South Africa's emerging renewable-energy industry committed to a minimum local content level of 35% for the initial roll-out of renewables projects, but indicated that steps would be taken to raise that level towards government's aspirational target of 75% over time.

The commitment was made in a new 'Green Economy Accord', which was signed by government, business, labour and organised community groups at a ceremony held in Cape Town on Thursday.

The accord was the fourth to be signed under the aegis of the New Growth Path, which expects green industries to contribute some 300 000 jobs to a bigger goal of adding a total of five-million jobs to the South African economy by 2020. The other accords cover skills development, basic education and the goal to materially raise the level of local procurement. A further accord focusing on enterprise development was likely to be unveiled soon.

Economic Development Minister Ebrahim Patel said the commitment made by the renewables sector to localisation was part of a plan to create at least 50 000 jobs directly in the renewable-energy sector by 2020. The balance of the green jobs would be created in producing green products and components, in pursuing energy efficiency targets, by producing biofuels and through rolling out lower-carbon public and private transport alternatives.

The accord, which was signed in the run up to the seventeenth United Nations Framework Convention on Climate Change Conference of the Parties, or COP 17, starting in Durban on November 28, also followed on the close of the first bidding window for the Department of Energy's (DoE’s) plan to procure 3 725 MW of renewables capacity from independent power producers by 2016.

A total of 53 bids were submitted, representing more than 2 000 MW of potential wind, solar and small hydropower capacity. Should all the capacity bid in the first round be built, an investment of R7-billion would have to be made by local and foreign developers.

Energy Minister Dipuo Peters said the next window would close in March and that there could be five bid windows in total to facilitate the procurement of the first round of renewables projects. South Africa's Integrated Resource Plan for electricity envisaged the roll-out of 17 800 MW of renewables capacity by 2030.

FUNDING POOLS & PRICE PATHS

But government was also conscious of the potential for green industries to raise costs, especially power prices, and displace employment prospects in other sectors. Therefore, it was interrogating various innovative funding mechanisms to lower the cost of green-project funding.

The Industrial Development Corporation would extend up to R25-billion worth of green-economy funding over the coming five years.

In addition, the South African Renewables Initiative, or SARi, would be launched on December 6, alongside COP 17, and Peters indicated it was likely to be supported from the start by funding from the UK, Germany, Norway and possibly Denmark.

SARi would seek to mobilise and channel international public finance into the development of renewables generation capacity in a way that would also deliver economic, social and environmental benefits.

The initiative, which was being driven jointly by the DoE, the Department of Trade and Industry and the National Treasury, was premised on crowding in low-cost loans, insurance products, and other financial instruments "at scale" to lower the cost of capital and reduce the incremental cost of renewables.

However, government was also interrogating the current electricity pricing policy and the regulatory methodology use by the National Energy Regulator of South Africa to set power tariffs in a bid to assess whether there was a way to moderate the current price path, which had the potential to undermine energy-intensive sectors, such as mining, parts of the manufacturing sector, and the country's minerals beneficiation vision.

BIOFUELS

The green-economy accord also had a strong focus on stimulating biofuels and cogeneration in the sugar sector, which had the potential to lower emissions and create agricultural jobs in the provision of crop feedstocks.

Draft mandatory blending regulations were published for public comment recently - a critical step in creating the framework for a domestic biofuels industry.

Government believes the draft regulations send a positive signal to investors regarding securing a biofuels offtake from oil companies at a fair price, and about the creation of a framework for the blending of locally manufactured biofuels into the existing petrol or diesel pool.

But Agriculture, Forestry and Fisheries Minister Tina Joemat-Petterson stressed that the feedstock should not be derived from existing land under cultivation, as this could drive up food prices. Government had also restricted the feedstocks to sorghum, sugar cane, sugar beet and jatropha.

Work was also under way with the sugar industry to ensure that the power-generation potential of the sector was realised.

The accord was described by Patel as one of the most comprehensive social partnerships on the green economy internationally.

It was signed by the Ministers of Energy, Economic Development, Environmental Affairs, Finance, Trade and Industry, Labour, Public Enterprises, Transport, Rural Development and Land Reform and Agriculture, Forestry and Fisheries.

Business signatories included several representative bodies, as well as renewables industry associations, while all three of the country’s main labour federations, representing more than two-million workers, also initialled the document.