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1 Renewable Energy Policy 771 Individual Assignment 2014 Compton Saunders [email protected] Name: Compton Saunders Student Number: 13718436 Degree: PGD Sustainable Development Module: Renewable Energy Policy Lecturers: Prof. A. Brent Total Words: 7.217 (Part A: 4200, Part B: 3029, Policy Brief: 900) Due Date: 7 July, 2013

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Renewable Energy Policy 771 Individual Assignment 2014

Compton Saunders [email protected]

Name: Compton Saunders

Student Number: 13718436 Degree: PGD Sustainable Development

Module: Renewable Energy Policy Lecturers: Prof. A. Brent

Total Words: 7.217 (Part A: 4200, Part B: 3029, Policy Brief: 900) Due Date: 7 July, 2013

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Table of Contents

List of Figures ............................................................................................................................ iii List of Tables ............................................................................................................................. iii List of Equations ........................................................................................................................ iii PART A ........................................................................................................................................ 1

Individual Assignment - Renewable Energy Policy: Literature Review ...................................... 1

1. Introduction ........................................................................................................................... 1

2. The Then and Now – South African Energy Policy ................................................................. 2

3. Electricity Markets and Renewable Energy Policy Mechanisms ........................................... 5

3.1 Changing the South African Energy Sector ...................................................................... 5

3.2 Barriers to the Development or Reform of the Renewable Energy Sector ..................... 6

4. Policy Mechanisms to Promote Renewables ......................................................................... 7

4.1 Quantity Based Policy Schemes ....................................................................................... 7

4.2 Electricity Feed-in Mechanism ......................................................................................... 8

4.3 Competitive-Bidding Tenders or Renewables Obligation ................................................ 9

4.4 Small Scale Renewable Projects - Structures Enabling Financial Incentives .................... 9

4.4.1 Green Energy Efficiency Fund (GEEF) ..................................................................... 10

4.4.2 Integrated Demand Management (IDM) ................................................................ 10

5. Conclusion ............................................................................................................................ 11

PART B ...................................................................................................................................... 12

Case Study: Commercial Scale Rooftop PV Supported by Smart Metering, Load Demand Control System incorporating ZigBee technology with IDM Funding for Heat Pumps.................................................................................................................................................. 12

1. Introduction ......................................................................................................................... 12

2. Demand Control and Background ........................................................................................ 13

2.1 Load Management Techniques ...................................................................................... 13

2.2 Benefits of Demand Control ........................................................................................... 13

3. Overview of Technology and Functionality ......................................................................... 14

4. Considerations from Regulations, Policy and Legal Frameworks ........................................ 17

5. Financial Analysis ................................................................................................................. 18

5.1 Assumptions Made During Modelling ............................................................................ 18

6. Conclusion ............................................................................................................................ 22

Bibliography ............................................................................................................................. 23

Policy Brief ............................................................................................................................... 26

Journal ...................................................................................................................................... 28

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List of Figures

Figure 1: Load management load shape objectives. Source (Malik and AL Mata’ni 2007) .... 13

Figure 2: Top view of where Zigbee wireless load switches have been placed to control geyser and boiler loads. ....................................................................................................................... 14

Figure 3: SCADA interfacing allowing viewing and controlling of demand control system..... 15

Figure 4: Demand Control and Metering EcoSystem ............................................................... 15

Figure 5: Maximum Demand of more than 170 KVA before demand control install –cost per month in around R15 000 ........................................................................................................ 16

Figure 6: Maximum Demand of around 135 KVA after demand control install – cost per month in around R11 500 .................................................................................................................... 16

Figure 7: South African Historical Prime Interest Rate. Source SARB (2014). ......................... 19

Figure 8: The energy consumption and cost of conventional boiler system. .......................... 20

List of Tables Table 1: System cost summary ................................................................................................ 18

Table 2: Cash flow analysis. ..................................................................................................... 21

List of Equations

Equation 1: Formula to calculate the Net Present Value. Source (Bas 2013). ........................ 20

Equation 2: Formula to calculate the Internal Rate of Return. Source (Bas 2013) ................. 21

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PART A

Individual Assignment - Renewable Energy Policy:

Literature Review

1. Introduction

The complexity concealed within the concept of policy and more specifically renewable

energy policy has increased with all its numerous discourses, attempt at elucidations while

trying to remain free from its political stronghold. The often controversial political

environment in which energy policy lives adds to its malleability and according to Büscher

(2009), issues around energy policy will continue to remain a heated debate.

The literature reviewed contend with renewable energy policy from a the perspective of

South African history and inequality (Fine and Rustomjee 1996, McDonald 2012, Davidson,

Winkler, Kenny, Prasad, Nkomo, Sparks, Howells and Alfstad 2006); policy and system

disconnect (Büscher 2009, Mosse 2004); and proportion via policy and barriers towards

renewables (Haas, Eichhammer, Huber, Langniss, Lorenzoni, Madlener, Menanteau,

Morthorst, Martins, Oniszk, Schleich, Smith, Vass and Verbruggen 2004, Bird, Bolinger,

Gagliano, Wiser, Brown and Parsons 2005, Agnolucci 2006, Eberhard 2006, Beck and Martinot

2004, Pegels 2010) (Winkler 2005) (Rader and Norgaard 1996, Wiser, Porter and Bolinger

2000).

The numerous methods to promote renewable energy uptake via policy spans across

Renewable electricity Portfolio Standard (RPS) (Menanteau, Finon and Lamy 2003, Winkler

2005); Tradable Renewable Energy Certificates (TRECs) (van der Linden, Uyterlinde, Vrolijk,

Nilsson, Khan, Åstrand, Ericsson and Wiser 2005); competitively-bid tender (REBID)

mechanism (Msimanga and Sebitosi 2014, Winkler 2005, Menanteau et al. 2003); and the

renewable energy feed-in tariff (REFIT) mechanism (Menanteau et al. 2003, Gipe 2006,

Winkler 2005).

The literature reviewed provides a short general overview of South African policy history in

order to understand some of the context in which policy has to operate and also introduces

some of the major policy documents. A short overview is provided on some of the barriers to

the uptake of renewables as well as policy mechanisms which could promote it.

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2. The Then and Now – South African Energy Policy

Policy is more often than not influenced by the South African political landscape. South Africa

is steeped in political history which has evidently played and will continue to play a critical

role within the development of all government policy. The following section will seek to

identify some of the social powers in the South African energy sector.

According to Fine and Rustomjee (1996), the South Africa Minerals Energy Complex (MEC),

noted as a “system of accumulation” during the era of apartheid was a major driver of the

economy. In essence, the MEC makes reference to the wider economy whereby consortium

hegemony guarantees accrual from all sectors (Fine and Rustomjee 1996). In order to stock

the MEC with extraction processes which are heavily energy intensive the countries power

systems became intertwined with industries in order to deliver cheap electricity with a

constant supply. Mining and the production of petroleum from coal make South Africa’s

economy one of the most energy intensive (Fine and Rustomjee 1996). McDonald (2012)

states that ‘‘social and environmental inequities of the MEC’’ are ‘‘simply too great to be

sustained’’ which strengthens Büscher (2009) thinking in having a critical analysis opposed to

a pure problem solving analysis of the status quo in order to promote more radical change.

