green industries sector profile

Provincial Industrial Development Strategy (PIDS) Implementation Plan, 2012

6: Green Industries Sector Profile

116

Green Industries Sector Profile 6.1 Role for energy and the green industries sector

As the primary focus of the Green Industries sector, energy is important in the formulation of an industrial

strategy as is it essential for industrial activities and it has significant positive and negative impacts on industrial

strategy. This is the case generally and it is also the case in the Eastern Cape Province.

Firstly, the energy sector in the province is a key enabler for all the other sectors – to provide the power and

energy for manufacture and service provision – and hence it requires special attention to address issues of

security of supply, pricing, etc.

Secondly, the energy sector activities which provide energy services to the Eastern Cape economy represent an

economic/industrial development opportunity in itself.

Thirdly, the negative impacts of the energy sector have negative direct and indirect impacts on the economy of

the Province. Increasingly the negative environmental impacts of energy service provision are being monetised

to reflect these economic costs. The imminent Carbon Tax in South Africa is a specific and good example of this.

The opportunities for addressing these three dimensions of the energy sector in the Province are significant and

new. Consequently, the need for specialist input on the policy, regulatory, institutional and (especially) capital

investment framework for the clean energy sector is new (unlike the other more established industrial sectors).

Hence there is a need for specialist inputs beyond the gap analysis and action plan development which may be

appropriate for the more established sectors.

Lastly, the very long-term investment requirements for the energy sector (in the range of 20 – 50 years) also

suggests a more strategic approach – especially given the cross-cutting nature of the energy sector in

underpinning the investments in the other sectors.

6.2 Understating the Green Industries Sector

The Eastern Cape Industrial Development Strategy (EC PIDS, 2010) defines Green Industries to include:

• Potential in Renewable energy

• Carbon extraction

• Environmental management

• Carbon trading facility

The EC PIDS states that

A commonly used term which overlaps this definition is Environmental Goods and Services (EG&S or EGS). The

OECD defined the EGS industry as follows:

“Green Industries (are) emerging as the most promising emerging sector (with) significant linkages to the

Eastern Cape auto-sector, rural development, agriculture and environmental management”

EC PIDS(2010)



117

The Department of Trade and Industry in the United Kingdom divides the EGS industry into the following sub-

sectors (dti, 2006):

• Air Pollution Control

• Cleaner Technologies and processes

• Decommissioning/Decontamination of Nuclear Sites

• Environmental Consultancy

• Environmental Monitoring, Instrumentation and Analysis

• Marine Pollution Control

• Noise and Vibration Control

• Remediation and Reclamation of Land

• Renewable Energy

• Waste Management, Recovery and Recycling

• Water Supply and Waste Water Treatment

Green Industries are relevant in five key sectors in the National Industrial Policy Framework (NIPF) which have

diversification and growth potential (Visagie, 2007).

The term Green Industries is used in this report to mean industries which manufacture products or provide

services which offer environmentally more sustainable impacts (including energy efficiency and renewable

energy) and environmental services including clean energy services (and carbon project registration and trading).

Energy efficiency means the increasing effectiveness in converting primary energy into energy services.

Energy efficiency interventions are undertaken as part of a continuing process of improvement. There is scope

for continual improvements in operation and upgrading or replacement of energy infrastructure.

Renewable energy refers to sources of primary energy which are not depleted in terms of human timescales.

Renewable energy sources are essentially derived from either the i) sun, in the form of solar, wind, biomass,

hydro or ocean/wave energy, ii) gravitational energy – such as tidal energy, or iii) geological energy such as

geothermal energy.

Energy services are the services derived from the conversion and availability of energy which customers

(sometimes called users or consumers) require to live their lives or operate their businesses. These include the

services of lighting, water heating, transport, product manufacture, space heating (and cooling), cooking,

refrigeration, etc. These services are provided as outcomes of different energy service supply chains.

6.3 Context for Green Industries

6.3.1 National and International Context

Overall, the national and international context for developing the role for the Green Industries sector are

increasing conducive. Coupled to other social and economic considerations, the increasing awareness and focus

“The environmental goods and services industry consists of activities which produce goods and services to

measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems

related to waste, noise and eco-systems. This includes cleaner technologies, products and services that

reduce environmental risk and minimise pollution and resource use”

OECD (1999)



118

on the negative climate change implications of current (and past) activities in the energy sector has led to

significant increases in the levels of policy support for and investment in the clean energy sector. This global

trend has been clearly evident since 2008 when investments in renewable energy generation infrastructure have

exceeded those in fossil fuel energy infrastructure (SEFI, 2010).

