Rafikh Ismail, Industrial Development Corporation


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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.

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Rafikh Ismail, Industrial Development Corporation

  1. 1. Energy EfficiencyDay Month YearBy : Rafikh Ismail: Senior Account Manager: Green Industries Strategic Business Unit09 May 2013
  2. 2. Contents PageSouth Africa’s Energy MixEnergy EfficiencyFunds Available: GEEF and AfDFunded CasesConclusion
  3. 3. South Africa: Current Market and Energy Situation• Since the South African economy largelyrelies on coal reserves for electricity, manyopportunities exist for Renewable energy(RE) and Energy Efficiency (EE)improvements.• Currently, future energy supply is notexpected to be sufficient to match theanticipated demand, and increased pressureon price and energy security, force industryplayers to focus on green initiatives (mainlyRE and EE).• Recurring power outages since early 2008have highlighted the fact that electricitygeneration is unable to keep pace withdemand.In the light of adversity comesIn the light of adversity comesIn the light of adversity comesIn the light of adversity comesopportunity!!!opportunity!!!opportunity!!!opportunity!!!
  4. 4. South Africa’s Current Energy Mix• The South African(SA) economy isdominated by energyintensive industry.• SA is also one of thelarger emitters of CO2in the world. This isprimarily due to thefact that 86% of itselectricity generationis coal based.Eskom Installed Generation CapacityMWCoal 37755 MWOCGT 2426 MWNucler 1930 MWConventionalHydro 600MWPumped Hydro1400MWWind 3MW
  5. 5. South Africa’s Integrated Resource Plan (IRP2010)According to the IRP2010 atotal of 19 GW of overallelectricity will begenerated from RE,estimated to cost closeto R500bn over the next20 years up to 2030(close to R100bn overthe next 5 years).IDC’s targeted investmentover the next 5 years isR25bn (includingmanufacturing of greencomponents for greenindustries).Future Generation Plannedby 2030Coal 6300 MWOCGT 3900 MWNucler 9600 MWHydro 2600 MWCCGT 2400 MWWind 8400MWSolar PV 8400 MWCSP 1000 MWDriving opportunities to developthe Green economy from anenergy generation perspective
  6. 6. Contents PageSouth Africa’s Energy MixEnergy EfficiencyFunds Available: GEEF and AfDFunded CasesConclusion
  7. 7. Energy EfficiencyBackground• 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 avery high dependence on coal for the generation of primary energy, South Africa isone of the most carbon emission-intensive countries in the World.• This, coupled with historically low electricity prices, has resulted in substantialenergy inefficiencies throughout the various sectors in our economy. South Africacould benefit substantially from the implementation of renewable energy to addressthe challenges towards clean energy, energy efficiency and greenhouse gas (GHG)mitigation.
  8. 8. Energy efficiencyEnergy efficiencyHeat, Electricity & buildingefficiencyCleaner production / IndustrialEfficiencyTransportEfficiencyEfficient lightingSWH & Heat pumpsEnergy monitoringMeteringIndustrial processes & efficiencyRetrofitting of buildingsHigh efficiency enginesEnergy AuditsEnergy ServicingCompanies(ESCOs)Research &associationsCarbon MarketsCertification &verificationServices relatedto EEServices relatedto EEEnergy EfficiencyExamples of EE interventionsExamples of EE interventions
  9. 9. CommercialandIndustrial• Office &BusinessParks andOfficeBlocks• IndustrialParksDomesticHouseholds• SWH• HeatPumps• Lighting• SpatialHeating
  10. 10. Why is there reluctance to make the move???Reluctance inthe market isdue to:EE notbusiness asusualUncertainty:Lack ofawarenessCapital ExpenditureRequired – notnecessarybudgeted forRelatively LowTariffs comparedto internationalbenchmarks
  11. 11. Challenges iro Energy Costs and Availability :Drivers to move to EE (Carrot & Stick Rational)Rising Energy Cost isgreater than:• Inflation• Increases in domestic households disposable income• Increases in average Turnovers and Profitability incompaniesPositives in themarket• Incentive scheme through the Eskom’s Demand Sidemanagement programmes supporting the move tocleaner production and Energy Efficiency
  12. 12. Industry EnvironmentEnergy EfficiencyChange inenvironmentImplications for Industry and SBU Sector StrategiesEnergy EfficiencyIncreased electricityprices (Most recentincrease approved8%pa in MYPD3)Increased focus on EE interventions, IDC funding andimplementation of EE through strategic alignment and actionplans towards existing and new clients.Eskom’s DSM targetto reduce 6 000MW ongrid through DSMinterventionsDSM has targets overthe next 3 years of:Demand 1074 MWOpportunity to work closely with Eskom to support and fundingvarious DSM programs i.e. SWH roll out and own use co-generationImplementation ofNational Solar WaterHeating strategyDrive to increase the roll out of SWH creates opportunities tofund manufacturing capacity and training of installers (skillsdevelopment)
