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19 March 2009

Programme director
Chairperson of Portfolio Committee on Minerals and Energy, Honourable Dr Nqaba Ngcobo
Honourable ministers
Honourable premiers
Honourable Executive Mayors, Mayors and Councillors
Senior government officials
Captains of Renewable Energy Industry
Distinguished guests
Ladies and gentlemen

It is indeed a great pleasure and honour for me to be part of this historic occasion that aims to review the White Paper on Renewable Energy which was approved by Cabinet back in 2003. We are gathered here, for the first time, to talk to each other and not past each other. What we are coming here to present as government is not a panacea but an effort to ensure that we work together to build this important renewable energy effort.

Let me take this opportunity to express my heartfelt gratitude to you, our international and local experts, for setting aside time – in your busy schedules - to be with us to share your experiences and be part of this eventful process.

This gathering comes at the end of a number of events that are highlighting the attainment of certain milestones in our new democracy. It occurs at the end of excess capacity in electricity supply as well as the end of the political term of the current administration.

Global context of renewable energy

Globally, the renewable energy industry is projected to grow rapidly in the next few years. The International Energy Agency (IEA) estimates that 15 to 20 percent of total energy supply contribution will be from renewable energy by 2026. The focus on renewable energy development is underpinned by three key drivers. Firstly, their potential role in contributing to national energy security; secondly, the desire to reduce vulnerability to the effects of climate change through sustainable development, as well as the job creation potential of this new market.

Investment in renewable energy sources for electricity, heating and in bio-fuels has increased considerably. Studies indicated that an estimated 71 billion dollars was invested in new renewable energy capacity world-wide in 2007, up from 55 billion dollars in 2006 and 40 billion dollars in 2005.

Climate change/low carbon economy

The global village is facing the challenge of harnessing the earth's resources effectively and efficiently. There is still a vast dependence on fossil fuels, and the use of this energy source is common to both developing and developed countries. These fossil fuels are also finite commodities. It is well known that the excessive burning of fossil fuels does not go without a price as they release large amounts of carbon dioxide into the atmosphere. This, therefore, has propelled us to position 14 in the world in terms of the world's biggest emitters of greenhouse gases.

Accordingly, it is our intention to make due contribution to the global effort to mitigate greenhouse gas emissions. In the recent Climate Change Summit, we reaffirmed our commitment to playing a pivotal role in the fight against climate change. We are indeed duty bound to be pioneers in defining the future response of our nation to the growing global climate change challenge.

National policy context

The White Paper on Energy Policy of 1998 (The Energy White Paper) which is the overarching national policy on energy matters, provides policy direction for all energy carriers, including renewable energy sources. The policy provides for the government to:
* provide focused support for the development, demonstration and implementation of renewable energy sources for both small and large-scale applications
* support renewable energy technologies, for application in specific markets on the basis of researched priorities
* promote the development and implementation of appropriate standards and develop guidelines and codes of practice for the correct use of renewable energy technologies.

This process was followed by the release of the White Paper on Renewable Energy in 2003 which spells out details of the targets and renewable policy options for the sector. In addition to that, a number of enabling legislations have been promulgated, but of particular relevance to this gathering are the Electricity Regulation Act (2006) and the Energy Act (2008). These two pieces of legislation and resultant regulations are designed to enable us to position the renewable energy sector on a high pedestal.

Targets

A target of 10 000 Gigawatt Hour (GWh) derived from renewable energy has been set in the Renewable Energy White Paper. We need to reflect on the relevance of the target in the light of existing developments, nationally, regionally and internationally.

Capacity

We are however faced with many capacity challenges in our quest to deal with these challenges. We have limited home grown renewable energy technology. We have for an example publicly announced that we have budgeted for 100 000 solar water heaters to be installed in our country. However, we can only be able domestically to produce about 10 000 solar water heaters. This untenable situation invariable compels us to import these solar water heaters.

This has far reaching consequences for both the creation of jobs and the discord in our balance of payment situation.

