rafikh ismail, industrial development corporation
DESCRIPTION
With the expected Eskom increases over the next five years, retail petroleum service stations are facing reduced profitability and some even closure as profits are continually eroded by rising operating costs. Electricity is one of the costs that can be managed and self generated. This conference aims to examine best practices in energy efficiency and unpack the options and complexities of generating electricity from renewable energy specifically for retail fuel sites.TRANSCRIPT
Energy Efficiency
Day Month Year
By : Rafikh Ismail
: Senior Account Manager
: Green Industries Strategic Business Unit
09 May 2013
Contents Page
South Africa’s Energy Mix
Energy Efficiency
Funds Available: GEEF and AfD
Funded Cases
Conclusion
South Africa: Current Market and Energy Situation
• Since the South African economy largely relies on coal reserves for electricity, many opportunities exist for Renewable energy (RE) and Energy Efficiency (EE) improvements.
• Currently, future energy supply is not expected to be sufficient to match the anticipated demand, and increased pressure on price and energy security, force industry players to focus on green initiatives (mainly RE and EE).
• Recurring power outages since early 2008have highlighted the fact that electricity generation is unable to keep pace with demand.
In the light of adversity comes In the light of adversity comes In the light of adversity comes In the light of adversity comes opportunity!!!opportunity!!!opportunity!!!opportunity!!!
South Africa’s Current Energy Mix
• The South African (SA) economy is dominated by energy intensive industry.
• SA is also one of the larger emitters of CO2 in the world. This is primarily due to the fact that 86% of its electricity generation is coal based.
Eskom Installed Generation Capacity MW
Coal 37755 MW
OCGT 2426 MW
Nucler 1930 MW
ConventionalHydro 600MW
Pumped Hydro1400MW
Wind 3MW
South Africa’s Integrated Resource Plan (IRP2010)
According to the IRP2010 a
total of 19 GW of overall
electricity will be
generated from RE,
estimated to cost close
to R500bn over the next
20 years up to 2030
(close to R100bn over
the next 5 years).
IDC’s targeted investment
over the next 5 years is
R25bn (including
manufacturing of green
components for green
industries).
Future Generation Planned by 2030
Coal 6300 MW
OCGT 3900 MW
Nucler 9600 MW
Hydro 2600 MW
CCGT 2400 MW
Wind 8400MW
Solar PV 8400 MW
CSP 1000 MW
Driving opportunities to develop
the Green economy from an
energy generation perspective�
Contents Page
South Africa’s Energy Mix
Energy Efficiency
Funds Available: GEEF and AfD
Funded Cases
Conclusion
Energy Efficiency
Background
• South Africa is the largest contributor to the African Continent’s GHG emissions. Due to the fact that South Africa has an extremely energy intensive economy and a very high dependence on coal for the generation of primary energy, South Africa is one of the most carbon emission-intensive countries in the World.
• This, coupled with historically low electricity prices, has resulted in substantial energy inefficiencies throughout the various sectors in our economy. South Africa could benefit substantially from the implementation of renewable energy to address the challenges towards clean energy, energy efficiency and greenhouse gas (GHG) mitigation.
Energy efficiencyEnergy efficiency
Heat, Electricity & building
efficiency
Cleaner production / Industrial
Efficiency
Transport
Efficiency
Efficient lighting
SWH & Heat pumps
Energy monitoring
Metering
Industrial processes & efficiency
Retrofitting of buildings
High efficiency engines
Energy Audits
Energy Servicing
Companies
(ESCOs)
Research &
associations
Carbon Markets
Certification &
verification
Services related
to EE
Services related
to EE
Energy Efficiency
Examples of EE interventionsExamples of EE interventions
Com
merc
ial and Industria
l
• Office & Business Parks and Office Blocks
• Industrial Parks
Dom
estic H
ousehold
s • SWH
• Heat Pumps
• Lighting
• Spatial Heating
Why is there reluctance to make the move???