Büscher (2009) makes a compelling argument by noting that policy deliberations within South

Africa energy sector is not sufficiently interlinked with the political economy that is the driving

force behind it. The criticism made by Büscher (2009) also highlights the disconnect observed

by (Mosse 2004) between 'system goals' and policy goals.

"Policy goals come into contradiction with other institutional or ‘system goals.’ Policy models

are poor guides to understanding the practices, events and effects of development actors,

which are shaped by the relationships and interests and cultures of specific organisational

settings" (Mosse 2004:664)

Considering this critique, a brief discussion on the background of energy policy in South Africa

is undertaken looking at different eras. There is no doubt regarding whether the policy

landscape was influenced by political motives and three periods can be defined when

considering the political economy and policy trends. The first era noted as the era of apartheid

is between 1948 and 1994; the era after apartheid between 1994 and 2000; and the era after

the year 2000 up until current day where real concern have risen above the romanticism of

our democracy (Davidson et al. 2006).

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Policy was shaped in very different ways in each of the periods mentioned above. According

to (Trollip 1996), energy security received high priority and lead to large investment into the

production of petroleum from fuel. Davidson et al. (2006) states that the aim to only benefit

a few was further reinforced by the Electricity Act of 1987 and the Escom Act of 1987 while

Gentle (2009) explains how the Electricity Act of 1987 was used to scrap the idea of energy

supply being 'in the public interest'.

Shortly after promulgation of the Electricity Act of 1987, the country transitioned into

democracy and paved the way for energy policy to shift its focus on addressing the vast social

and economic inequality left by apartheid. One of the most reformist policies to emerge was

the Reconstruction and Development Plan (RDP) which has mass electrification as one of its

key objectives. The Growth, Employment and Redistribution (GEAR) policy, introduced in the

1990’s, and which was more audacious in terms redistributions and deregulation steered the

country towards a more neoliberal trajectory (Schneider 2003). GEAR changed the landscape

of numerous segments of the economy and particularly the energy industry which has also

been greatly influenced by the White Paper on the Energy Policy of the Republic of South

Africa (DME 1998).

The White Paper on the Energy Policy of the Republic of South Africa (DME 1998) revealed

the need to start diversifying the energy mix and that renewable energy sources should be

included, this can be seen in objective 4 and objective 5. These objectives become obvious in

the effort to manage ecological issues related to dominant coal based energy production. This

also led to the promulgation of the White Paper on the Renewable Energy of the Republic of

South Africa (DME 2003b) which as one of its objectives strives to a production figure of

10 000 gigawatt hours (GWh) of energy from renewables (DME 2003b). The White Paper on

the Renewable Energy of the Republic of South Africa (DME 2003b) is painted on a canvas

formed by the White Paper on the Energy Policy of the Republic of South Africa (DME 1998);

Reconstruction and Development Programme (RDP); Growth, Employment and

Redistribution (GEAR); Integrated Sustainable Rural Development Strategy (ISRDS); and The

Constitution of South Africa.

The White Paper on the Renewable Energy Policy discusses the policy against the backdrop

of the following documents: The Constitution, The White Paper on the Energy Policy of the

Republic of South Africa, the Reconstruction and Development Programme (RDP), the

Growth, Employment and Redistribution (GEAR) policies, and the Integrated Sustainable Rural

Development Strategy (ISRDS). Interestingly the White Paper on the Renewable Energy of the

Republic of South Africa (DME 2003b) prioritises energy security while lacking environmental

justice and focusing on instruments required to advance the renewables industry. The

strategic policy goals outlined in the White Paper on the Renewable Energy of the Republic of

South Africa (DME 2003b) are:

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a. The establishment of Financial Instruments.

b. The establishment of Legal Instruments.

c. The development of Technology.

d. Raising awareness and increasing education while building capacity

The objectives stated in the policy is based on a high level description without

implementation recommendations but includes a vision of development (DME 2003b):

"An energy economy in which modern renewable energy increases its share of energy

consumed and provides affordable access to energy throughout South Africa, thus

contributing to sustainable development and environmental conservation."

The White Paper on the Renewable Energy of the Republic of South Africa (DME 2003b)

highlights development related to financial and legal instruments in order to encourage the

uptake of renewable energy technologies. It also states the requirement to enable

Independent Power Producers (IPPs) but only years after the targets set in 2003 the

procurement programme for renewables was promulgated. This happened only shortly

before the release of the Integrated Resource Plan (IRP) (DOE 2011) which via its Policy

Adjusted Scenario provides a long term (2010 – 2030) plan for the generation capacity or

energy mix of South Africa.

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3. Electricity Markets and Renewable Energy Policy

Mechanisms

"Electricity is most efficiently supplied, under capitalism, by a monopoly. Even the most

ardent believer in free competition will usually see that two or more large power station

networks, with two or more overlaid reticulation systems, arranged so that consumers can

choose between suppliers, are likely to be an uneconomic waste of resources. It rapidly

becomes obvious to competing capitalists that a merger or cartel would suit all parties

better: consumers might get lower prices because of increased economies of scale, and

suppliers would have security of demand, so that capital would not lie idle. Power networks

are so large and take so long to build that once a vested interest is established 'entry into the

market' is exceedingly difficult. Nevertheless entries are made and competition does occur at

the boundaries of networks. The sheer size, however, of investments in electricity systems,

means that high risks are run where systems compete" (Christie 1984).

The view taken by Christie (1984) is an accurate reflection of how the South African power

industry was developed and operated. Until recently, very little opposition has been mustered

towards changing the monopoly held by Eskom but this is starting to change due to various

economic, socio-economic, environmental and political drivers.

3.1 Changing the South African Energy Sector

The consumption of conventional or fossil fuels based technology has led to the requirement

of finding ways and means to mitigate its negative environmental impact. Over the past few

decades, on a global scale, the combination of seeking ecological mitigating measures; an

increasing volatility and rise in conventional fuel prices; meeting energy security and

transformation strategies have played critical roles in the driving growth of power generation

capacity by renewable energy (RE) technology. A generally accepted condition for the

promotion and dissemination of renewable energy technologies is the requirement to deploy

policy based instruments (Haas et al. 2004, Bird et al. 2005, Agnolucci 2006)

The South African energy sector is currently undergoing reform in many ways and according

to Eberhard (2006), global reform within the electricity sector is driven by three significant

catalysts:

1. An improvement in the efficiency of investment as well as operations that impair the

delivery of utilities holding monopolies and more so if they are State Owned

Enterprises (SOE) that do not have to account to various stakeholders.