Despite the early investments in the developed economies in the world, the global growth in the Green Industries

sector is expected to take place in developing countries which share many characteristics with the Eastern Cape

Province. The Potential of Renewable Energy outlined in the report by the Intergovernmental Panel on Climate

Change indicates that close to 80% of the world‘s energy supply could be met by renewable energy technologies

by 2050 if backed by the right enabling public policies (IPCC, 2011).

The levelised cost of energy from renewable energy technologies is decreasing with technology learning and

market scale. Figure 6.1 illustrates the relative costs and ranges of costs for electricity, heat and fuel energy

derived from renewable sources. In certain cases these levelised costs are already competitive with those

associated with conventional fossil-fuel and nuclear technologies.

Figure 6.1: Levelised costs of energy from Renewable Energy

Source: IPCC (2011)

A further concern, linked to market access and competition, is the issue of “eco-protectionism” from more

developed economies.



119

6.3.2 Eastern Cape Context

At present, energy services provided in the Province are largely supplied from outside the province (physically)

and also by energy suppliers which operate outside the provincial economy. The supply of energy services for

any new growth in the industrial activities in the Province are likely to continue to be supplied from ‘outside’

service providers unless conscious and strategic steps are taken to develop the capacity in the Province to

provide these from ‘within’ the provincial economy.

The opportunity, and attraction, for providing energy services at a provincial level is reinforced by the fact that the

Province enjoys more than sufficient energy resources – in the form of solar, wind, biomass and wave energy –

and innovative human resources in both the public and the private sector (AGAMA Energy, 2009).

Furthermore, the quality – or source of origin – of energy services are increasingly becoming important from the

perspective of market penetration in international markets. The establishment of auditing and reporting

frameworks for environmental footprinting or green energy procurement are encouraging manufacturing sectors

to consider cleaner (or greener) energy service options. The announcement of a R7-million fund via the Eastern

Cape’s Automotive Industry Development Centre (AIDC) for automotive component manufacturers in the Eastern

Cape to reduce energy consumption is a good example of support for cleaner production (Engineering News May

2011).

Similarly, the need for ongoing maintenance and upgrading of existing infrastructure suggests the opportunity for

the manufacture and supply and installation of new infrastructure which would stimulate the provincial economy.

The following quote illustrates this point:

6.4 Green Industry Initiatives

6.4.1 National Initiatives

Environmental Goods and Services Forum

The Department of Trade and Industry (the dti) launched the Environmental Goods and Services (EGS) Forum in

2007. The EGS Forum intended to formulate an EGS Sector Action Plan and take into account:

• Sustainability support to government supply side measures

• SMMEs’ challenge to afford environmental goods and services

• Demographic balance in the EGS sector

• Utilisation of technology programmes such as the Support Programme for Industrial Innovation (SPII)

and the Technology and Human Resources for Industry Programme (THRIP)

• A comprehensive statistical database to fill information gaps

• A market information system to position SA as a springboard for taking EGS partnerships into African

and other markets

• Communication structures to advise government in policy formulation

• Training and other forms of capacity building

• Further strategic interventions

“Buffalo City municipality general manager for electrical and mechanical services SyGourrah calculated the

unfunded backlog within the Eastern Cape municipal area was currently R680-million.”

Creamer (2011)



120

REFiT

Guidelines for a Renewable Feed-in Tariff (REFiT) have been published by NERSA in 2009 and again in 2010

with selection criteria and procedures for renewable electricity production to be contracted and fed into the

national electricity system. These REFiT tariffs were revised early in 2011 to reflect changes in the market

conditions for renewable electricity. However, the REFIT process has been superseded by a competitive

procurement process as detailed in the box below.

Electricity Regulations on New Generation Capacity

New regulations for electricity generation were promulgated in 2009. Furthermore an associated draft Bill for an

Independent System and Market Operator (ISMO) has been published. The ISMO provides the basis for a less

centralised, more competitive, energy generation and transmission market.

SARI

The South African Renewables Initiative (dti, 2011) is an initiative to encourage investment in the grid-connected

renewable energy sector. The document was approved by cabinet in March 2011 as an industrial policy flagship

initiative under the IPAP.

6.4.2 Provincial Initiatives

NMMM alternative energy projects

In 2005 the Mayoral Executive of the NMBM mandated the Electricity and Energy Business Unit should pursue

the possibility of implementing renewable energy projects within the metro. After an RFP and a tender process in

2006, agreements were signed with private sector partners to develop energy efficiency, solar water heating,

wind energy, energy from waste and landfill gas projects.