  13. 13. Energy Efficiency SolutionsEE SolutionIncentives –ThoughRebates,PerformanceContractingFunding :Concessional ratesavailableMarket and TechnologyAwareness
  14. 14. Types of projectsPerformance Contracting:Lighting RetrofitsHVACShower 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 PVGround Mounted – Off Grid Mines using Diesel Gen SetsRoof Top – Textile Companies , Agro businesses (Pack Houses) **Challenges on host Company•Metering – (Municipality Roll Outs only) - Load Management Systems (Virtual Power Stations) & Billing Apps
  15. 15. Energy Efficiency –Solar Water HeatersMinister: 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
  16. 16. Photo Voltaic TechnologyRoof Top PV Installations:• IDM Support through a rebate decreasingpay back period of technology• Cost of Technology of the decline• Grid Parity pricing would be reached onthe PV systems within the next 18 to 24monthsChallenges• Lack of formalised Net Metering legislation• Lack of awarenessOpportunities• South Africa having very good solarirradiation that supports this technology• Excellent funding models at attractiveinterest rates and long debt tenures
  17. 17. 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 electronicballasts & T8 to T5 Fluorescent Lampreplacement• Solar Water Heaters
  18. 18. Energy Efficiency – Industrial Processes• Opportunities– IDC Investments – Current Portfolio– IDC Pipeline – New Potential Investments– IDC – Successful Ex-Clients– Other industries, specifically mining, metals andchemicals– 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 anexisting business model)– EE Not business as usual– Industry standards for industrial processes– Lack of awareness• Specific actions– Develop IDC in-house knowledge on technologiesavailable for process EE awareness (training)– Develop case study for Boiler Change / Retrofit– Road show to SBUs on potential, presenting casestudies (Increasing the awareness of accountmanagers throughout the IDC– Identification of potential IDC clients with largeindustrial processing– Set EE targets for new IDC investments– Create generic financial model to illustrate– Understand and communicate incentives and taxstructures– Developing Measurement and Verification systems tomonitor KFW investments (GFA Consultants toimplement)– Lessons learnt globally through technical assistanceand training by GFA
  19. 19. Energy Efficiency – Industrial Processes• Specific Actions (Cont.)– Develop legal skills re contracts (i.e. energy savingmodels)– Identify competent “developers” or ESCOs– Access to subsidised funding:Clean Technology fund/ IFCEE specific credit linesEskom DSM programKFW Credit Line
  20. 20. Energy Efficiency – BuildingsBuildings 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 – Recentlyconcluded ESCO Market Study–• Challenges– Local ESCOs – skills and financial stability– Lack of reliable information or case studies– Biased benefit accrual between landlord andlessee 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
  21. 21. Energy Efficiency in Buildings - examplesOthersLightsCoolingHeatingReference Case020406080100%Energy consumption- Madrid BuildingCategory• Electronics • Reduced standby consumption• LCD screens• Heating• Cooking• Water Heating• Optimised heating technology (districtheating, 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 useExamples of measures/technologySource: Energy Partners
  22. 22. Contents PageSouth Africa’s Energy MixEnergy EfficiencyFunds Available: GEEF and AfDFunded CasesConclusion
  23. 23. Green Energy Efficiency FundKfWConcessional debt fundingTechnical assistance grantIDCDevelop Green IndustriesCapacity building in clean energy financeAddresses market failure and funding barriersReduced interest loan -Prime less 2%Long payment term ( up to 15 years)Green Energy EfficiencyFundStimulate energy efficiency and renewable energy investmentTechnical assistance to:-identify energy efficiencyand renewable energyopportunities-calculate the economicand financial benefits-support the selection ofeligible equipment andenhanced performancetechnologies.Promote long term business competitiveness-Modernisation ofbusinesses-Increased companyprofitability-Improved product qualityand production capacity-Lower vulnerability toincreasing energy prices.Contribute to global climateprotection-Measurement ofenergy savings andcarbon reduction-Enhanced companyimage due tocontribution to reductionof carbon footprint.