It is these difficulties that have created a situation where we have achieved only four percent of our target which was set by our energy white paper.

Financial resources are also another impediment to the successful implementation of the renewable energy projects. This lack of financial capacity also negatively affects our investment in technology. We were only able to receive R5 million for the financial year 2007/08, R9 million for 2008/09. This has increased to R10 million for the 2009/10 financial year. National Treasury has given an amount of R55 million over and above the R10 million only for the 2009/10 financial year.

This gathering, today and tomorrow, is a major step that we are taking in our quest to build an enduring enabling environment towards the full and uninterruptible renewable energy supply industry in our country.

Procurement

Having reviewed the environment in which the targets are set

This process is spear-headed by the National Energy Regulator of South Africa (NERSA) under its tariffs setting mandate. The Renewable Energy Feed in Tariff (REFIT) approach is currently under development and will be implemented in the near future.

For us in the renewable energy space, and due to the lack of experience in the procurement of the renewable energy generated electricity, the tendering system will be used to further qualify bidders in terms of other non tariff related issues.

Progress to date

The work on renewable energy that has been done to date has been primarily geared at creating levelling the playing field for the renewable energy sector to take off. In the view of the ruling party, we have resolved to enhancing attaining the renewable energy targets advocating for diversifying energy sources away from coal, and putting a price on the emission of carbon dioxide and other greenhouse gasses.

You may recall that our Minister of Finance, Trevor Manuel, in his 2008 budget speech announced a precedent setting of a levy on the sale of electricity generated from non-renewable resources. This was our first step towards monetising carbon emissions.

In addition the minister has also implored South African companies to take advantage of CDM established and announced a favourable tax treatment for companies that derive income from the sale of emission reductions.

Therefore in addition to what the energy sector is doing to improve the access to renewable energy, there are fiscal instruments too proposed by National Treasury.

Accordingly, in terms of CDM we are relatively doing well compared to many countries on the African continent. However, we are still lagging far behind many countries in both the developed and the developing world. We shall, therefore not rest until we succeed with these ground breaking initiatives. In our quest to achieve success we are working very closely with the most Scandinavian countries such as Norway, Denmark as well as Finland. We are looking at how we can pool our resources together to build local manufacturing capacity as we reduce our carbon footprint. All of these initiatives we are doing as retain and continue with our involvement in relevant international bodies that are active in this area such as the Carbon Leadership Sequestration Forum.

Challenges

We acknowledge that there are several challenges hampering the development and implementation of renewable energy technologies. The current constraints in the renewable energy sector resulting from inadequate legal and regulatory framework, funding instrument(s), low electricity tariffs, lack of technical capacity of stakeholders to reach set targets pose risks to increasing diversification of energy.

Ministerial directives to the summit in line with the summit resolutions

Noting the peculiarities of the South African economy, I would like to see the summit make certain pronouncements on the approach to be taken in the medium to long term in terms of the approach towards renewable energy.

Legislative, regulatory and policy environment

There is a need for a decisive and progressive policy, legislative and regulatory frameworks that are based on sustainable development principles in order to enhance the renewable energy industry. In line with the foregoing, it is also pivotal to have a clear and unambiguous policy and legislative alignment and harmonisation between the three spheres of government.

Financial resources

The existing state financial support mechanisms and institutions should be harmonised and expanded. There is also a need to introduce innovative approaches that will enhance the establishment of sustainable structures and financing mechanisms for delivering renewable energy.

In addition to the introduction of innovative approaches there is a need to introduce a reasonable tariff framework to facilitate investment in renewable energy. In fact, and the recently promulgated Electricity Pricing Policy is a crucial building block in the eventual success of the programme.

Low tariffs are not going to help in our quest to attract prospective investors into this sector. It is quite interesting considering the fact that we are human to realise that we do not object when we pay less for coal and forget the reality that we may have to pay more in order to realise the full potential of the renewable energy industry. These are the dynamics that are currently being considered by NERSA (The regulator).