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2. The involvement by the private sector is often relied on due to a requirement for large

investment in new capacity when funds from the public sector is not available.

3. The spread of leases and assets of the electrical energy system, the reduction of debt

by government or the creating economic value is often created by privatisation or

restructuring.

3.2 Barriers to the Development or Reform of the Renewable Energy Sector

There are numerous aspects which act as barriers to the update of renewable energy into the

market. According to Beck and Martinot (2004) there are three categories into which these

barriers can be summarised namely “Market Performance” ; ”Legal and Regulatory” ; “and

Cost and Pricing”.

“Cost and Pricing” where other fuel types which directly compete with renewables receive

subsidies and distorts their final energy pricing; very high capital costs due to large upfront

investment and perceived risk leading to high cost of capital; unfavourable rules around

pricing even if fuel costs volatility does not have to be considered; and the omission of

external environmental costs .

”Legal and Regulatory” where the lack of or vague legal framework does not encourage

investment by Independent Power Producers (IPPs); access to transmission; interconnection

requirements from utilities; and the requirement to have liability insurance.

“Market Performance” where there could be issues around obtaining access to credit;

renewable energy technology performance is still perceived to be a risk; and the scarcity of

cost effective technical skill and commercial information (Beck and Martinot 2004).

Although the barriers mentioned above are universally applicable there are reasons

mentioned by Pegels (2010) which are more specific to the South African context such as

specific waterless technology needs; monopolising of skills employments and innovation for

traditional fossil fuel technology due to historical reasons; and politically it is also unlikely that

public funds would be diverted to develop costly and perceived risky renewable energy

technology.

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4. Policy Mechanisms to Promote Renewables

As a result of reasons mentioned in the preceding section, numerous countries across the

globe have made an attempt at using various policy driven mechanisms to promote the

development of renewable energy. According to Beck and Martinot (2004) the promotion of

renewable energy technologies by polices can be grouped in three major categories:

1. Price-setting polices as well as quantity-forcing policies, which direct the prices and

quantities of renewable energy technologies. Up until recently there were two

dominant quantity-forcing policies associated with quota systems which force

quantities set at a specific amount of renewables at undefined prices and is known as

competitive-bid programmes or Renewable Portfolio Standards (RPS). South Africa

has selected to follow a competitive bidding route which is a quantity-forcing policy.

2. Investment price reducing policies which incentivises investment into renewable

energy technologies on a voluntary basis by offering reductions in the cost associated

with these investments. Some of these policies include tax exemptions and relief,

grants, loans, rebates and subsidies.

3. “Public investments and market facilitation activities” offering a broad range of public

focussed policies that diminish barriers in the market and facilitates the renewable

energy sectors (Beck and Martinot 2004).

4.1 Quantity Based Policy Schemes

Quantity based mechanisms are also often referred to as quota schemes, Renewable Portfolio

Standards, tradable green certificates (TRECs), or quota-obligation mechanisms. The portfolio

standard is a policy instrument which dictates the quantity of renewables. The state will

determine a target which needs to be met through a renewable electricity portfolio standard

(RPS) and utilities or distributors of electricity can select how they wish to meet the

requirements. There is a great deal of experience with RPS with the United States of America

(Rader and Norgaard 1996, Wiser et al. 2000). According to Winkler (2005) a RPS involves a

purchase obligation where the state dictates targets for the allocation of power distributed

as a percentage of each generators sales. In the event where the distributor is one utility, the

mount of capacity that is set aside would equal that of the RPS. According to Menanteau et

al. (2003) the most effective manner to obtain a certain quantity of renewable energy

generation is by the setting of targets. Only local South African renewable energy technology

such as solar wave, tidal, PV, CSP, and bioenergy will be eligible to obtain targets and imported

energy will be excluded (Winkler 2005). Another possible instrument would be the permission

for distributors to obtain reach their respective targets by the trading of credits.

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RPS type policies generally occur where electricity markets have more freedom and there are

numerous electricity sellers available. According to van der Linden et al. (2005) Tradable

Renewable Energy Certificates (TRECs) also are associated with such market conditions and

enabled utilities low renewable energy assets to purchase quota from other players in the

market. A liberal energy market with multiple sellers of electricity is more likely to succeed

with quota based systems. However, the South African market is currently still dominated by

Eskom and systems would not be appropriate for our market conditions to enable the uptake

of renewables provided by independent power producers. Based hereon, the South African

government has opted only to consider the feed-in tariff and the competitively-bid tender

mechanisms.

4.2 Electricity Feed-in Mechanism

One of the most commonly used schemes is a price incentive mechanism known as a Feed-in

Tariff (FIT). The renewable energy feed-in tariff (REFIT) is a mechanism where a set price for

each unit of renewable electricity produced by an IPP is established at which a utility can

purchase energy. The set price or tariffs normally are different for each type of renewable

energy technology and are long term commitments typically 10 – 20 years (Menanteau et al.

2003). According to Winkler (2005), this strategy enables the capacity of renewable power

that connects to the grid to be determined by the market. In the opening paragraph of a

report by Gipe (2006), he states that renewable energy feed in tariff had up to that point

proved itself to be the mechanism resulting in the most global success regarding the

investment uptake and stimulation of the renewable energy generation technologies

(Mendonça, Jacobs and Sovacool 2009). Globally, FIT’s are the most commonly used policy

mechanism in order to promote renewable energy technologies and projects with more than

70% of PV projects worldwide driven by the mechanism (REN21 2013).

Renewable energy tariffs had also yielded an increase in competition among competing

manufacturers while delivering more generation capacity and stimulating the development

of renewable energy technology than the alternative policy mechanisms (Gipe 2006). Winkler

(2005) also noted that FIT’s are generally favoured by the market. There are variations of

REFIT policies where prices as well as purchases are guaranteed and according to Kulatilaka,

Santiago and Vakili (2014) such policies can guard investment in renewables against

unpredictability regarding the market price of electricity; reduce risk via purchase guarantees;

and foster an investment atmosphere which is predictable thereby leading to growth in the

renewable energy sector. Kulatilaka et al. (2014) as well as Menanteau et al. (2003) mentions

that these policy guarantees are often underwritten or cross subsidised by tax payers.

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The context within South Africa brings with it very high uncertainty regarding the pricing

renewable energy projects and setting correct FIT’s could be a challenging task. This

essentially could lead to very high costs even though there are potential ways to mitigate this

(Winkler 2005). However, the South African feed-in tariff strategy was abandoned with

Webber Wentzel outlining anti-competitive and legal concerns and a decision was made to

op for the competitively-bid tender (REBID) mechanism (NERSA 2011).