In addition, a solar water heating pilot project comprising 1200 units has been implemented in the Zanemvula

Housing Project and a 1.8 MW wind turbine has been erected by Electrawinds.

Renewable energy for the ELIDZ

The ELIDZ commissioned a renewable energy study in 2009 (AGAMA Energy, 2009) and has since attracted

investment by a solar water heating manufacturing business, Matla Solar Heating. In addition, the ELIDZ has

been facilitating the investment in independent power producers (IPPs) and the provision of certified Green

Power to customers in the BCM area of supply.

Renewable Energy Projects in BCM

The BCM has initiated a study to identify and assist with the development of renewable energy projects in the

local authority. The Emonti Green Hub is one example of an energy-from-waste project with is currently under

development.

IPP Procurement Process

In 2011 the Department of Energy announced a competitive Independent Power Producer (IPP) Procurement

Process. Under the Procurement Process, Power Purchase Agreement totalling 3 725 MW will be entered

into with IPPs. This is broadly in accordance with the capacity allocated to Renewable Energy generation in

the Integrated Resource Plan (IRP) 2010-2030. In December 2011, 28 successful bidders from the first

bidding round were announced. Five of these projects were situated in the Eastern Cape. These bidders

were all for the establishments of wind farms with these farms collectively having a total capacity of 470MW.

Provincial Industrial Development Strategy


Going Green

Going Green is an example of a green products and services resource centre which is based in the Eastern

Cape.

6.5 Demand for energy services

The economic and social wellbeing in the Eastern Cape Province is directly and indirectly dependent on i) the

degree to which energy service needs in the province are met (in terms of access to energy services and the

security of supply for these energy services) and ii) the manner in which the energy services are provided

(including the entire energy service supply chain).

Table 6.1: Provincial energy supply by energy carrier

Energy Carrier

Total electricity (purchases)

Electricity - National grid

Electricity - Small hydro

Petrol

Diesel

Paraffin

LPG

Heavy fuel oil

Coal

Natural gas

Figure 6.2: Electricity consumption and cost projections for the Eastern Cape

1Data sources utilised: Electricity: Eskom, 2009; Liquid 2007.

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

Yr 1 Yr 2 Yr 3

R million

R million

R million

R million

Electricity Sales for GWh (R million)


n example of a green products and services resource centre which is based in the Eastern

Demand for energy services


energy service needs in the province are met (in terms of access to energy services and the


(including the entire energy service supply chain).

1: Provincial energy supply by energy carrier1

Quantity

8 599

8 411

187

845

652

131

9

24

97 700

0

Source:

2: Electricity consumption and cost projections for the Eastern Cape

Source:

Data sources utilised: Electricity: Eskom, 2009; Liquid Fuel: SAPIA 2007/2008; Coal and HFO: Sustainable Energy Africa

Yr 3 Yr 4 Yr 5 Yr 10 Yr 15 Yr 20 Yr 25

Electricity Sales for GWh (R million) Electricity Consumption - GWh/a

(PIDS) Implementation Plan, 2012

121

n example of a green products and services resource centre which is based in the Eastern


energy service needs in the province are met (in terms of access to energy services and the


Unit

GWh

GWh

GWh

Ml

Ml

Ml

Ml

Ml

tons

Tons

Source: AGAMA Energy (2009)

Source: AGAMA Energy (2009)

Fuel: SAPIA 2007/2008; Coal and HFO: Sustainable Energy Africa

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Yr 30

GWh/a

GWh/a

GWh/a

GWh/a



122

These data have been developed from research undertaken for the Renewable Energy study for the ELIDZ and

more detail is available from the report on that study.

6.6 Scope of the Eastern Cape to supply energy demand

As discussed, the emphasis until now for addressing i) has been on centralized energy systems and suppliers of

energy carriers (such as electricity from Eskom or liquid fuels from the oil majors) but increasingly there is scope

to meet energy services needs from a combination of centralized, distributed and on-site energy infrastructure

investments. The attached diagram illustrates the ‘landscape’ for these modes of energy service provision.

Figure 6.3 below illustrates three complementary supply chains which all provide energy services at levels of

quality for which customers would buy the services. The prevailing emphasis on centralised grid-based electricity

generation does not take into account the benefits (and costs) of direct on-site supply of energy services or of

distributed energy conversion or generation. This narrow focus on centralised grid-connected electricity

generation is understandable, given the historical development of the energy (and electricity) sector, but it is

unlikely to address many of the policy drivers.

