Renewable Energy at the Local Government Level SALGA/GIZ Small Scale Embedded Generation Workshop 18.04.2013 SALGA NATI

1. Renewable Energy at the Local Government Level SALGA/GIZ Small Scale Embedded Generation Workshop 18.04.2013 SALGA NATIONAL OFFICE PRETORIA

3. Renewable Energy and the Role of Local Government SALGA/GIZ Small Scale Embedded Generation Workshop 18.04.2013 Dr Fritjof Boerstler GIZ-Advisor RE South African Local Government Association (SALGA)

4. Responding to the challenges – The Focal Area on Energy and Climate • Technical cooperation (GIZ): 3 Programmes • South African German Energy Programme (SAGEN) • Climate Support Programme • Skills Development for Green Jobs • Financial cooperation (KfW): 6 Projects in total, for example The Green Energy Efficiency Fund implemented by IDC for EE/RE; SHS in rural areas, co-financing of a 100 MW concentrated solar power plant in the Northern Cape • Scientific and Technological cooperation projects, for example the Enerkey project

5. South African – German Energy Programme (SAGEN) Component 1:Renewable Energy • Objective: The conditions for investments in • RE have improved Component 2:Energy Efficiency • Objective: The conditions for investments in • EE have improved Sub-Component 1.1:Institutional and regulatory capacities for promotion of RE Sub-Component 2.1: Institutional capacity development for EE promotion Sub-Component 1.2: Support to grid and system integration of RE Sub-Component 2.2: Implementation of innovative EE programmes Sub-Component 1.3: Technical expertise for wind and solar Sub-Component 2.3: Development of a market for energy service provides Sub-Component 2.4: Technology dissemination and private sector cooperation

6. SAGEN Component 1: Geographic Focus LG (Districts and Province Level

7. Renewable Energy and the Role of Local Government SALGA/GIZ – An Overview 18.04.2013 Dr Fritjof Boerstler GIZ-Advisor RE South African Local Government Association (SALGA)

8. 1 Focus RE – from a national and local government perspective IPP (REI4P) ? ERA Schedule 4 NEA IRP IEP White Paper NERSA SC-SSEG ERA NGR Blueprint Legislation Vision • Constitution of South Africa (1996):Schedule 4B • Competency in relation to electricity and gas reticulation.

9. Interest by municipalities to engage in RE-activities Baseline 45 District Municipalities 8 Metros 226 Local Municipalities • Push Factors • Energy security • Increase in tariffs Pull Factor Climate Change Compiled by Giljova S., GIZ, source: Municipal Integrated Development Plans (2012-2017)

10. ERA • MFMA • MSA RE-regulatory framework for municipalities „The Stepping Stones“ RE/EE Committee • Energy and Climate Change Strategy/AP State of Energy Report • National Climate Change Response White paper Institutional and Regulatory framework Legal requirements Institutional Set up Strategy Development Data Collection Political Will Compiled by author L

11. Current status on RE The metros’ perspective Compiled by author. Source of information: State of Energy in South African Cities 2011, SEA and AURECON NAS, 2012

12. Overview: Exisiting and Planned RE-Projects Solar PV WtE Wind Mixture

13. Form of Engagements 1. Public Private Partnerships (PPP)

14. PPP BOO + + BOT Concession Leasing Duration of Contracts Management contracts Private Sector Commitment Sub-contracting Technical assistance contract - - Supply and Civil Works Contracts Foundation Determination

15. Example 1: RE PPP – Maintenance Contract

16. Example 1: RE Maintenance Contract City of Johannesburg: Waste to Energy Project (Biogas to Electricity) • Location: Johannesburg Water’s Northern Waste Water Treatment Works near Diepsloot • Operational since Nov 2012 • Upgrading sludge digestion facilities (by-product biogas) • Product of sewage treatment • Aim: to reduce the electricity consumption by replacing the Eskom supplied electricity

17. Example 1: RE Maintenance Contract City of Johannesburg: Waste to Energy Project (Biogas to Electricity) • Power plant is capable of producing 1.1MW of power for the treatment plant, which is 18% of its power requirements. • Plans to ramp up the project to 4MW, which would be 65% of the site’s power requirement, and the plant was designed to suit the upgrade. • Power plant is capable of producing 1.1MW of power for the treatment plant, which is 18% of its power requirements. • Plans to ramp up the project to 4MW, which would be 65% of the site’s power requirement, and the plant was designed to suit the upgrade.

