Government rhetoric about state involvement in promoting green industries is finally translating into action. The trade and industry department’s new industrial policy action plan (IPAP) for 2011 to 2014 lays heavy emphasis on the state’s role in developing renewable energy sectors.
Launched this week, the plan sets targets of creating 43 000 direct jobs and 86 000 indirect jobs in the next three years.
The department claims that the previous policy, IPAP 2, led to investment commitments of R13-billion in the automotive sector, which supports 24 000 jobs. The department says the clothing textile competitive programme and the production incentive had been taken up by 106 and 94 companies respectively, protecting sectors that are struggling against cheap overseas imports.
In business process outsourcing, investments totalling R40-million have resulted in 950 new jobs, it says.
New sectors singled out for state support in the plan are boatbuilding and oil and gas servicing. But the key focus appears to be green industries in general and renewable energy in particular, which are cited as being among the fastest-growing industries worldwide, with an annual growth rate of 30% or more.
“The green economy is a major new thrust for the South African economy, which presents multiple opportunities to create jobs and value-adding industries,” according to the IPAP document.
“Success in the large-scale development of renewables could realise direct economic benefits of up to 50 000 jobs and $55-billion in green investment in the next 15 years,” it adds, which could also lead to R11,2-billion in exports.
Renewables initiative
Key to unlocking green industry potential will be financing. The introduction of an intra-governmental renewables initiative is designed to develop a financing strategy to fund renewable development. This is likely to involve international donors who will provide the “necessary concessionary finance and risk guarantee instruments”.
The plan focuses on several key green industries, including those generating solar, wind and biomass energy, and manufacturers of energy efficient vehicles [see box below]. It also reveals specific plans to target industrial energy efficiency, water efficiency and waste management.
The greater detail provided on the development of green industries is likely to be welcomed by proponents of green energy. But much of the development of solar and wind energy projects will depend on the feed-in tariff to pay for the power generated from renewable sources and the determination of standardised power purchase agreements (PPAs) for independent power producers.
The national energy regulator recently published revised feed-in tariffs, but this has caused investor uncertainty as the tariffs for some technologies have been cut substantially. Also, no PPAs have been finalised and it is not clear what type of entity will buy electricity from Âindependent producers.
The department of energy has said that it will establish an independent systems and market operator to perform this function, but whether it will be independent of Eskom has yet to be determined. It is also not clear how the IPAP lines up with the recently finalised integrated resource plan, which maps out South Africa’s 20-year electricity supply policy.
Tim Harris, the Democratic Alliance’s trade and industry spokesperson, noted that the successful implementation of the plan relied heavily on the seamless coordination of several government entities and departments, as outlined in the IPAP.
The department of trade and industry itself, in its annual strategic plan briefing to Parliament’s trade and industry committee last month, noted that inter-departmental coordination was one of the major strategic risks to implementing policy.
Harris warned that the IPAP required the ramping up of state involvement in the economy. “International experience shows that industrial policy should target specific activities, but this plan continues to target entire sectors,” he said. “In addition, too many interventions involve the state right through to the marketing of products, and there is seldom a sunset clause to end state involvement,” he said.
Key sectors
Solar water heaters
The energy ministry has undertaken to install a million solar water heaters by 2014 but the government’s new industrial policy suggests that the target figure is expected to increase to 5,6-million units by 2020.
The current size of the local solar water heating market is 35 000 units a year, but more than 40% of these are imported. South Africa exports very few. The industry is worth R220-million a year and employs about 700 people.
The industrial policy action plan (IPAP) document suggests that by early 2012 the department of trade and industry plans to have national building regulations amended to make it compulsory to install solar water heaters in all new buildings and upgrades to homes.
“As shown by countries such as Australia and Israel, successful domestic solar water heater promotion programmes can lead to the establishment of an internationally competitive solar water heater manufacturing industry that can become a global supplier,” says the document.
The department has set targets to increase installations from 35 000 to 250 000 a year in the next three years and plans to increase manufacturing from 20 000 to 200 000 units a year.
Concentrated solar thermal
Concentrated solar thermal power (CST) is small on a global scale and the trade and industry department sees it as an opportunity to develop competitive local manufacturing. But the key stumbling block is Eskom, which needs to expedite its power purchase agreements.
The department insists that the commercial viability of CST needs to be demonstrated and, with this in mind, has set a target of early 2012 for the development of a CST demonstration plant financed by the Industrial Development Corporation.
Wind
Large parts of South Africa have economically viable wind energy potential. “The scale and maturity of the global wind industry have made it a cost-competitive energy option compared not just with other renewable technologies but also with many fuel-based technologies,” says the IPAP document. The department also argues that wind energy can be installed relatively quickly and does not require water to run.