Technological issues

We will need to strengthen collaboration between government and research institutes, such as the CSIR, in order to accelerate research and development in renewable energy technologies. We do not have sufficient local manufacturing facilities and this impedes the development of this sector. It is essential that we scale up our manufacturing capacity, in collaboration with our international partners.

We should also develop and implement appropriate standards, guidelines and codes of practice for the appropriate and safe usage of renewable energy technologies. We should also facilitate the deployment and trade of local renewable energy technologies and thereby provide access to modern energy carriers and create sustainable jobs.

Institutional arrangements

The department as the custodian of energy will continue with the overall responsibility for renewable energy policy in South Africa. The department will co-ordinate all fragmented energy related activities within sector and will continuously play the leading role in the establishment of the appropriate enabling environment.

Multilateral considerations

There must also be a clear and unambiguous policy and legislative alignment and harmonisation with multilateral renewable energy and climate change imperatives, to which South Africa subscribes, such as G8+5 and United Nations Framework Convention on Climate Change (UNFCCC).

We are going to continue our work in regional bodies such as WESTCOR (a company formed by five utilities from SADC countries to address the issues of electricity shortage and the sustainability in the region). The issue of bringing Inga project on stream has subsequently been delayed by the war that broke out in the Eastern Democratic Republic of Congo (DRC). We are, however, going to continue with our initiative in this regard, for we are convinced that the Inga project carries with it the possibility to supply our region, and ultimately our continent, with a source of uninterrupted renewable energy supply.

Evaluation and monitoring

Lastly I want to advice you all that going forward it will be critical that we have clear baseline and benchmarks that will be used when we set national renewable energy targets. There is also a need to conduct regular evaluation and monitoring to ensure to ensure that targets are achieved and review policy frameworks to enhance its effectiveness periodically.

Awareness raising, capacity building and education

We are facing the challenge of eradicating the myth that renewable energy is not reliable compared to other sources. This challenges us to undertake vigorous campaigns to promote knowledge of renewable energy options and thereby increase their usage. We should also craft ways of enhancing stakeholder's management and communication in the sector to derive maximum benefits out of their deployment.

One of the biggest challenges that we are facing in our country relates to the relationship, perceived or real, between solar energy and the people living in the rural areas of our country. A wrong perception has developed that poor quality solar projects are being used for our people living in the rural areas. This can not be allowed to be the case. We cannot be continuing or in this case to be seen to be continuing, with the apartheid patterns of providing separate development of solar projects to our people based in the rural areas. Our people, whether they are in the urban or rural areas should be encouraged to use solar projects in a non-discriminatory way. This is the essence of democracy in our country.

Charting the Renewable Energy Policy going forward

Distinguished guests, when we review renewable energy policy in the next two days it is imperative that we also set strict timetables for the finalisation of the Renewable Energy Policy review.

We need to open the debate on the current renewable energy target and propose realistic targets taking into account all the above enablers. I would be indeed pleased if you could confirm if the targets for the period 2013 and 2018 could be set in the range of six to nine percent and nine to fifteen percent of the current capacity respectively.

I would also like to see how environmental polluters can be forced to remedy the impact of their pollution through investment in the implementation of the renewable energy technologies. This is more like the national "Kyoto Protocol." In this regard I will work closely with my colleague Ministers of Environmental Affairs and Tourism, Finance and Trade and Industry as well as Science and Technology.

Closing

From my side, we will stop at nothing to make sure that we promote and implement renewable energy projects. We will continue to engage all interested and affected stakeholders. We will make it a point that we respond positively and promptly to the market so as to enhance the growth of renewable energy sector.

It is important for us to make sure that renewables contribute towards the new generation capacity, assist government in its efforts to manage energy demand.

It would be an injustice Programme Director, if I don't remind fellow South Africans to use their energy sparingly and efficiently.

I would like to extend my appreciation to all national, regional and international partners for showing interest in the South Africa renewable energy industry.

I wish you a successful summit and am looking forward to the informative resolutions.

I thank you.

Issued by: Department of Minerals and Energy
19 March 2009