Liberate economic development for renewable energy companies
With government refreshing its drive to build renewable energy capacity, it’s time for these respective companies in the industry to renew their focus on economic development outputs. Licences were first issued in 2011 and the communities around these plants are growing. With the sector being revitalised, now is the time to review lessons learnt and make some strategic decisions where necessary.
In May 2011, the Department of Energy (DoE) gazetted the Electricity Regulations on New Generation Capacity under the Electricity Regulation Act (ERA). We subsequently saw the first Independent Power Producers (IPPs) appointed. Over the past seven years, photo voltaic (PV) solar farms, wind farms, concentrated solar plants and small-scale biogas plants have been established in rural areas of South Africa to meet the goals of the National Development Plan (NDP) - namely establishing 10,000 megawatts (MWs) of additional electricity capacity by 2025 against the 2013 baseline of 44,000 MWs.
To date, three IPP Bid Windows have reached full operation phase. Last week saw the signing of the Bid Window 4 Power Purchase Agreements (PPAs) and projects are in the process of achieving financial close. In addition, the country still awaits the announcement of the Expedited Window, Bid Window 4.5, where bids have been submitted and no preferred bidders have been announced.
Much effort was put into the sustainability and transformation opportunities that these projects created, yet now that numerous renewal energy plants have been established and economic benefit has been created, yet, this leads to a number of questions such as:
- Are the levels of monitoring and evaluation of these initiatives sufficient to ensure success in the long-term?
- Are the locals that were employed during the construction of the plant still gainfully employed, and have they become more employable within other industries or found employment at different renewable energy plants?
- Have local businesses indeed benefitted from the procurement of their goods and services as part of the commitments made to the DoE? What was the impact of these big contracts?
When circumstances change, as they did for renewable energy companies in 2015 when government delayed the issuing of PPAs on Bid Window 4, business expenses get cut to the bone to ensure the organisation’s sustainability. One of the measures taken was bringing the execution of economic development plans in-house.
With expertise and focus of in-house teams diluted, so is the potential impact of these economic development investments and programmes. A pressed in-house team often does not have the time, skill or motivation to maximise outputs that specialised independent economic development teams do.
Renewable energy companies usually take 18 to thirty months (technology dependent) to get the infrastructure implemented. Post construction and commissioning revenue generation starts (Operations), which will begin to allow for inputs to the economic development programmes that assist to uplift the community. It’s vital to build sustainability into these projects from the beginning.
The elements of the economic development scorecard that need to be addressed include management control, preferential procurement, local content, job creation, socio-economic development and enterprise development. The 20-year power purchase agreement awarded to these companies by government also include clauses that compel the energy company to apply a minimum of 2,1% of their turnover to improve and uplift the community.
Independent economic development service providers can provide dedicated expert resources to not just oversee design of these plans, however, to engage and negotiate best outcomes with all stakeholders. This includes:
- Key players such as municipalities, whose IDP provide insight into the needs of the community.
- Impacted Government Departments such as Social Services, Health and Basic Education.
- Other companies and SEOs investing in similar projects where collaboration can help increase the positive impact of efforts.
- Community stakeholders – community and labour leaders.
With broad insight, the ability to collaborate, and the processes in place to drive outcomes for reporting, the returns on the socio-economic development investment are improved for the community and the investing company.
Waldo Adams is the Executive Director of Projects at Economic Development Solutions.
Trafigura and Yara International explore clean ammonia usage
Reducing shipping emissions is a vital component of the fight against global climate change, yet Greenhouse Gas emissions from the global maritime sector are increasing - and at odds with the IMO's strategy to cut absolute emissions by at least 50% by 2050.
How more than 70,000 ships can decrease their reliance on carbon-based sources is one of transport's most pressing decarbonisation challenges.
Yara and Trafigura intend to collaborate on initiatives that will establish themselves in the clean ammonia value chain. Under the MoU announced today, Trafigura and Yara intend to work together in the following areas:
- The supply of clean ammonia by Yara to Trafigura Group companies
- Exploration of joint R&D initiatives for clean ammonia application as a marine fuel
- Development of new clean ammonia assets including marine fuel infrastructure and market opportunities
Magnus Krogh Ankarstrand, President of Yara Clean Ammonia, said the agreement is a good example of cross-industry collaboration to develop and promote zero-emission fuel in the form of clean ammonia for the shipping industry. "Building clean ammonia value chains is critical to facilitate the transition to zero emission fuels by enabling the hydrogen economy – not least within trade and distribution where both Yara and Trafigura have leading capabilities. Demand and supply of clean ammonia need to be developed in tandem," he said.
There is a growing consensus that hydrogen-based fuels will ultimately be the shipping fuels of the future, but clear and comprehensive regulation is essential, according to Jose Maria Larocca, Executive Director and Co-Head of Oil Trading for Trafigura.
Ammonia has a number of properties that require "further investigation," according to Wartsila. "It ignites and burns poorly compared to other fuels and is toxic and corrosive, making safe handling and storage important. Burning ammonia could also lead to higher NOx emissions unless controlled either by aftertreatment or by optimising the combustion process," it notes.
Trafigura has co-sponsored the R&D of MAN Energy Solutions’ ammonia-fuelled engine for maritime vessels, has performed in-depth studies of transport fuels with reduced greenhouse gas emissions, and has published a white paper on the need for a global carbon levy for shipping fuels to be introduced by International Maritime Organization.
Oslo-based Yara produces roughly 8.5 million tonnes of ammonia annually and employs a fleet of 11 ammonia carriers, including 5 fully owned ships, and owns 18 marine ammonia terminals with 580 kt of storage capacity – enabling it to produce and deliver ammonia across the globe.
It recently established a new clean ammonia unit to capture growth opportunities in emission-free fuel for shipping and power, carbon-free fertilizer and ammonia for industrial applications.