4.3 Competitive-Bidding Tenders or Renewables Obligation

A renewables obligation or tendering scheme is another way of setting the amount of

renewable energy that gets generated. Essentially, a tender is announced for a specified

production capacity with the goal of obtaining the best price from one of the bidders. This

type of mechanism is however is mostly used for large projects due to the demanding

administrative and financial requirements involved in the process which is noted by (Winkler

2005) to having a market constraining effect.

One fundamental difference between a FIT and a Renewables obligation is that the price gets

set up front with a FIT but not with a renewables obligation. The process determines a

quantity of renewables to be generated which is then put out on tender (Winkler 2005). The

price per kWh is determined though the bidding process (Menanteau et al. 2003) and the

winner of the bid is determined by whoever offered the lowest price with a price guarantee

according to a contracted period on completion of the process (Winkler 2005).

South Africa has been very successful in its implementation of its REBID program despite the

global market indicating a high failure rate of these contracts, up to more than 70%, due to

low bidding (UNEP 2012). Msimanga and Sebitosi (2014) however thinks that they the REBID

mechanism is restrictive as it tends to exclude certain stakeholders while it potentially will

not be able to meet the target quantities or levels of renewable energy penetration as

desired.

4.4 Small Scale Renewable Projects - Structures Enabling Financial Incentives

There are numerous financial incentive structures to promote small scale renewable propjets

such as green funds, energy efficiency, Accelerated Depreciation, carbon tax and carbon

trading. This study will however only briefly discuss energy efficiency and the Green Energy

Efficiency Fund as it is applicable to the case study.

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4.4.1 Green Energy Efficiency Fund (GEEF)

A partnership between the Industrial Development Corporation (IDC) and the German

Development Bank (KfW), underneath the South African-German Financial Cooperation

framework, has been established in order to support renewable energy as well as energy

efficiency investment via a Green Energy Efficiency Fund (GEEF) (IDC 2014). However, there

are criteria which need to be met such as that only South African private sector companies

will be considered and where projects will entail energy efficiency and self-consumption

energy offset via grid connected RE systems. Funding is also only provided for projects

between R1mil to R50mil and for up to 15 years at an interest rate of prime less 2%.

4.4.2 Integrated Demand Management (IDM)

Although renewable energy is generally the major point of discussion, consideration should

be given to energy efficiency strategies as they play and important part in sustainability and

the mind shift required by the global population. The “National Energy Efficiency Strategy for

South Africa”, released in 2005, posed an objective of obtaining an energy utilisation

reduction of 15% by the year 2015 (DME 2005). South Africa as a country was facing energy

major supply challenges and as part of the mitigation measures the Integrated Demand

Management (IDM) program was establish by Eskom1. The framework adopted by the

Integrated Demand Management program stems from numerous policy documents

published by the Department of Minerals and Energy such as the White Paper on Energy

Policy (DME 1998) and Energy Efficiency Strategy of the Republic of South Africa (DME 2005)

as well as the Energy Efficiency and Demand Side Management Policy (NERSA 2012) published

by the National Energy Regulator NERSA. The documents released by the DME only mentions

that there is great potential within developing energy efficiency measures while the National

Energy Regulator, NERSA, as a directive to safeguard energy security. The Integrated Energy

Plan (IEP) for the Republic of South Africa (DME 2003a) which in many ways acts as base for

the Integrated Resource Plan (IRP) (DOE 2011) also provides the framework for major

development and decisions related to energy planning. The Integrated Resource Plan, which

looks over a 20 year window, also considers energy security by developing and planning

demand and supply side strategies to achieve this in an economical way.

Until recently ESKOM had various programs with the aim assisting in short term energy

security by coordinating IDM initiatives to optimise energy consumption (ESKOM 2013a).

ESKOM (2013a) noted that crucial parts of the IDM initiative is the advent of technology,

improved processes and changing customer behavioural patterns to being more energy

efficient. Although Eskom offered a range of funding models which was aimed at promoting

1 Public power utility operating in South Africa

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efficiency projects, an announcement was made that the IDM programme would be put on

hold until further notice (ESKOM 2014).

5. Conclusion

South Africa energy sector is indeed still on its long walk to freedom. The energy sector is

steeped in political interest. The energy sector has been under tremendous pressure for the

past decade due to capacity constraints and sustainability. (Büscher 2009) argues that there

should be a move towards focusing on the political economy of energy as there are numerous

links between politics, socio-economic, poverty and sustainability which need to be

considered.

A review of some of the options to promote renewable energy and factors to be included in

the political economy of energy shows that FIT’s are globally seen to be the most common

policy mechanism and also less resource intensive (REN21 2013). Quantity driven schemes

often require markets which have more freedom opposed to a monopolised system as it

exists current in South Africa. These are typically markets where TRECs would be a able to

operate as promotion mechanism (van der Linden et al. 2005). A general concern around

competitive bidding or tendering schemes were that they are restrictive and could potentially

exclude stakeholders as it is only viable for large scale projects (Msimanga and Sebitosi 2014,

Winkler 2005). Although globally competitive bidding have high failure rates (UNEP 2012), the

South African government had up till now had a successful implementation of its REIPPPP

program. Other incentive structures such as the Green Energy Efficiency fund provide

affordable funding for viable renewable energy and energy efficiency which meet certain

criteria while the Eskom IDM initiatives or programs have been offering rebate and funding

programs since 2005 which have now all been put on hold.

The affordability of electricity is an important part of major polices developed by government

and within the South African environment institutional and budget considerations will play a

role in keeping prices as low as possible (DME 1998). According to Winkler (2005) numerous

studies have shown that in order to obtain the most positive beneficial change in terms of

the environment and the economy a combination of the policy mechanism mentioned should

be deployed.

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PART B

Case Study: Commercial Scale Rooftop PV Supported by

Smart Metering, Load Demand Control System

incorporating ZigBee technology with IDM Funding for

Heat Pumps

1. Introduction

The researcher had, between 2010 and 2013, part of a project which entailed the

development and implementation of innovative metering and demand control systems.

These integration and solution development projects centred on smart metering applications

with real-time and quasi real-time data collection combined with localised real-time

maximum demand control. These projects were also unique as they were the only projects of

its sort in South Africa using ZigBee2 in the system design.

This case study will investigate the potential of stimulating the commercial scale solar PV

industry by combining new build commercial PV systems with energy efficiency projects. The

objective would be to investigate project viability when no FIT is available but where the

customer received the benefit of self-consuming energy generated by a PV system. Although

the actual projects only consisted of smart metering, maximum demand control and energy

efficiency measures this study will incorporate PV from a theoretical perspective. An attempt

will be made to assess projects from a financial feasibility perspective when combining energy

efficiency; maximum demand control; and commercial scale PV projects. Power generation

and energy efficiency projects are not only technological developments or deployments but

also a function of policy and societal behaviour.

Technology plays a very important function in transitions related sustainability and the multi-

level perspective (MLP), which is considered as a socio-technical transition, deliberates not

only the influence of technology but that of policy, ecology, socio-economics and economics.

