification criteria: Project Structure, Legal, Land, Financial, Environmental, Technical,

Economic Development, Bid Guarantee;

• Proven technology - equipment must have been installed on two previous projects;

• Track record of contractor - must have constructed two similar projects;

• A bid bond of R100k/MW must be provided with the bid, increasing to R200k/MW when the

Project is selected as preferred bidder;

• If Qualification is met the bid will be evaluated mainly against Price (70%) and Economic

Development (30%);

• Price not to exceed price caps for each technology;

• Economic development matrix with focus on Jobs, local content, community and skills

development.

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IPP Procurement Programme RfP Highlights

• Non-negotiable

documentation include:

PPA, Implementation,

Direct and Connection

Agreements;

• Bidders must provide

confirmation that equity is

fully underwritten and

preliminary approval for

debt;

• Bid must be accompanied

by audited Sponsor and

Banker Case Financial

Model.

Gate Keeping

Criteria

Wind

Solar

Photovoltaic

Concentrated

Solar

Hydro

- Project size (min 1MW)

< 140MW < 75MW <100MW <10MW

- Resource measurement

12-month on

site

Satellite data 12-month on site 10-years

Hydrology

Price Caps R1.15/kWh R2.85/kWh R2.85/kWh R1.03/kWh

- Environmental Approval

ROD required ROD required ROD required ROD required

- Commercial Operation Date (COD) for REPP 1

June 2014 June 2014 June 2015 June 2014

- COD for REPP 2-5

Dec 2016 Dec 2016 Dec 2016 Dec 2016

- Local content 25% 35% 25% -Storage

35% - No Storage

25%

- BEE/BBBEE Ownership

12% - 30% 20% - 40% 10% - 30% 20% - 30%

- Community Trust

2.5% - 5.0% 2.5% - 5.0% 2.5% - 5.0% 2.5% - 5.0%

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Bio FuelsBio Fuels






Services related

to renewable

energy & energy

efficiency

Services related

to renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

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Energy Efficiency KfW facility Opportunity: Facilitate the growth in EE

Energy Efficiency scheme: • R 500 million• Interest Rate at prime -3%• Targeting SME‘s with a 20% energy saving.

Support to IDC through implementing agents:• 2 years of Technical Assistance• Resident Team Leader• Pool of 15 international experts and local experts to provide Technical Assitance to IDC (through KfW grant)• GFA & other local consultants

- Energy Audits- Business Plans- Marketing Materials- ESCO business know-how

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Energy Efficiency: Example of SWH project

• Solar Academy of Sub-Saharan Africa– The IDC approved funding for the roll-out of 200 000 solar water

heaters to the South African market. The company has a diversified portfolio of projects including the mass roll out of the low pressure SWH, high pressure SWH and investigating opportunities within the renewable energy space.

– The low pressure SWH project is the first programmatic CDM SWH Carbon Project globally to be registered at the UNFCCC.

– The project has rolled out 60,000 LPSWH units to the impoverished RDP Communities, uplifting their standards of living by providing them with hot water on tap, benefiting at least 240,000 individuals.

– The project supports localisation and in doing so is currently establishing a local manufacturing plant. The manufacturing facility would allow the local content of the product offering and service, creating 535 local job opportunities. The second phase of training will see 10% of all installers being trained to become qualified plumbers.

Sustaining and creating jobs

Building a new industry

Green industry

Gauteng

North West

Eastern Cape

KwaZulu-Natal

Western Cape

Free State

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Bio FuelsBio Fuels






Services related

to renewable

energy & energy

efficiency

Services related

to renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

Local

manufacturing

related to

renewable

energy & energy

efficiency

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Fuel Based Green Energy (including hydro)

To achieve TARGET ZONE:1. FEEDSTOCK (FUEL) SECURITY!

– No Feedstock security, no start!

– Feedstock security means quantity, quality, price, period!

2. PROCESS/INVESTMENT options– largely driven by FEEDSTOCK

QUALITIES, QUANTITIES, TERM and OFFTAKE OPTIONS

– Typical R 15-35 mil per MW

– High load factors eg 90 % (base load), or peaking for gas, hydro

3. High RATIO of OFFTAKE:FEEDSTOCK pricesProject

- Low O&M, so capital can be repaid if Scale sufficient & Offtake/Feedstock price ratio strong

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Fuel type Feedstock and Processes

Agricultural Origin Industrial Origin Municipal Origin ProcessTechnologies

-Livestock manure-Agricultural residues-Animal mortalities-Energy crops

-Wastewater (organic)-Industrial sludge (organic)-Industrial by-products (organic)-Spent beverages-Biosolids

-Sewage sludge-Municipal solid waste (MSW) organic/wet-Food residues

Anaerobic digestion- Methane for power gen (mid-merit) with heat, or as transport fuel

-Alien vegetation removal-Forestry waste-Grown biomass

-Timber mills residue-Sugar mill residues

-Green waste, cuttings- MSW dry & mixed

Combustion for heat for steam turbinesGasification for syngas for engine gensets

-Waste gas (fuel)-Waste gas heat-Solid waste (coal fines dumps)

Cogen-steam turbines -direct firing in gas engines

-Run of river (farmers, communities)

-Dams (DWEA) and irrigation

-Dams Hydro

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Example of Co-generation project

• SA Calcium Carbide– SA Calcium Carbide is the only producer of calcium carbide in Africa,

through the beneficiation of local limestone and coal mineral resources.

– The company uses a large portion of the electricity supplied to the town of Newcastle.

– Apart from the strain put on the electricity supply, recent tariff hikes will result in significantly higher production costs.

– IDC will provide funding to assist with the installation of a co-generation facility, utilising furnace off-gas currently being flared, to reduce the company’s reliance on the national grid for electricity.

– Co-generation promotes energy efficiency and reduces the use of coal in power stations and hence qualifies for carbon emissions reductions.

Green industry KwaZulu-Natal

IDC’s approach in developing the Green Economy Towards a green future …

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