18. Example 1: RE Maintenance Contract City of Johannesburg: Waste to Energy Project Cost of sewage treatment in direct correlation with tariff development

19. Example 1: Public Electricity expenditure (eThekwini)

20. PPP BOO Contract duration Etc Ownership (only at BOO level all other stages imply assets ownership by public entity) in this sense a BOO would be very difficult according to section 14 MFMA Municipal Asset transfer regulation. Not in iterest of munic (e.g. eThekwini Land fill site management) + BOT Concession Leasing Management contracts Private Sector Commitment Sub-contracting Technical assistance contract - Supply and Civil Works Contracts Foundation Commitment , data, strategy, institutional capacity + determination (ERA, section 34)

21. Example 2: RE PPP BOT Contracts

22. Example 2: RE PPP BOT Contracts • Total 32 of registered projects (3 RE-projects) • Standardized PPP provisions and PPP manual • Growing interest by municipalities and private sector to engage in PPP

23. Perceptions about PPP PRO CON PPP Models Example 1/2 • Service can often be delivered more efficient and cheaper by IPP • Less financial/technical risks for munics • Projects seem to be bankable using ESCOM-rates (tariffs) • Support by NT “along the entire way” • Onerous and costly process (minimum of 2 years) • Lack of awareness (process and eligible technologies) • On-grid feed-in specifications not clear • Two legislations to be followed? • Credit risk • Provisions of loans difficult

24. Form of Engagements 2. Power Purchase Agreements

25. PPA Voluntary Market (PPA between willing Buyer/Willing Seller) + Private Sector Commitment Contract between municipality and EG - Foundation Commitment , data, strategy, institutional capacity + determination (ERA, section 34)

26. Example 3: PPA Contracts between municipality and EG

27. Example 3: PPA between Municipality and EG eThekwini – guidelines and forms Registration Form • eThekwini first municipality in SA to establish a formal application process for grid-tied energy generation • Currently 6 EPGs have followed procedure and are in operation PPA

28. Example 3: PPA between Municipality and EG Co-generation eThekwini • NCP Alcohols (Co-generation) • 2.8 MW of electricity is generated, of which 2.4 MW is used up on site with 0,4 MW being sold back to the grid • NCP has signed a PPA with eThekwini (3 years) • ESCOM Megaflex rates used (capital cost low)

29. Perceptions about PPA PRO CON PPA Models Example 3 • Control of SSEG-activity by municipality • Existing projects and layouts • MFMA (Section 33) • Expensive and time consuming tender process • Security of investment not guaranteed • Feed-in tariff (?)

30. PPA Voluntary Market (PPA between willing Buyer/Willing Seller) + Private Sector Commitment Contract between municipality and EG - Foundation Commitment , data, strategy, institutional capacity + determination (ERA, section 34)

31. Example 4: PPA Contracts between willing buyer and willing seller

32. Example 4: PPA between willing buyer + willing seller • Location: premises of the Beefcor at Bronkhorstspruit • 10 year PPA between generator (Bio2Watt) and user (BMW) • 3 MW biogas to electricity plant (60,000 tons of biowaste per annum) • Electricity to be sold at ZAR 0.96/kWh • Wheeling agreements with ESKOM and Tswhane Municipality (40 km distance) Bronkorsspruit Biogas project BBP

33. Example 4: PPA Contracts between willing buyer and willing seller

34. Observations PRO CON Voluntary Market Models Example 4 • Existing (and certified) traders • Existing wheeling agreements • Market driven/demand-based (willing buyer willing seller) • Market restricted by “willing buyers” • Municipality “only” benefits from wheeling charges

35. GIZ/SALGA RE-Activities 2 1 3 4 RE Technology Bioenergy Waste to Energy Biogas to Electricity Solar PV (CSP) All ? PPP/PPA Selection of Pilot Municipalities (Circular) Feasibility Studies Green Tariff LCOE (Green Tariff for solar PV, business models) Workshop 26.04 Green Tariff Cost of Supply Study (Green Tariff) ? Business Models/ Regulatory Framework Safety Standards Impact ??? Grid Integration

36. Contact:Fboerstler@salga.org.za