Figure 6.3: Schematic representation of energy supply chains for providing energy services

Primary energy

Resources

• Coal

• Nuclear

• Solar

• Wind

• Biomass

•

Energy conversion /

generation / refineries

• Eskom generation

• Municipal/RED

generation

• Oil refineries

• Other

Energy service needs

• Shaft power

• Heating

• Refrigeration

• Cooing

• Pumped water

• Others

Distribution conversion

/ generation

• OC GTs / CCGTs

• Gensets

• Mini-hydro

• Wind

• Solar

• Other

On-site direct conversion

• Solar water heaters

• Thermally efficient

buildings

• Biogas digesters

• Others

Energy carriers

• Electricity

• Gas

• Wood fuel

• Candles

• Other

Appliance /

conversion

• Electric motors

• Air-conditioners

• Stoves/cookers

• Geysers

• Lamps

Transmission and

distribution

Provincial Industrial Development Strategy

6: Green Industries Sector Profile High-level resource surveys confirm that the solar, wind, hydro and bioenergy resource potentials in the Province

are among the highest among the nine provinces in South Africa

6.7 Industrial investment opportunities in the province

6.7.1 Services provision

The list of current and proposed renewable energy

between 2007 and 2011. As of October 2011

had been made to Eskom. These included

However, based on the IRP 2010-2030 discussed above, it is unlikely that all of these projects will be allocated

Power Purchase Agreements in the near futu

indicated that the Eastern Cape has

The key opportunities for renewable energy

shown below.

6.7.2 Materials/products

Opportunities exist for the entire value chain for product in the Green Industries sector. Specific clusters of

technologies have been suggested in an

clusters of products are discussed in

While significant opportunities exist for renewable energy, the opportunities for energy efficiency are important t

ensure maximum utilization of the primary energy in the overall supply chain.

Figure 6.4: High priority opportunities for DSM savings

0%

5%

10%

15%

20%

25%

30%

35%

40%

Residential Agriculture

High

potential for

DSM Savings


level resource surveys confirm that the solar, wind, hydro and bioenergy resource potentials in the Province

are among the highest among the nine provinces in South Africa.

Industrial investment opportunities in the province

The list of current and proposed renewable energy projects in the Eastern Cape has increased dramatically

between 2007 and 2011. As of October 2011, 73 separate applications for grid connection in the Eastern Cape

been made to Eskom. These included 60 Wind Farm applications and 7 Solar Photovoltaic applications.

2030 discussed above, it is unlikely that all of these projects will be allocated

Power Purchase Agreements in the near future. Recent data measured as part of these project feasibility studies

world class wind energy resources.

renewable energy in the electricity sector are for the residential and industrial sectors as


ggested in an renewable energy study undertaken for the ELIDZ in 2009. These

clusters of products are discussed in the subsequent section.

While significant opportunities exist for renewable energy, the opportunities for energy efficiency are important t

ensure maximum utilization of the primary energy in the overall supply chain.

: High priority opportunities for DSM savings

Agriculture Mining Industrial & Manufacturing

Commercial Transport

Peak Demand % Consumption %

High

potential for

DSM Savings

(PIDS) Implementation Plan, 2012

123

level resource surveys confirm that the solar, wind, hydro and bioenergy resource potentials in the Province

projects in the Eastern Cape has increased dramatically

73 separate applications for grid connection in the Eastern Cape

60 Wind Farm applications and 7 Solar Photovoltaic applications.

2030 discussed above, it is unlikely that all of these projects will be allocated

measured as part of these project feasibility studies

in the electricity sector are for the residential and industrial sectors as


study undertaken for the ELIDZ in 2009. These

While significant opportunities exist for renewable energy, the opportunities for energy efficiency are important to

Source: Singh (2008)

Transport General



124

6.8 Key stakeholders in the Green Industry Sector

The Green Industries sector is a new cluster in terms of the traditional categorisation of industrial strategy

stakeholders. Consequently, these stakeholders are not well defined or identified. Similarly, the Green

Industries stakeholders are not well organised or represented by industry associations.

The list in Table 6.2 is indicative only. A full listing of stakeholders in the Green Industry sector would require a

substantial and ongoing effort. Commercial directories of stakeholders in the EGS sector, such as The

Enviropaedia and Going Green, and membership lists of the fledgling industry associations are already fulfilling

the function of registering stakeholders.