Technological curves are not solely influenced by engineers but also those who make policy,

research, society and investors (Geels 2002).

2 ZigBee is of high level wireless communication protocol that can form mesh networks and enables the relay of information between devices.

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2. Demand Control and Background

Maximum demand controls systems are capable of altering the load profile or demand level

at which a system consumes electricity. According to Malik and AL Mata’ni (2007) involves

the decrease and modification of the electricity demand against time profile with the aim of

improving the balancing act of meeting the power needs of customers with that of the

utility’s’ capacity to generate and distribute power. Demand control is often a function of

behaviour and ABU-Zeid and AL-Shakarchi (2002) stated that the success of demand

management programs often depending on their design and how they influence end users.

According to ABU-Zeid and AL-Shakarchi (2002) load management aims to flatten the load

curve by influencing the behavioural use of energy, usually via financial incentives, through

striving to reduce consumption in high demand periods by shifting it to low demand periods.

2.1 Load Management Techniques

There are numerous techniques, as shown in Figure 1, which can be deployed in order to

obtain the objectives. The demand control objective of the system mentioned in this study is

load shifting whereby peak demand is limited and energy is shifted into low demand periods.

Load shifting often does not reduce the amount of energy consumed but just controls when

the energy is consumed within a system.

Figure 1: Load management load shape objectives. Source (Malik and AL Mata’ni 2007)

2.2 Benefits of Demand Control

Utilities and consumers can benefit, especially financially, from the implementation of

demand control systems. Promoting public awareness concerning the benefits of energy

efficiency is often neglected according to The Energy Efficiency Strategy of the Republic of

South Africa (DME 2005). Shifting and decreasing peak load can have a substantial cost saving

benefit for business users. Commercial customers get billed on different tariff structures

compared to residential users and the time energy is consumed, or Time-Of-Use (TOU), can

offer a financial benefits in conjunction with limiting demand below notified demand3.

3 Customer has to in writing notify Eskom (the utility) what their notified maximum demand will be.

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3. Overview of Technology and Functionality

Since 2010 a large scale and ongoing project smart metering role out for large power users

(largely commercial) in the Nelspruit municipality supported by the advent of automated

meter reading (AMR4) brought about a change in how the Municipality and the business

consumers viewed their use of energy. The environment created the foundation where

additional projects such as energy efficiency initiatives and other energy related projects

could be built.

The advent of smart metering and AMR enables users to review energy consumption data

online and has had a positive impact on how users are managing their consumption and

energy bill. Smart meters, heat pumps and other mechanisms of energy have been around

for quite some time and are reliable tools within the energy efficiency. However the demand

control solutions have good prospects but not commonly used as it is not well known and

generally costly to implement.

The demand control system deployed at numerous businesses and schools in Mpumalanga is

unique as is uses Zigbee wireless mesh to communicate across the control network. Zigbee

was selected as the technology could practically be deployed in situations where a big area

(see Figure 2) had to be covered by control devices. The Zigbee devices have the ability to

relay data from node to node and create a wireless mesh via which information can travel

back to the central control unit.

Figure 2: Top view of where Zigbee wireless load switches have been placed to control geyser and boiler loads.

4 Automated meter reading (AMR) is the collection of energy consumption data via remote methods such as GPRS in order to bill clients. No person has to visit the meter to take readings.

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Figure 3: SCADA interfacing allowing viewing and controlling of demand control system.

Figure 4: Demand Control and Metering EcoSystem

Zigbee, unlike outdated radio controlled ripple switches, uses two way communication which

allows the real-time reading of data and control of devices such as smart meters and load

shedding relays. Two way communication also enables the development of real-time

maximum demand control algorithms that can respond to actual system conditions and not

rely on static statistical data. In addition Supervisory Control and Data Acquisition (SCADA)

can be designed and implemented allowing the visualisation and manual control of the

system using a desktop computer, see Figure 3. In Figure 4 is an example of a system

implemented at a school which offers all three of the technologies previously mentioned.

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In addition to the demand control system this study will consider what the impact would be

of the installation of a commercial size PV were to customer remain a gross consumer of

energy. This means energy will still be flowing from the grid to the customer premises but the

embedded generator (EG), the PV system, will only assist in decreasing the amount of energy

required from the grid. The financial saving due to this would be the same as the rate per kWh

paid for energy by the customer which is a common scenario in South Africa (Reinecke,

Leonard, Kritzinger, Bekker, van Niekerk and Thilo 2013).

The combination of having a demand control system performing load shifting is that the time

when the energy is consumed can now be controlled to ensure that the most energy is used

in conjunction with PV production to maximise self-consumption. This also ensures that there

is a more evenly distributed level of energy demand. Figure 5 shows the peak demand and

energy consumption before demand control system was installed while Figure 6 shows the

effect of the demand control.

Figure 5: Maximum Demand of more than 170 KVA before demand control install –cost per month in around R15 000

Figure 6: Maximum Demand of around 135 KVA after demand control install – cost per month in around R11 500

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4. Considerations from Regulations, Policy and Legal Frameworks

NERSA, The National Energy Regulator of South Africa has a mandate to implement policies,

regulations and laws related to energy. NERSA is also responsible for publishing Distribution

Grid Codes which generally refer standards developed by South African National Standards

(SANS) and include but not limited to Distribution Metering Code, Distribution Network Code

and the System Operating Code. One of the codes in development is the NRS 097-2 standard

which is more specific to renewable energy technologies. NERSA also released “Standard

Conditions for small-scale (<100kW) Embedded Generation within Municipal Boundaries” and

in process of drafting the “Scheduling and Dispatch Rules” (Reinecke et al. 2013).

Currently South African does not have a complete set of standards for small-scale embedded

generators. The South African Bureau of Standards (SABS), which is also in charge of

maintaining the South African National Standards (SANS) is currently busy developing the

standards related to the complete installation of PV systems (Reinecke et al. 2013).

The SABS also works with the National Rationalised Specifications Project Management

Agency who is currently developing the NRS 097 standard for grid interconnection of

embedded generation systems. The objective is to have the NRS 097 standard provide the

overarching framework for embedded generation and consists of NRS 097-1, for systems

larger than 100KW and requiring a medium or high voltage connections; and the NRS097-2

which will consider small-scale rooftop type applications (Reinecke et al. 2013).

This particular case study is relevant to a dedicated LV feeder and would fall within the

“Simplified utility connection criteria for LV connected generators”. This could eliminate the

need for an expert analysis of grid impact and reduce time and cost. This is a draft document

which is under consideration as to whether it should be endorsed by the NRS 097. The

requirement for this case study would thus be for the maximum generation not to be more

than 75% of the notified maximum demand (NMD) and be balanced across all three phases.

The NMD for the customer in this case study is 180KVA which limits the possible PV system

to 135KW however a 120KWpeak system is selected by considering Figure 6.

