SA Cabinet Announces SARi to Launch at COP 17 in Durban

The South African Cabinet formally approved the launch of SARi during the United Nations Framework Convention on Climate Change (UNFCCC), Conference of the Parties (COP17), which will take place in Durban from November 28 to 9 December 2011. The launch of SARi will be accompanied by the announcement of partnerships between the South African Government and international governments and Development Finance Institutions who will work together to explore possibilities for developing the enhanced financing arrangements needed to catalyse growth in the renewables industry.

The planned launch of SARi at COP 17  received extensive coverage from the week of 3 November 2011. The article that was carried on industry websites across the globe, was carried on SouthAfrica.info on 3 November 2011. Other pieces from the week ending 12 November follow below from South Africa’s Financial Mail and the Independent Group’s Natal Mercury.

South Africa will launch an ambitious project aimed at boosting its “green” economy and reducing the country’s carbon footprint during the United Nations Climate Change Conference starting in Durban on 28 November. The South African Renewables Initiative (SARi), set to be unveiled at the 17th Conference of the Parties (COP 17) to the UN Framework Convention on Climate Change, will seek to catalyse the growth of a “green” industry through the financing of large-scale renewable generation capacity.

“SARi presents a key element in ensuring that South Africa meets the emissions targets set by President Jacob Zuma who, at COP 15 in Copenhagen in 2009, committed South Africa to reducing its emissions trajectory to 34% below business as usual by 2020, and to 42% by 2025,” Trade and Industry Minister Rob Davies said last week. An integral part of South Africa’s Industrial Policy Action Plan, SARi will help to develop capacity in related industries by designing a financial solution to encourage the roll-out of large-scale renewable generation capacity. South Africa will be looking to use its international partnerships to help the country secure funding to enable an ambitious scale-up of renewables.

The launch of the initiative will be accompanied by the announcement of partnerships between the South African government and international governments and Development Finance Institutions to explore possibilities for further developing the renewables industry. Davies said an initial design for a financing mechanism had been developed, which combined low-cost loans, insurance and other financial instruments with climate funding on a pay-for-performance basis. “Success in the large-scale development of renewables could realise direct economic benefits of up to 40 000 jobs, contribute up to 15% of South Africa’s Copenhagen Commitment, and decarbonise exports by up to 30% in increasingly carbon-sensitive international markets,” Davies said.

Financial Mail reported on Thursday 10 November 2011

When President Jacob Zuma pledged in Copenhagen in 2009 to cut SA’s carbon emissions by 34% by 2020 and 42% by 2025, it was conditional on finance. The SA Renewable Initiative (Sari), to be launched at the 17th Conference of the Parties (COP17) climate change talks in Durban in December, will endeavour to provide this finance . The initiative is being led jointly by the departments of trade & industry (DTI) and Department of Energy and is part of the DTI’s industrial policy action plan.

The aim is to establish financing mechanisms to enable the “critical mass” of renewable energy needed to achieve the socio economic benefit of “up to 40000 jobs, contribute up to 15% of SA’s Copenhagen commitment and de- carbonise exports by up to 30% in increasingly carbon-sensitive international markets”, says trade & industry minister Rob Davies.

Sari adviser and head of the WWF’s Living Planet Unit, Saliem Fakir, says to achieve these targets SA will need to produce 20GW of renewable energy by 2025.SA has already committed to 3750MW of renewable energy by 2016, which will be financed largely through traditional project finance. Fakir says if SA doesn’t have renewable energy at scale for a consistent period of 15-20 years, it will lose the long-term benefits of consistent installation, such as lower average costs and increased localisation potential. But to reach the scale envisaged by Sari, additional funding mechanisms will be needed.

Sari aims to secure finance for this initiative through international partnerships, which Fakir says could include bilateral or multilateral arrangements or partnerships with development finance institutions. Research suggests the best way to bring capital costs of renewable energy down is through a combination of grants and concessional finance. Sari has also looked at the socioeconomic impact of increasing electricity prices: one benefit of reducing the capital cost of renewable energy will be to lower the future cost of electricity in general, says Fakir. He says the cost of renewable energy could come down to the price of new coal production.

The Natal Mercury reports on 10 November 2011 on the launch as well as on the presentation to the Portfolio Committee by Dr Edwin Ritchken, a founder team member and advisor to DPE who originally led on the initiative with the dti (NOTE: SARi is officially co-chaired by the Departments of Energy and dti as it enters its official launch phase)

THE government is set to use Durban’s hosting of the 17th Conference of the Parties of the UN Framework Convention on Climate Change to launch a renewable energy initiative aimed at putting South Africa firmly on a path to a low-carbon economy. Dubbed the SA Renewables Initiative (SARi), the plan was announced by Trade and Industry Minister Rob Davies last week. According to the Department of Trade and Industry, SARi is aimed at “catalysing the growth of a green industry” through the financing of large-scale renewable generation capacity.

“The objective of SARi, which is an integral part of the Industrial Policy Action Plan, is to develop related industrial capabilities through the design of a financial solution for the roll-out of large-scale renewable generation capacity,” he said. “Success in the large-scale development of renewables could realise direct economic benefits of up to 40 000 jobs; contribute up to 15 percent of South Africa’s Copenhagen commitment and de-carbonise exports by up to 30 percent,” he said.

Edwin Ritchken, the strategic projects adviser at the Department of Public Enterprises, told the National Assembly’s energy committee that if South Africa was going to build a renewables industry, it had to do so on a scale big enough for the manufacturing industry and the regulatory industry to be able take it seriously.”To do so, we needed a new paradigm to frame the way we thought of economic strategy,” he said.

The focus of the SARi project was to enable a “critical mass of investment” in renewables in South Africa. “The essence of SARi is: what will it take to reach this critical mass, so that we don’t have only renewable energy, but a whole cluster of industrial initiatives? We’re trying to embed a new logic into the heart of how we think of economic growth,” Ritchken said.

He said that if we did not reach this critical mass, renewables would always remain a small “add-on” to our industrial development. That meant renewables would remain relatively expensive and the government would be inclined to choose cheaper options. This was the “single biggest threat” to the success of the renewable energy industry, he said. Because of this, one of the central aims of SARi was to bring down the cost of renewables.

“The focus is around financing arrangements, because renewable energy at the moment is more expensive. Annex 1 (developed) countries have said they will share the burdens of the emerging nations of adapting to low-carbon economies.” With international donor money, the renewable industry would not impose a burden on the consumer or on the fiscus.“We hope to sign a memorandum of understanding with our global partners at COP17,” Ritchken said.

Agreement would have to be reached on how much funding would be borne by the international partners and how much by South Africa. Ritchken said the degree to which SARi would succeed depended on the extent to which government departments would adopt an intergovernmental view.

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