Reluctance in the market is
due to:
EE not business as
usual
Uncertainty: Lack of
awareness
Capital Expenditure Required – not
necessary budgeted for
Relatively Low Tariffs compared to international benchmarks
Challenges iro Energy Costs and Availability : Drivers to move to EE (Carrot & Stick Rational)
Rising Energy Cost is greater than:
• Inflation
• Increases in domestic households disposable income
• Increases in average Turnovers and Profitability in companies
Positives in the market
• Incentive scheme through the Eskom’s Demand Side management programmes supporting the move to cleaner production and Energy Efficiency
Industry EnvironmentEnergy Efficiency
Change in
environment
Implications for Industry and SBU Sector Strategies
Energy Efficiency
Increased electricity
prices (Most recent
increase approved
8%pa in MYPD3)
Increased focus on EE interventions, IDC funding and
implementation of EE through strategic alignment and action
plans towards existing and new clients.
Eskom’s DSM target
to reduce 6 000MW on
grid through DSM
interventions
DSM has targets over
the next 3 years of:
Demand 1074 MW
Opportunity to work closely with Eskom to support and funding
various DSM programs i.e. SWH roll out and own use co-
generation
Implementation of
National Solar Water
Heating strategy
Drive to increase the roll out of SWH creates opportunities to
fund manufacturing capacity and training of installers (skills
development)
Energy Efficiency Solutions
EE Solution
Incentives –Though Rebates,
Performance Contracting
Funding : Concessional rates
available
Market and Technology Awareness
Types of projects
Performance Contracting:
Lighting Retrofits
HVAC
Shower Heads
•Solar Water Heaters
•High Pressure SWH (Municipal Roll Outs, Corporate Roll Outs) – Projects Currently under development
•Low Pressure SWH (Current situation (Allocation Basis) and moving towards Commercial Contracting)
Self Use PV
Ground Mounted – Off Grid Mines using Diesel Gen Sets
Roof Top – Textile Companies , Agro businesses (Pack Houses) **Challenges on host Company
•Metering – (Municipality Roll Outs only) - Load Management Systems (Virtual Power Stations) & Billing Apps
Energy Efficiency –Solar Water Heaters
Minister: Target of 1 million SWH in next 3 years, saving 4700GWH by 2014
• Challenges
– Lack of certainty around rebates
– Affordability constraints of domestic households
– Capital Costs too high
– Too Many conflicting messaged about the technologies
– Funding to ESCOs – weak financial structures
– Awareness/ Lack of reliable information or case studies
Photo Voltaic Technology
Roof Top PV Installations:
• IDM Support through a rebate decreasing pay back period of technology
• Cost of Technology of the decline
• Grid Parity pricing would be reached on the PV systems within the next 18 to 24 months
Challenges
• Lack of formalised Net Metering legislation
• Lack of awareness
Opportunities
• South Africa having very good solar irradiation that supports this technology
• Excellent funding models at attractive interest rates and long debt tenures
EE Technologies used in DSM Projects
• LED’s – Light Emitting Diodes • Low flow / Flow restricted Shower Heads
• CFL’s – Compact Fluorescent Lamps
• Geyser Blankets
• Geyser / Pool Timers
• Retrofitting of magnetic to electronic ballasts & T8 to T5 Fluorescent Lamp replacement
• Solar Water Heaters
Energy Efficiency – Industrial Processes
• Opportunities
– IDC Investments – Current Portfolio
– IDC Pipeline – New Potential Investments
– IDC – Successful Ex-Clients
– Other industries, specifically mining, metals and chemicals
– Marketing opportunities: Conferences and Events
• Challenges
– Local ESCOs – skills and financial stability
– Lack of credibility of ESCOs
– Lack of reliable information or case studies
– Project financing (ring fencing projects within an existing business model)
– EE Not business as usual
– Industry standards for industrial processes
– Lack of awareness
• Specific actions
– Develop IDC in-house knowledge on technologies available for process EE awareness (training)
– Develop case study for Boiler Change / Retrofit
– Road show to SBUs on potential, presenting case studies (Increasing the awareness of account managers throughout the IDC
– Identification of potential IDC clients with large industrial processing
– Set EE targets for new IDC investments
– Create generic financial model to illustrate
– Understand and communicate incentives and tax structures
– Developing Measurement and Verification systems to monitor KFW investments (GFA Consultants to implement)
– Lessons learnt globally through technical assistance and training by GFA
Energy Efficiency – Industrial Processes
• Specific Actions (Cont.)– Develop legal skills re contracts (i.e. energy saving
models)
– Identify competent “developers” or ESCOs
– Access to subsidised funding:
� Clean Technology fund/ IFC
� EE specific credit lines
� Eskom DSM program
� KFW Credit Line
Energy Efficiency – Buildings
Buildings offer the most cost-effective solution to GHG elimination
• Projects identified
– Government Buildings
– Municipal Buildings
– Blue Chip Corporates
• Working with Escos
– Support of the ESCO Market – Recently concluded ESCO Market Study
–• Challenges
– Local ESCOs – skills and financial stability
– Lack of reliable information or case studies
– Biased benefit accrual between landlord and lessee for buildings
– Project financing (ring fence / on- balance sheet
– Industry standards for commercial buildings
– Industry standards for industrial processes
– Lack of awareness of the benefits
Energy Efficiency in Buildings - examples
Others
Lights
Cooling
Heating
Reference Case0
20
40
60
80
100%
Energy consumption
- Madrid BuildingCategory
• Electronics • Reduced standby consumption
• LCD screens
• Heating
• Cooking
• Water Heating
• Optimised heating technology (district
heating, biomass, solar)
• Improved ovens
• Induction technology
• Water-saving appliances
• Solar-heated water
• Cooling
• Aircon
• Improved placement of appliances (e.g.
