B Sonjica: Renewable Energy Summit

19 March 2009

Programme director
Chairperson of Portfolio Committee on Minerals and Energy, Honourable Dr Nqaba
Ngcobo
Honourable ministers
Honourable premiers
Honourable Executive Mayors, Mayors and Councillors
Senior government officials
Captains of Renewable Energy Industry
Distinguished guests
Ladies and gentlemen

It is indeed a great pleasure and honour for me to be part of this historic
occasion that aims to review the White Paper on Renewable Energy which was
approved by Cabinet back in 2003. We are gathered here, for the first time, to
talk to each other and not past each other. What we are coming here to present
as government is not a panacea but an effort to ensure that we work together to
build this important renewable energy effort.

Let me take this opportunity to express my heartfelt gratitude to you, our
international and local experts, for setting aside time – in your busy
schedules - to be with us to share your experiences and be part of this
eventful process.

This gathering comes at the end of a number of events that are highlighting
the attainment of certain milestones in our new democracy. It occurs at the end
of excess capacity in electricity supply as well as the end of the political
term of the current administration.

Global context of renewable energy

Globally, the renewable energy industry is projected to grow rapidly in the
next few years. The International Energy Agency (IEA) estimates that 15 to 20
percent of total energy supply contribution will be from renewable energy by
2026. The focus on renewable energy development is underpinned by three key
drivers. Firstly, their potential role in contributing to national energy
security; secondly, the desire to reduce vulnerability to the effects of
climate change through sustainable development, as well as the job creation
potential of this new market.

Investment in renewable energy sources for electricity, heating and in
bio-fuels has increased considerably. Studies indicated that an estimated 71
billion dollars was invested in new renewable energy capacity world-wide in
2007, up from 55 billion dollars in 2006 and 40 billion dollars in 2005.

Climate change/low carbon economy

The global village is facing the challenge of harnessing the earth's
resources effectively and efficiently. There is still a vast dependence on
fossil fuels, and the use of this energy source is common to both developing
and developed countries. These fossil fuels are also finite commodities. It is
well known that the excessive burning of fossil fuels does not go without a
price as they release large amounts of carbon dioxide into the atmosphere.
This, therefore, has propelled us to position 14 in the world in terms of the
world's biggest emitters of greenhouse gases.

Accordingly, it is our intention to make due contribution to the global
effort to mitigate greenhouse gas emissions. In the recent Climate Change
Summit, we reaffirmed our commitment to playing a pivotal role in the fight
against climate change. We are indeed duty bound to be pioneers in defining the
future response of our nation to the growing global climate change
challenge.

National policy context

The White Paper on Energy Policy of 1998 (The Energy White Paper) which is
the overarching national policy on energy matters, provides policy direction
for all energy carriers, including renewable energy sources. The policy
provides for the government to:
* provide focused support for the development, demonstration and implementation
of renewable energy sources for both small and large-scale applications
* support renewable energy technologies, for application in specific markets on
the basis of researched priorities
* promote the development and implementation of appropriate standards and
develop guidelines and codes of practice for the correct use of renewable
energy technologies.

This process was followed by the release of the White Paper on Renewable
Energy in 2003 which spells out details of the targets and renewable policy
options for the sector. In addition to that, a number of enabling legislations
have been promulgated, but of particular relevance to this gathering are the
Electricity Regulation Act (2006) and the Energy Act (2008). These two pieces
of legislation and resultant regulations are designed to enable us to position
the renewable energy sector on a high pedestal.

Targets

A target of 10 000 Gigawatt Hour (GWh) derived from renewable energy has
been set in the Renewable Energy White Paper. We need to reflect on the
relevance of the target in the light of existing developments, nationally,
regionally and internationally.

Capacity

We are however faced with many capacity challenges in our quest to deal with
these challenges. We have limited home grown renewable energy technology. We
have for an example publicly announced that we have budgeted for 100 000 solar
water heaters to be installed in our country. However, we can only be able
domestically to produce about 10 000 solar water heaters. This untenable
situation invariable compels us to import these solar water heaters.

This has far reaching consequences for both the creation of jobs and the
discord in our balance of payment situation.

