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SA must aspire to a C-lean, job-rich economy

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SA must aspire to a C-lean, job-rich economy

19th June 2009

By: Harald Winkler

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Our country is facing many challenges – creating jobs for the poor, keeping the lights on, battling climate change – and all that in the transition to a new administration and in the midst of the global financial crisis. But in every crisis lurks an opportunity. These challenges may represent several potentials coming together – developments in solar energy, new institutional structures and emerging markets.

South Africa has an opportunity to plan for a low-carbon, job-intensive economy. It will have to be carbon lean (C lean), a radical departure from our carbon-intensive past.

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In the jargon of international climate nego- tiations, it’s about a ‘low-carbon economy and society’. Rather a mouthful, so a specific example might help illustrate the potential. Take the solar energy industry in South Africa – it represents an amazing opportunity to construct our economy in a different way, not least in better links to the second economy. It would be a bright plan – perhaps, something the National Planning Commission should take up.
The renewable-energy feed-in tariff (Refit) approved by the National Energy Regulator of South Africa guarantees a tariff of 210c/kWh for solar thermal electricity. This is 10 to 20 times what bulk tariffs have been in the past and, even if future ones went to 35c, solar would be six times as much.

Refit surely deals with the big economic barrier, namely that renewable-energy technologies typically have high upfront capital costs, even though they save on fuel later. Indeed, they need no fuel of the fossil variety – and the sunshine is free!

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The only question one asks oneself is: Why are the projects not springing up all over the show? Well, project developers say they are in the pipeline, but it will take some time. Certainly, Refit should ease the entry of independent power producers (IPPs) into the solar market. The next set of issues for IPPs is about ease of entry – standard contracts in the form of power purchase agreements, nondiscriminatory access to the grid, and ensuring a smooth path through planning requirements.

Eskom, too, should now be making different calculations on the 100-MW concentrating solar power (CSP) plant near Upington. But it will have to do business in a different way. Eskom only has a long-term role if it moves away from its extreme dependence on coal, stops relying on nuclear as the only alternative, learns to collaborate with others rather than assuming that its ‘natural monopoly’ will last forever, and creates jobs for those losing them in the coal-based electricity sector – and beyond.

A much bigger shift than 100 MW is needed. The challenge of mitigation has been defined as the ‘peak, plateau and decline’ of our greenhouse-gas emissions (see Hot Spot of April 2009). All strategic options in the Long-Term Mitigation Scenarios required at least 27% of electricity generation to come from renewables by 2050. Modelling that option includes 30 000 GW of CSP by 2050 – and there are more aggressive cases model- led too. To put it in a more typical energy planning horizon, by 2025, we need 11,5 GW, or 11 500 MW, of CSP. We need a shift from a project to a programme approach.

The most fundamental change in envisioning a solar energy industry lies in how we think of an industry – indeed, how we think of our economy. We need to move away from the highly monopolistic structure of the past, and its carbon intensity and concentration of assets, to the C-lean and job-rich economy.

This requires thinking of solar industry not as a single 10 000-MW project. Think of it as hundreds of 100-MW projects, thousands of 10-MW projects, or tens of thousands of 1-MW projects. Now many readers will understand that a 1-MW wind turbine is still too big to put into one’s backyard. It is a big machine. Similarly, a CSP plant takes a field of heliostats for one megawatt. If we think of it at the kilowatt scale, we are talking, literally, about 10-million 1-kW interventions.

It should probably be a mix of all these options. If Eskom makes an actual investment decision on the first 100 MW, it could probably follow with several more. IPPs could take on 1-MW- to 10-MW-scale projects. The challenge will be to make it worth the while of small and medium-sized enterprises to replicate this, again and again and again. In that kind of business model, we are not thinking of a large-scale roll-out with one massive utility implementing it all. It is about creating many sustainable microenterprises.

The potential to create new jobs in these industries is huge, and is significantly higher for each megawatt than for traditional plants. It should involve the poor, engaging them in jobs that do not disappear – not only construction, but also polishing mirrors. Fortunately, you don’t have to be a nuclear engineer to work on a CSP plant. The potential for new, decent work is large for semi-skilled workers. And in the process of working, they would gain new skills, developing new human capital.

Eskom might retrain workers who used to work in the coal-fired power plants, and employ additional staff – changing the trend of job losses in the sector. It is all still very much a middle-class vision. We will need to ensure that the employment model is also fundamentally different to what we have had in the past.

At the kilowatt scale, we can think about households. Photovoltaic panels replacing roof shingles is one way of imagining the future – but the unit costs must still come down a long way. If real breakthroughs happen in battery technology, perhaps, electric vehicles can store the electricity generated in your car port of the future. CSP, particularly together with Refit and the possibility of earning carbon credits at scale, has potential to change our grid system sooner.

Development and climate policy is still emerging, and that makes it more flexible than in other domains. Climate is going through a policy development process, and a first draft is due to be delivered later this year. Development is being redefined in a new economic department – the old National Treasury, with a new chief, and the new National Planning Commission (NPC).

This, it seems to me, would be a challenge that the NPC should take up. It is about developing a new industry, and so must speak to the Department of Trade and Industry’s industrial strategy. It must align with the Integrated Resource Plan, whether it is drawn up by an independent entity or by Eskom. Clearly, it must connect with climate policy and the potential to sell carbon credits and earn foreign exchange in the process. Overall, our economy and society must become C lean and job rich.

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