shaded)
• Installation of doors/shutters
• Natural-cooling systems in new buildings
• Regular maintenance
• Solar-cooling systems
• Lighting • Electronic ballasts
• Better daylight use
• Increased CFL/LED use
Examples of measures/technology
Source: Energy Partners
Contents Page
South Africa’s Energy Mix
Energy Efficiency
Funds Available: GEEF and AfD
Funded Cases
Conclusion
Green Energy Efficiency Fund
KfW
Concessional debt funding
Technical assistance grant
IDC
Develop Green Industries
Capacity building in clean energy finance
Addresses market failure and funding barriersReduced interest loan -Prime less 2%
Long payment term ( up to 15 years)
Green Energy Efficiency Fund
Stimulate energy efficiency and renewable energy investment
Technical assistance to: -identify energy efficiency and renewable energy opportunities
-calculate the economic and financial benefits
-support the selection of eligible equipment and enhanced performance technologies.
Promote long term business competitiveness
-Modernisation of businesses
-Increased company profitability
-Improved product quality and production capacity
-Lower vulnerability to increasing energy prices.
Contribute to global climate protection
-Measurement of energy savings and carbon reduction
-Enhanced company image due to contribution to reduction of carbon footprint.
Energy Efficiency: 2012/13 ReviewA snap shot of the GEEF to date…
10Number of
Deals approved
325,905 avoided CO2/year
-Technical Support
11 Walk through energy audits
conducted
4 detailed energy audits (investment
grade)
- 12 SBUs and Regional Offices Trained
on GEEF and EE
-ESCO Market Study
- Energy Efficiency Conference
Programme supported by the German Cooperation and Development Ministry
Green Energy Efficiency Fund- Competitiveness through energy savings
Highlights
R145m
Amount committed
ca 25% of fund
SWH
Energy Performance Contracts
Cogeneration
Waste to Energy
Energy Efficiency
& GEEF
More Energy Efficiency and Renewable Energy Finance in the pipeline
Capital Source AFD
Type of funding Credit Line
Amount EURO 40 million
Targeted Projects Greenfields Energy Efficiency, Small Scale Renewable Energy sold under PPA and
Refurbishment of RE plants
Project Size ZAR 1 – 100 million total investment
AFD to finance up to 85% of total investment costs
“IDC Gearing Ratio’s and Mandate is overarching”
Pricing Fixed rate of 10% or
Prime less 1%
Loan Term Up to 12 years
Green Economy Catalyst through EE
Energy Efficiency:
• IDC has created an enabling environment by securing cheaper funding, with long debt tenures to act as a catalyst in the Energy Efficiency Markets.
• Green Energy Efficiency Fund was launched recently that offers the market debt at concessionary rates with debt tenures up to 15 years by partnering with the German DFI – KfW.
• IDC has structured the repayment of these loans to effectively match the savings profile of the technology installed. eg. On a Roof Top PV the savings over 15 years are equivalent to the debt service repayment and hence the facility of 15 years is then proposed. Hence not an out of pocket expense for the company.