It is these difficulties that have created a situation where we have
achieved only four percent of our target which was set by our energy white
paper.

Financial resources are also another impediment to the successful
implementation of the renewable energy projects. This lack of financial
capacity also negatively affects our investment in technology. We were only
able to receive R5 million for the financial year 2007/08, R9 million for
2008/09. This has increased to R10 million for the 2009/10 financial year.
National Treasury has given an amount of R55 million over and above the R10
million only for the 2009/10 financial year.

This gathering, today and tomorrow, is a major step that we are taking in
our quest to build an enduring enabling environment towards the full and
uninterruptible renewable energy supply industry in our country.

Procurement

Having reviewed the environment in which the targets are set

This process is spear-headed by the National Energy Regulator of South
Africa (NERSA) under its tariffs setting mandate. The Renewable Energy Feed in
Tariff (REFIT) approach is currently under development and will be implemented
in the near future.

For us in the renewable energy space, and due to the lack of experience in
the procurement of the renewable energy generated electricity, the tendering
system will be used to further qualify bidders in terms of other non tariff
related issues.

Progress to date

The work on renewable energy that has been done to date has been primarily
geared at creating levelling the playing field for the renewable energy sector
to take off. In the view of the ruling party, we have resolved to enhancing
attaining the renewable energy targets advocating for diversifying energy
sources away from coal, and putting a price on the emission of carbon dioxide
and other greenhouse gasses.

You may recall that our Minister of Finance, Trevor Manuel, in his 2008
budget speech announced a precedent setting of a levy on the sale of
electricity generated from non-renewable resources. This was our first step
towards monetising carbon emissions.

In addition the minister has also implored South African companies to take
advantage of CDM established and announced a favourable tax treatment for
companies that derive income from the sale of emission reductions.

Therefore in addition to what the energy sector is doing to improve the
access to renewable energy, there are fiscal instruments too proposed by
National Treasury.

Accordingly, in terms of CDM we are relatively doing well compared to many
countries on the African continent. However, we are still lagging far behind
many countries in both the developed and the developing world. We shall,
therefore not rest until we succeed with these ground breaking initiatives. In
our quest to achieve success we are working very closely with the most
Scandinavian countries such as Norway, Denmark as well as Finland. We are
looking at how we can pool our resources together to build local manufacturing
capacity as we reduce our carbon footprint. All of these initiatives we are
doing as retain and continue with our involvement in relevant international
bodies that are active in this area such as the Carbon Leadership Sequestration
Forum.

Challenges

We acknowledge that there are several challenges hampering the development
and implementation of renewable energy technologies. The current constraints in
the renewable energy sector resulting from inadequate legal and regulatory
framework, funding instrument(s), low electricity tariffs, lack of technical
capacity of stakeholders to reach set targets pose risks to increasing
diversification of energy.

Ministerial directives to the summit in line with the summit resolutions

Noting the peculiarities of the South African economy, I would like to see
the summit make certain pronouncements on the approach to be taken in the
medium to long term in terms of the approach towards renewable energy.

Legislative, regulatory and policy environment

There is a need for a decisive and progressive policy, legislative and
regulatory frameworks that are based on sustainable development principles in
order to enhance the renewable energy industry. In line with the foregoing, it
is also pivotal to have a clear and unambiguous policy and legislative
alignment and harmonisation between the three spheres of government.

Financial resources

The existing state financial support mechanisms and institutions should be
harmonised and expanded. There is also a need to introduce innovative
approaches that will enhance the establishment of sustainable structures and
financing mechanisms for delivering renewable energy.

In addition to the introduction of innovative approaches there is a need to
introduce a reasonable tariff framework to facilitate investment in renewable
energy. In fact, and the recently promulgated Electricity Pricing Policy is a
crucial building block in the eventual success of the programme.

Low tariffs are not going to help in our quest to attract prospective
investors into this sector. It is quite interesting considering the fact that
we are human to realise that we do not object when we pay less for coal and
forget the reality that we may have to pay more in order to realise the full
potential of the renewable energy industry. These are the dynamics that are
currently being considered by NERSA (The regulator).