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5. Financial Analysis

5.1 Assumptions Made During Modelling

This section will consider a financial analysis of a practical combination of existing and

implemented solutions. The system has 26 smart meters in order to measure and bill the

energy consumption of teachers living on a school premises. The school provides cost

effective living arrangement to attract teachers. A Zigbee based maximum demand control

system is installed to control the 26 geysers and 4 boilers where the boilers will be replaced

with heat pumps. The IDM Standard Program will be considered for this case. A 120 KW

rooftop PV system will be considered as an embedded generator.

Table 1: System cost summary

This project is ideally suited toward the Green Energy Efficiency Fund as it contains an energy

efficiency in the form of heat pumps as well as maximum demand control. The project also

involves a renewable energy component by using a PV system to generate energy for self-

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consumption. The total project cost is over a R1mil and would thus be eligible to receive

funding for up to 15 years at prime minus 2%.

The cost of the demand control system comes in at R136 800 and financed with a monthly

payment of R15 88.36 at 7% which is 2% less than the current prime rate as seen in Figure 7

below. The cost for the PV system is selected at R15 per watt peak, based on cost of Vodacom

PV system noted by Msimanga and Sebitosi (2014) as well as research by Reinecke et al.

(2013) indicating figures of R16 per watt peak. An additional cost reduction is assumed for

economy of scale, learning rates and PV panel cost reduction in order to obtain R15 per watt

peak. The total cost of the 120 KW PV system is calculated to be R1.8 mil which is also financed

at 7% with a monthly repayment of R20 899.53 via the GEEF. The load term is 10 years.

Figure 7: South African Historical Prime Interest Rate. Source SARB (2014).

The installation and capital cost for heat pumps and metering are paid up front with a two to

four week payment period of IDM Standard Product rebate for approved heat pumps (ESKOM

2013b). Using the Standard Product Toolkit, it is calculated that a rebate of more than R50 000

could be obtained via the IDM programme, this was verified by a consultation with Dr Johan

Delport (ESKOM 2013b, Delport 2013).

The automated meter reading and billing services, management services, general and PV

related maintenance incur a monthly cost of R2000, R1150, R750 and R1800 respectively. PV

related maintenance is estimated at 0.1% of the total PV system cost.

A energy saving of up to 1/3 can be obtained by using heat pumps instead of electric boilers

(Rousseau and Greyvenstein 2000). History consumption data, as shown in Figure 8, indicates

that the cost due to electric boilers could be reduced from more than R6000 pm to around

R2000 pm due to heat pumps, translating to a saving of more than R4000 pm.

Due to the installation of smart meters at each of the 26 tenant houses, collecting electricity

consumption cost from the tenants would equate to an additional R13 000 per month.

Looking at Figure 5 and Figure 6 the effect of the maximum demand control system can clearly

be seen as the demand is brought down from around 180 KVA to 140KVA translating to a

saving of more than R3000pm. Figure 6 clearly shows the “flat” profile which also an improved

load factor due to the real-time maximum demand control. Load factor, which is the average

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power demand divided by peak demand, is good indicator to typify customers and can play a

role in determine the customer tariff (Masters 2005). The closer the customer is to 100% load

factor the less costly it is for the utility to supply power as power is being used more efficiently

(Masters 2005).

A 10% inefficiency rate is applied to all savings mechanisms in to account for various

circumstances which reduce the savings they deliver. These instances could be PV panels

malfunctioning, control system failures, metering errors.

Figure 8: The energy consumption and cost of conventional boiler system.

In assessing project profitability or viability the “hurdle rate” is a very important decision

making criteria (EPA 1998) and regarded as marginal cost of capital attuned to the related

project risk. As the cost of capital increases and risk increases, it will effectively increase the

hurdle rate. According to EPA (1998) a 20% hurdle rate should be considered for energy

efficiency relate projects and will be used for this case study discount rate.

Net Present Value (NPV) as well as the Internal Rate of return (IRR) are methods used to

determine the feasibility of projects (Bas 2013). NPV is calculated by considering the net cash

flow generated in the lifetime of a project and has to include initial costs and discount future

cash flows (EPA 1998).

𝑁𝑃𝑉 = ∑𝑏𝑛 − 𝑐𝑛

(1 + 𝑟)𝑛

𝑁

𝑛=0

[1]

Equation 1: Formula to calculate the Net Present Value. Source (Bas 2013).

The cash flow period for 10 years is indicated in Table 2 below after which the NPV of the

project is in excess of R74 000. According to Bas (2013) projects with a negative NPV should

not be considered while Park and Sharp-Bette (1990) states that if the NPV is positive it should

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be considered. This project will make a huge impact on operations and cost saving and needs

to be considered.

The Internal Rate of Return (IRR) is the interest percentage that associates project input

capital costs with expected cash flow. The IRR can assist in determining how profitable an

investment is the hurdle rate or loan rate can directly be compared (EPA 1998).

∑𝑏𝑛 − 𝑐𝑛

(1 + 𝑟)𝑛

𝑁

𝑛=0

= 0 [2]

Equation 2: Formula to calculate the Internal Rate of Return. Source (Bas 2013)

A value needs to be found which can substitute 𝑟 and satisfy the equation, this is how the IRR

is found. In the event that that the IRR is larger than the “Minimum Attractive Rate of Return”

or hurdle rate the project can be considered and if it is below should be declined (Bas 2013,

Park and Sharp-Bette 1990). Over the 10 year period the case study project delivers a 24% IRR

which is 4% above the 20% hurdle rate and a good indication that the project is indeed

feasible, see Table 2 below.

Table 2: Cash flow analysis.

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Provisions are made for regulations allowing savings related to energy efficiency by allowing

a tax incentive to be claimed for projects related to energy efficiency. The incentive, which

can be used until 2020, was brought into effect in November 2013 is provisioned for by

Section 19 of the National Energy Act, 2008 (Act no 34 of 2008) (DOE 2008) in conjunction

with section 12L of the Income Tax Act, 1962 (Act No. 58 of 1962) (DTI 1962). The case study

IRR and NPV can be improved by incorporating this tax incentive into the model.

6. Conclusion

This case study demonstrates the financial viability of rooftop PV and energy efficiency

projects should the correct incentives be in place. Although a FIT was not directly applied the

case study accounted for the most common current scenario where grid feedback via rooftop

PV is not allowed, however there are a handful municipalities which have programs to support

grid feed. The financial viability could be greatly increased should a FIT be applied during

periods where energy is not required such as weekends and tax incentives or accelerated

depreciation are realised. The study clearly shows that projects like these, which do not

require new policy and technical feasibility studies can be viable and offer real value to the

people and the country.

A statement by the Minister of Minerals and Energy, Phumzile Mlambo-Ngcuka reads, “Major

energy savings can only be achieved through changes in people’s behaviour, and that depends

on informing them about what options exist” (Mlambo-Ngcuka 2005:i). Energy efficiency

thought technologies and behaviour is a proven method to achieve short terms and long term

financial, environmental and social goals. There is also a clear benefit for the utility and the

customer which can roll over to other socio-economic benefits such as jobs.