Developing other sectors of the Green Economy through innovation ...
Repayment from savings
• The idea of structuring the repayment is to ensure that the debt repayment is less than the saving achieved as a result of the EE intervention.
0
2
4
6
8
10
12
14
16
Savings
DebtRepayment
Contents Page
South Africa’s Energy Mix
Energy Efficiency
Funds Available: GEEF and AfD
Funded Cases
Conclusion
Funded cases
• A Cape Town-based company that produces sport wear and leisurewear under license to an international brand.
• The company has embarked on a project to install a grid connected (grid-tied) rooftop PV system to generate 25% of the company’s annual electricity requirement
“Electricity accounts for more than 90% of our carbon emissions and is a scarce resource that is vital to the successful operation of our business. We are confident that the solar installation will generate between 30 – 40% of our energy requirement, thereby reducing our carbon footprint, save money and improve our sustainability into the future.”
William Hughes, MD, Impahla Clothing
Sector Textile Industry
Region Western Cape
Goals Reduced reliance on coal
based electricity from grid
Investments Solar Photovoltaic (PV)
system – 30kW peak
Financial
Savings
Investment cost covered by
energy and cost savings
Other
Benefits
Positive image as a
progressive environmentally
friendly company
CO2
Reduction
50 CO2 tons per annum
Case Study 1: 25% Reduction in Grid Electricity Consumption by Installing a Solar Photovoltaic (PV) System
• The chemical production company wants to use the waste gas as fuel for a 7.8 MW CHP plant to replace part of the power supply from the grid.
• This results in 18% savings from using the waste gas to feed the CHP plant.
“The company spends close to R7-million on electricity a month, and this new co-generation plant will cut this bill by about 20%. The additional 8 MW capacity will enable the company to operate at full production compared with the 70% capacity because of electricity constraints. „
Claudio Siracusano, GM, SACC
Sector Chemical Industry
Region KwaZulu-Natal/South Africa
Goals Reduced reliance on coal
based electricity from grid
Investments • 4 co-generation units
• Scrubber plant
Financial
Savings
• Investment cost covered
by energy and cost savings
Other
Benefits
Increased reliability from
own energy supply
CO2
Reduction
46,000 CO2 tons per annum
Case Study 2: 18% Energy Savings from Utilisation ofWaste Gas to feed a Combined Heat and Power (CHP) Plant
IDC project example: Solar Water Heaters in rural areas
• IDC is proud to be associated with the 1st Low Pressure Solar Water Heater Programmatic CDM project to be registered worldwide at the UNFCCC.
• The project has resulted in excess of 800 jobs for the unemployed in these impoverished areas, the up-liftment of these people lives who for the first time ever are enjoying running hot water on-tap.
LPSWH CDM Registered Project
• The project has resulted in more than 70,000 LPSWH being installed nationally to the impoverished communities for free. The innovative funding model was facilitated through the CER revenue, A Rebate for Energy Efficiency and the bridging finance facility from the IDC. Ref: Diagram
ESCO
IDC
(Industrial Development Corporation)Carbon Credit Off-Taker
CarbonDevelopers
ESKOM
REBATE PAID
Municipality
Households (Beneficiaries)
Equipment Suppliers
ERPA
Prepayment Guarantee
MOU Signed
Prepayment (Guaranteed By the IDC)
Net PrepaymentAfter Costs
Free Direct Low Pressure Solar Water Heater
Cession Of Rebate and Cession of the Carbon Credits
Funding of the working capital requirement
Contents Page
South Africa’s Energy Mix
Energy Efficiency
Funds Available: GEEF and AfD
Funded Cases
Conclusion
Conclusion
• Pro-active approach to develop Green Industries
• Renewable energy
• Energy efficiency
• Fuel based green energy
• Emission and pollution management
• Bio fuels
• As well as localisation opportunities
• Focus on early phase project development;
• Develop specific funding interventions;
• Support and development of an emerging industry at various level.
• Value chain approach with an objective to develop a long term sustainable
industry.
Day Month Year
The Industrial Development Corporation
19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146
South Africa
Telephone (011) 269 3000
Facsimile (011) 269 2116
E-mail [email protected]
Thank You!
Any Questions?
RAFIKH ISMAIL
+2711 269 3297+2776 984 [email protected]