Technological issues

We will need to strengthen collaboration between government and research
institutes, such as the CSIR, in order to accelerate research and development
in renewable energy technologies. We do not have sufficient local manufacturing
facilities and this impedes the development of this sector. It is essential
that we scale up our manufacturing capacity, in collaboration with our
international partners.

We should also develop and implement appropriate standards, guidelines and
codes of practice for the appropriate and safe usage of renewable energy
technologies. We should also facilitate the deployment and trade of local
renewable energy technologies and thereby provide access to modern energy
carriers and create sustainable jobs.

Institutional arrangements

The department as the custodian of energy will continue with the overall
responsibility for renewable energy policy in South Africa. The department will
co-ordinate all fragmented energy related activities within sector and will
continuously play the leading role in the establishment of the appropriate
enabling environment.

Multilateral considerations

There must also be a clear and unambiguous policy and legislative alignment
and harmonisation with multilateral renewable energy and climate change
imperatives, to which South Africa subscribes, such as G8+5 and United Nations
Framework Convention on Climate Change (UNFCCC).

We are going to continue our work in regional bodies such as WESTCOR (a
company formed by five utilities from SADC countries to address the issues of
electricity shortage and the sustainability in the region). The issue of
bringing Inga project on stream has subsequently been delayed by the war that
broke out in the Eastern Democratic Republic of Congo (DRC). We are, however,
going to continue with our initiative in this regard, for we are convinced that
the Inga project carries with it the possibility to supply our region, and
ultimately our continent, with a source of uninterrupted renewable energy
supply.

Evaluation and monitoring

Lastly I want to advice you all that going forward it will be critical that
we have clear baseline and benchmarks that will be used when we set national
renewable energy targets. There is also a need to conduct regular evaluation
and monitoring to ensure to ensure that targets are achieved and review policy
frameworks to enhance its effectiveness periodically.

Awareness raising, capacity building and education

We are facing the challenge of eradicating the myth that renewable energy is
not reliable compared to other sources. This challenges us to undertake
vigorous campaigns to promote knowledge of renewable energy options and thereby
increase their usage. We should also craft ways of enhancing stakeholder's
management and communication in the sector to derive maximum benefits out of
their deployment.

One of the biggest challenges that we are facing in our country relates to
the relationship, perceived or real, between solar energy and the people living
in the rural areas of our country. A wrong perception has developed that poor
quality solar projects are being used for our people living in the rural areas.
This can not be allowed to be the case. We cannot be continuing or in this case
to be seen to be continuing, with the apartheid patterns of providing separate
development of solar projects to our people based in the rural areas. Our
people, whether they are in the urban or rural areas should be encouraged to
use solar projects in a non-discriminatory way. This is the essence of
democracy in our country.

Charting the Renewable Energy Policy going forward

Distinguished guests, when we review renewable energy policy in the next two
days it is imperative that we also set strict timetables for the finalisation
of the Renewable Energy Policy review.

We need to open the debate on the current renewable energy target and
propose realistic targets taking into account all the above enablers. I would
be indeed pleased if you could confirm if the targets for the period 2013 and
2018 could be set in the range of six to nine percent and nine to fifteen
percent of the current capacity respectively.

I would also like to see how environmental polluters can be forced to remedy
the impact of their pollution through investment in the implementation of the
renewable energy technologies. This is more like the national "Kyoto Protocol."
In this regard I will work closely with my colleague Ministers of Environmental
Affairs and Tourism, Finance and Trade and Industry as well as Science and
Technology.

Closing

From my side, we will stop at nothing to make sure that we promote and
implement renewable energy projects. We will continue to engage all interested
and affected stakeholders. We will make it a point that we respond positively
and promptly to the market so as to enhance the growth of renewable energy
sector.

It is important for us to make sure that renewables contribute towards the
new generation capacity, assist government in its efforts to manage energy
demand.

It would be an injustice Programme Director, if I don't remind fellow South
Africans to use their energy sparingly and efficiently.

I would like to extend my appreciation to all national, regional and
international partners for showing interest in the South Africa renewable
energy industry.

I wish you a successful summit and am looking forward to the informative
resolutions.

I thank you.

Issued by: Department of Minerals and Energy
19 March 2009