Allowing enough time and hind sight a fair degree of certainty can be attached to making

predictions around the viability of such projects however the question of sustainability is still

and open debate. There are too many variables affecting sustainability such as behaviour,

business relationships, policy mechanisms, financial incentives, incentive and energy price

stability which could all alter the course of project sustainability. There is a real need for

government to step up and finalise technical standards such as the NRS097 and other relevant

documents. This combined with firm commitments on incentives would help drive the uptake

of legal RE system grid connections and boost confidence while reducing perceived risk.

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Policy Brief Energy policy has always greatly been influenced by the political agenda of the reigning South

African government and large corporate entities. This will mostly likely continue to be the

case and there needs to be an awareness of how interlinked issues of poverty, economic,

ecology, sustainability and policy are. This is highlighted by Büscher (2009) who notes that

special attention needs to be given on the political economy of energy. There should be a

conscious shift towards diminishing the second economy and eradicating the Minerals Energy

Complex (MEC) propagating social and environmental inequalities. The South African energy

sector is currently still monopolised by Eskom which limits the policy mechanisms that could

help drive the uptake of renewable energy projects. Policy based instruments are a well-

known and accepted methods to promote dissemination of renewable energy technologies

(Haas et al. 2004, Bird et al. 2005, Agnolucci 2006).

The energy sector which is starting so see a reform requires catalyst to drive the change.

According to Eberhard (2006) there is a need to improve on the operations of state owned

monopolies such as Eskom as well as investment efficiency; strong involvement from the

private sector due to large capital investment requirement; and the redistribution of electrical

generation assets, reduction of debt and privatisation.

There are thus many barriers which need to be overcome in order to promote and develop

the renewable energy sector. There are three main categories of barriers which need to be

overcome which are related to “Market Performance” ; ”Legal and Regulatory” ; “and Cost

and Pricing” (Beck and Martinot 2004).

Costing and Pricing: Renewable directly compete with fuel types which receive state

subsidies. This creates a pricing distortion on the final energy price. Renewables have high

upfront capital costs and with the perception of the technology being high risk increases the

cost of capital. The cost of renewables should be compared to conventional fuels on a more

realistic base with consideration of volatile fuel process as well as negative environmental

and health impacts to understand the true cost.

Legal and Regulatory: There is a lack of clear legal framework related to many aspects of

renewable technologies specifically for small scale or Independent Power Producers (IPPs).

This combined with difficulty in interconnecting with utilities which discourage investment.

There needs to be a drive in establishing the required legal framework to promote renewable

technologies.

Market Performance: If there are problems gaining access to credit and the lack of affordable

commercial information the uptake of renewable projects could be hampered. There is a need

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to make commercial knowledge available to the local market in order to grow confidence and

boost investment.

A Case Study

A brief overview on a case study performed. A study was done to assess the financial

feasibility of developing projects which combine energy efficiency technology with

renewables. The study involved deploying a smart metering system, maximum demand

control system and a 120 KW commercial rooftop installation. The project costs amounted to

around R2.3mil with R2mil funded via a 7% interest rate load from the Green Energy Efficiency

Fund (GEEF). Additional rebates were received assuming that the Eskom IDM Standard Offer

was still applicable for energy efficiency measures. Saving were obtained from the energy

efficiency measures such as heat pumps, demand control and self-consumption of energy

generate by the PV system at a mere 52c per kWh. After a 10 year period the Internal Rate of

Return was 24% which is 4% above the target hurdle rate with a positive NPV. Clear signs that

this study could deliver a viable project according to Bas (2013) and Park and Sharp-Bette

(1990). The financial performance of this project could be made even more attractive by

ensuring policy and standards framework is in place to facilitate the feedback of energy to the

grid and the payment of a FIT. The application of tax incentives or accelerated depreciation

could further improve the case.

There is a clear alignment between policies, laws, regulations and discussions around rooftop

and commercial scale PV when looking at the division making happening in government.

There is a positive movement towards accepting and promoting renewable energy

technologies (Reinecke et al. 2013).

There are however areas of shortcoming which need to be addressed. There is yet to be a

complete set of standards which outline the requirements for grid connected small-scale and

commercial-scale rooftop PV systems. Without these standards there is a hesitancy from

municipalities as well as investors who have to consider factors such as safety and grid

stability.

Currently there are now real incentives in place for connected small-scale and commercial-

scale rooftop PV systems. Residential users cannot benefit from accelerated depreciation, tax

incentives, IDM programs or GEEF funding. The Eskom IDM funding has been put on hold

which also removes this possibility for business users.

Ultimately there is a requirement for comprehensive and complete technical standards, the

correct legal and policy framework to encourage consumers to opt for legal connections

where they will be incentivised for the energy they can deliver.

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Journal

Monday 19 May 2014

First day of the course and very excited about the week ahead. Quickly looked through the

course outline and hoping that the course will at least be able to deliver its objectives. As we

start I realise that I will have to hand in an assignment for this course and experienced slight

panic as my job is much more demanding and often requires me to work all the time due to

the steep learning curve and the stage the projects are in. I have at least 50% less time than I

had last year and very concerned how this will affect my time and ultimately my mark – guess

it’s not always about the mark but should try and gain more from the experience. Not been

at the SI for some time and took a walk around to see what has changed. It’s challenging not

having to concentrate and class while dealing with email which I simply cannot ignore as the

projects are in a critical stage involving contractual negations around takeover as well as my

infrastructure project. Very relieved that it’s Monday and that we will not need to garden.

Prof Brent has been involved in RE field for quite some time – great to have access to such

specialist resources driving critical issues within the Country. Group presentation is around

Bioenergy policy and in a group with Mbali, Karen, Therese, David, Waldo. Always find it

difficult working with Karen but I will try a slightly different way of approaching the group

work this time, will try and be more relaxed if things don’t progress as quickly as to see if it

works better. Never tiring se see all the diverse people attending the courses. Someone

mentioned something interesting in class around mining companies not being able to sell

their aluminium as it is being produced using coal based electricity. Prof mentioned the first

and second economy – heard this before but not sure what it meant. Read up about it the

evening and interesting to note that President Thabo Mbeki was responsible for publically

mentioning that the country has two parallel economies although it is a common

development term. Scary stuff that as literature mentions that if there is no effort made to

reduce inequality and reduce the second economy the South African economy growth as a

whole is unsustainable Another interest thought that came out of class discussions was that

South African cannot just go above the 15% renewable mark without having other

technologies such as gas which has a high availability and capacity factor. Prof also mentioned

Amory Lovins book – Reinventing Fire which is a must read as well as another book Who Killed

the Electric Car – just need to find out who the author is. Overall a good first day.