Table 6.2: Stakeholders in the Green Industries sector in the Eastern Cape

Energy customers Energy suppliers Product suppliers Industry

associations

Government

agencies

National& Provincial

Departments Eskom Eveready SANEA IDC

NMBM Willard

SA Independent

Power Producers

Association

Department of

Energy

Buffalo City First National Battery

Southern African

Alternative Energy

Association

NERSA

Coega Central Energy Fund SAEE SANEDI

ELIDZ Working for Energy TIASA Working for Energy

Portnet Just Energy SABA

Transnet Matla Solar SAWEA

Fish River and Wild

Coast SDI

Renewable Energy

Systems SA

MBSA DNA Wind Farm

VW Windlab

Developments SA

Ford/Mazda VentuSA Energy

Delta Langa Energy

6.9 SWOT Analysis

SWOT analysis is an important tool for the identification of potential within a sector or industry. The intention of

the analysis process is to identify Strengths, Weaknesses, Opportunities and Threats that could impact the sector

wither positively or negatively. The following section seeks to conduct a SWOT analysis for the Eastern Cape

Green Industries Sector.

Strengths • Availability of primary energy throughout the province

• Existence of two IDZs, one of which has already developed renewable energy initiatives and

investments

• Existing EE, RE and clean energy initiatives in the NMBM

• Low base of installed capacity for energy supply chain infrastructure – the province has relatively little

energy service infrastructure and consequently it need not be locked into legacy decisions /

infrastructure



125

• Human capital – the young population of the province includes resourceful individuals who will be able

to engage positively in the Green Industries sector

• Academic and research capacity – the universities in the province provide a strong basis for building

human capital and supporting the industrial development of the province

Weaknesses • Clear and strong leadership – Green Industries, especially energy service provision, require long-term

(>30 year) planning and investment decisions. This requires clear and strong leadership.

• Institutional capacity – the province has little provincial capacity to plan, invest and operate energy

service businesses. The bulk of the capacity exists within the two metros, the IDZs and in the private

sector (in the form of consultants). The capacity in Eskom is nominally based in the province but is

not available to the province as it is managed by Eskom.

• Experience – there is limited experience with Green Industries sector. It is a relatively new sector.

Opportunities • Demand for energy services – enterprises, institutions and households require energy services. This

demand for energy service is ongoing and likely to increase (both in terms of value and, to a lesser

extent, volume)

• Existing market for energy services – customers in the ECP are already paying for energy services

• Ability to provide energy services at competitive pricing – the proximity of the primary energy

resources (solar, wind, hydro and biomass) to customers in the province allows for direct/on-site

energy service supply chains or distributed generation energy supply chains (refer to Figure 6.3).

These more-localised generation supply chains reduce losses and costs of energy services provided

by competing service providers located outside the province (and who necessarily have to include

transmission/distribution/logistics costs in their pricing).

• Commercial/ industrial capacity – in the form of two metros and two industrial development zones

which can respond to growth

• Competitive access to global markets – products which are manufactured using clean(er) energy

services will have preferential (or at least equal) access to markets which increasingly require cleaner

production methods.

Threats • Policy and regulatory uncertainty at national level – national government does not appear to have a

clear plan on energy and how stakeholders will participate in this plan.

• Competition from other provinces, IDZs and global players

• Pricing uncertainty for energy services places all sectors in the province at risk.

6.10 Synthesis

The Green Industries sector is poised for massive growth – based on international experience and the projections

for the demand for energy services in future.

The growth in the Green Industries sector globally is expected to be located within developing countries which

share energy service characteristics with the Eastern Cape Province.

The Eastern Cape Province itself is vulnerable to security of supply issues (including access to energy services

customers who currently are not ‘connected’) in the short- and medium-term and it is appropriate to consider

establishing a higher level of energy independence for energy service provision.

The Eastern Cape Province currently relies on energy services which are almost all based on ‘imported’ energy

from other parts of South Africa.



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The future costs of energy services are expected to increase dramatically – in line with the regulated increases in

fuel and electricity which are in place until 2012 – and are expected to be increasingly unpredictable. The risk of

price uncertainty is expected to dampen investment prospects for all industrial and economic sectors in the

Province.

Increased employment opportunities are expected from the development of the Green Industries sector. This is

based on i) the provision of energy services which are provided from ‘within’ the Province rather than from other

provinces and ii) the international experience that shows higher levels of employment (per unit of energy

production) for clean energy technologies and services.

green industries sector profile

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