  24. 24. Energy Efficiency: 2012/13 ReviewA snap shot of the GEEF to date…10Number ofDeals approved325,905 avoided CO2/year-Technical Support11 Walk through energy auditsconducted4 detailed energy audits (investmentgrade)- 12 SBUs and Regional Offices Trainedon GEEF and EE-ESCO Market Study- Energy Efficiency ConferenceProgramme supported by the German Cooperation and Development MinistryGreen Energy Efficiency Fund- Competitiveness through energy savingsHighlightsR145mAmount committedca 25% of fundSWHEnergy Performance ContractsCogenerationWaste to EnergyEnergy Efficiency& GEEF
  25. 25. More Energy Efficiency and Renewable EnergyFinance in the pipelineCapital Source AFDType of funding Credit LineAmount EURO 40 millionTargeted Projects Greenfields Energy Efficiency, Small Scale Renewable Energy sold under PPA andRefurbishment of RE plantsProject Size ZAR 1 – 100 million total investmentAFD to finance up to 85% of total investment costs“IDC Gearing Ratio’s and Mandate is overarching”Pricing Fixed rate of 10% orPrime less 1%Loan Term Up to 12 years
  26. 26. Green Economy Catalyst through EEEnergy Efficiency:• IDC has created an enabling environment by securingcheaper funding, with long debt tenures to act as acatalyst in the Energy Efficiency Markets.• Green Energy Efficiency Fund was launchedrecently that offers the market debt at concessionaryrates with debt tenures up to 15 years by partneringwith the German DFI – KfW.• IDC has structured the repayment of these loans toeffectively match the savings profile of the technologyinstalled. eg. On a Roof Top PV the savings over 15years are equivalent to the debt service repaymentand 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 ...
  27. 27. Repayment from savings• The idea of structuring the repaymentis to ensure that the debt repayment isless than the saving achieved as aresult of the EE intervention.0246810121416SavingsDebtRepayment
  28. 28. Contents PageSouth Africa’s Energy MixEnergy EfficiencyFunds Available: GEEF and AfDFunded CasesConclusion
  29. 29. Funded cases• A Cape Town-based company that produces sportwear and leisurewear under license to aninternational brand.• The company has embarked on a project to installa grid connected (grid-tied) rooftop PV system togenerate 25% of the company’s annual electricityrequirement“Electricity accounts for more than 90% of ourcarbon emissions and is a scarce resource that isvital to the successful operation of our business. Weare confident that the solar installation will generatebetween 30 – 40% of our energy requirement,thereby reducing our carbon footprint, save moneyand improve our sustainability into the future.”William Hughes, MD, Impahla ClothingSector Textile IndustryRegion Western CapeGoals Reduced reliance on coalbased electricity from gridInvestments Solar Photovoltaic (PV)system – 30kW peakFinancialSavingsInvestment cost covered byenergy and cost savingsOtherBenefitsPositive image as aprogressive environmentallyfriendly companyCO2Reduction50 CO2 tons per annumCase Study 1: 25% Reduction in Grid ElectricityConsumption by Installing a Solar Photovoltaic (PV) System
  30. 30. • The chemical production company wants to usethe waste gas as fuel for a 7.8 MW CHP plant toreplace part of the power supply from the grid.• This results in 18% savings from using the wastegas to feed the CHP plant.“The company spends close to R7-million onelectricity a month, and this new co-generation plantwill cut this bill by about 20%. The additional 8 MWcapacity will enable the company to operate at fullproduction compared with the 70% capacity becauseof electricity constraints. „Claudio Siracusano, GM, SACCSector Chemical IndustryRegion KwaZulu-Natal/South AfricaGoals Reduced reliance on coalbased electricity from gridInvestments • 4 co-generation units• Scrubber plantFinancialSavings• Investment cost coveredby energy and cost savingsOtherBenefitsIncreased reliability fromown energy supplyCO2Reduction46,000 CO2 tons per annumCase Study 2: 18% Energy Savings from Utilisation ofWaste Gas to feed a Combined Heat and Power (CHP) Plant
  31. 31. IDC project example: Solar Water Heaters in rural areas• IDC is proud to be associated with the 1st Low Pressure Solar Water HeaterProgrammatic CDM project to be registered worldwide at the UNFCCC.• The project has resulted in excess of 800 jobs for the unemployed in theseimpoverished areas, the up-liftment of these people lives who for the firsttime ever are enjoying running hot water on-tap.
  32. 32. LPSWH CDM Registered Project• The project has resulted in more than 70,000 LPSWH being installed nationally to theimpoverished communities for free. The innovative funding model was facilitatedthrough the CER revenue, A Rebate for Energy Efficiency and the bridging financefacility from the IDC. Ref: DiagramESCOIDC(Industrial Development Corporation)Carbon CreditOff-TakerCarbonDevelopersESKOMREBATE PAIDMunicipalityHouseholds(Beneficiaries)EquipmentSuppliersERPAPrepaymentGuaranteeMOU SignedPrepayment(Guaranteed By theIDC)NetPrepaymentAfterCostsFree DirectLow PressureSolar WaterHeaterCession Of Rebate andCession of the CarbonCreditsFunding of theworking capitalrequirement
  33. 33. Contents PageSouth Africa’s Energy MixEnergy EfficiencyFunds Available: GEEF and AfDFunded CasesConclusion
  34. 34. 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 sustainableindustry.
  35. 35. Day Month YearThe Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone (011) 269 3000Facsimile (011) 269 2116E-mail callcentre@idc.co.zaThankYou!AnyQuestions?RAFIKH ISMAIL+2711 269 3297+2776 984 9893rafikhi@idc.co.za