Tuesday 20 May 2014

The morning reading was insightful as it spoke the fact that we often spend our time telling

other that they are on the wrong path instead on focusing on our own path. I guess we are all

guilty of this at some stage and that we should continue to recognise if we are doing and

change our approach or focus. Garden work – not my favourite thing at the SI but its part of

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the course and I have to be part of the team activities. Dr Sara Grobbelaar presented her

incredibly long slideshow. Wish there was a few days over which she could share her ideas

and slides – so much information. What was once again evident is the fact that politics are

simply always going to influence policy and we will probably be stuck with the fact that the

battle between the “Market model vs Polis model” as noted by Dr Deborah Stone

What was evident from the presentation as well as Prof Brent’s presentation the previous day

is that although we are in a policy course, technology and innovation plays a large part in the

policy process.

Just reflecting on our group project – it has gone much better than in some of the other

modules. My new approach seems to be helping and working for me. Workload for the group

project is ok but seems like the afternoons are packed and we won’t get too much time to

work on it – still interesting and fun as the content gives a good overview on policy in general

and the bioenergy industry – it all seems so complicated with this act and that regulation and

whitepaper – not sure how everything always fist into each other – Where the handbook?

Still trying to find the relationship between my work in the RE field and what we are doing in

class – the practise sill seems very disjointed from reality. There is so much that goes on

behind the scenes in these multi billion rand REIPPPP projects which no one is aware of. So

much work that goes into establishing the infrastructure and systems (not just technology

system) to run these projects – with very little skill – everyone is adapting as they go along –

it’s crazy and incredible at the same time. Need to make a note to read “A system failure

framework for innovation policy design a system failure framework for innovation policy

design” by Woolthuis.

Took a walk over lunchtime to the farm next-door and managed to take this amazing photo.

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Wednesday 21 May 2014

Morning work was sweeping – much better than gardening - haha. The reading was about

teaching your kids about the value of living life to the fullest. Something I need to remember

when I eventually have kids. Found this interesting poem by Erin Belieu about energy policy:

“Energy Policy

This practical kid, born

Capricorn, actuary of the stars,

he's planning my death,

sure of the thermodynamic heaven

he's invented. Because energy

must go somewhere in this system,

in his I'll be repurposed as a tree.

And this comforts me, as no discount

coupons for paradise ever could.

Finally fitting, I'll meet my zero as

the absolute, container of soot buried

at a sapling's root. An organized boy,

he considers all options, which tree to

choose. I haggle for the ornamental—

jazz hands of a Jacaranda,

Fire Thorn to match my hair—

but am dismissed.

He insists on something sturdy:

What lives forever? Then, revising,

Or closest to? Next comes

the issue of where, harder

to answer, as Sequoias don't grow in

Nebraska. Let's put, he says, a pin

in that. It's his meeting, so we move

on to scenarios, the portrait he'll nail

to my trunk, a bench to sit on when

he comes to talk with me. But what kind

of bench? There's much to discuss with

this faithful child, who knows better than

to bet on the equilibrium, watching

ice in his glass, disordered by degree,

the first shareholder in my entropy. “

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We had Bruno from the UCT modelling team to come and give us on overview of some of the

things they are working on. This was great as I was using the SNAPP model for my RE system

assignment which Bruno has been involved in developing. I had a few questions on using the

model and Bruno was able to assist me – this was fantastic. Once again came across TRECs

which I find interesting – the concept makes sense and can understand why it is having

difficulty in gaining uptake – the systems and policies are simply not strong enough to support

it. Another question I have is whether the possibility or mechanism exists for rooftop PV

owners to sell TRECs if most of the energy they generate is for self-consumption as there is

not really any strong policy or frameworks in place for anyone to feed into the grid. Many

countries such as Germany have incentives to assist in driving the rooftop PV market where

South Africa does not really have any. Currently there seems to be quite a lot of market

research around innovation diffusion and there is a real need for government and policy

assistance in order to move these RE technologies along the S-Curve.

Thursday 22 May 2014

Starting the day with gardening- “joy”, but it did manage to wake me up a bit. Reflecting on

the gardening – it could be a metaphor for what we are trying to do. Essentially we are trying

to change the world or at least the country and in order to do so one needs to get into the

thick of things – get ones hands dirty in order to facilitate chance.

Found the lecture by Dr Josephine Musango very interesting. It was insightful as I always just

assume that that we should just implement measures to reduce GHG or promote renewable

energy without realising that there is often a cost associated with this. The opportunity cost

thus always needs to be considered – this is something I can use in my job as optimising solar

or wind power plants will have a cost associated with this – and need to ensure that the

benefits out way the cost.

Group work has been going slightly slower than expected as we don’t have too much time

during the day to work on this. Feel we need more time. Our framework for the presentation

is coming along well and now we just need to finalise the detail. The group has been working

together well. We are all out of our depth a bit on the bio energy as a technology – it’s all very

confusing at times as there are first generation and second generation technologies using

different processes to produce various fuels. It has been a bit frustrating trying to find relevant

material on policy and figure out how they fit into each other.

Friday 23 May 2014

The last day of lectures have arrived – it’s been an exciting week. Although the community

service and the stretching does not always invoke too much enthusiasm it is a welcomed

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break from my normal routine and I guess that it all contributes to making friends who are all

like-minded in the sense that we strive towards building a more sustainable future.

During the week there was often reference made to the REIPPPP program which is has been

absolutely amazing in helping the country grow its renewables fleet. However the bidding

process requires certain socio-economic commitments but is there really a benefit for the

common man on the street.

Something which come up again in discussions was that the barrier to renewable energy and

energy efficiency funding or incentives is that it is difficult for financiers and policy makers to

realise the value captured in the sustainability facets of projects – there must be a means to

emphasise the underlying value.

Group work is almost complete we just need to do the policy brief. This was more challenging

than anticipated. Having never done one before nobody was sure what needed to be done.

As for the presentation – we had all the content and slides and now it was just up tea each of

us to learn our bit. The group worked well together.

The ISMO bill was mentioned in class earlier the week and find it difficult to see how we will

ever really have an open market for power and the promotion of small scale renewable until

this has been passed. Eskom is not equipped to be the generator and purchaser or energy.

The DOE seems to be delaying key policy and finance decisions on this – would be interesting

to know why they are holding back. In my search on literature around the ISMO I came across

a few paper written by my boss, Mark Pickering. He was voted as one of the 50 most

influential people in the SA RE industry – great to be working side by side with such a legend.

Saturday 24 May 2014

Presentation went well – hope we get a good mark as we put some work into the process.

Reflecting on the week it made me realize how much there really is to the area of policy and

that it is extremely interconnected with the rest of the world in terms of economic and

politics. Seems like one would need a few lifetimes to really get a good grasp of all these

aspects relevant to the renewables field. One of the groups mentioned solar boosting – need

to do some reading on this.