Energy projects soar

News that South Africa registered investments valued around the $5.5bn (R50bn) mark in 2012 has generated some excitement, but people in the know are warning that it is still premature to pop the champagne.

There is a fear that a significant portion of this investment will leave the country unless more is done to facilitate localisation.

Certainly the government needs to do more to ensure that the ensuing renewable energy independent power producing programme yields better results, says businessman Ajay Lalu who is an executive of Black Lite Solar. Lalu is setting up a multibillion-rand solar panel manufacturing facility in the Eastern Cape.

This observation comes a week after a report by the Pew Charitable Trust think tank declared that SA had emerged as the fastest growing destination for renewable energy investment within the G20 nations.

The trust’s report noted that South Africa attracted $5.5bn worth of investments in renewable energy in 2012 and this placed the country in ninth position in the rankings of size of renewable energy investments. The report said about 80% ($4.3bn) of this investment was flowing into solar energy and $1.1bn into wind.

This comes after SA launched its renewable energy independent power producer (IPP) programme. The department of energy has licensed about 50 operators in two separate windows of a programme that will have five licensing windows and expected to draw investments of about R100bn at conclusion.

“We are facing the danger that a significant portion of this investment and especially in high value system items, like solar panels, wind turbines and inverters in the IPP programme will end up in foreign hands,” Lalu said.

This is despite the fact that the government has set a local participation target of 40% when it issues window two licences.

Lalu warned that a significant portion of this local participation target could be achieved via “non-core” or low value procurement items like civil works, advisors’ fees and environmental impact assessment studies.

“While this is fine we must be careful not to miss the high value items which will facilitate technology transfer and ensure development of a robust local renewable energy industry that is also able to support the continent,” Lalu said.

He said SA needed to focus on core areas like the production of solar panel wafers and inverters. “Unless you focus on such items you are unlikely to see meaningful localisation beyond 40%.”

“The government needs to be more proactive and braver in rolling out licences in the third, fourth and fifth windows.” He said the renewable energy IPP was a perfect platform for the government to advance its reindustrialisation programme, particularly the development of black industrialists.