(2001) South Africa

• Indicator 4: Clean Energy Investment

• Vector Value calculations and values
• Discussion and notes to SEW or next year's Observer-Reporter

A growing body of research world-wide is showing that an investment led strategy of promoting renewable energy and energy efficiency can create far more jobs than traditional supply driven, capital intensive energy investments (eg IWG 2000; Krause 2000; Krause et al. 2000; Renner 2000; Energy Innovations 1997; De Canio et al. 2000). Tracking investment in 'clean energy'  as a share of total energy sector investment is therefore an important tool to measure the contribution of the energy sector to employment generation and social welfare. The difficulty, however, is that investment data on the energy sector is notoriously difficult to find, particularly in developing countries. A combination of lack of government statistics, lack of data from private or non-listed companies, and the diffuse nature of the energy market (especially if we include demand-side investments), make this one of the most difficult indicators.

In South Africa, the energy supply industry is still highly concentrated. Eskom, the national utility, generates 96% of all electricity (NER 1999), while only three coal-mining companies (Sasol Mining, Ingwe Coal and Amcoal) contribute 83% of total coal production (Chamber of Mines of South Africa 1999). The members of the South African Petroleum Industry Association (SAPIA), along with Sasol Synthetic Fuels, would also supply almost all of the liquid fuels for the country.
Capital investment by Eskom, SAPIA companies, Sasol, Ingwe and Amcoal totalled more than 8.5 billion Rands in 1998 (Amcoal 1998; Ingwe Coal Corporation 1998; Eskom 1999; SAPIA 1999; Sasol 1999). Although this number does not include the significant investments by state-owned oil companies Soekor and Mossgas, we use this as an approximate base number for calculating the share of clean energy.

Data on renewable energy and energy efficiency investment are even more scarce. Based on a recent report ((EC et al. 2000; Stassen 2001), we estimate that the solar home system market was roughly 30 million Rands in 1998, while the solar water heating market was another 18 million. There have been no major hydropower or wind power investments from 1995 to 2000. The bagasse-based cogeneration plants operated by the large sugar companies were also built prior to the mid-1990s. There are several major renewable energy investments under discussion - including Eskom's proposed 100MW wind and solar thermal plants, the smaller 5MW Darling Wind Farm (which is a National Demonstration Project), and even a proposed 200MW 'solar chimney' project in the Northern project (Otto 2000; Stinnes 2001).

On the energy efficiency side, there is the least data of all. While Eskom has spent considerable resources in their residential, commercial and industrial energy efficiency advisory services, as well as research and development, very little of this could be called capital investment. Of course, there are certainly companies investing in more energy efficient equipment. A project run by the Energy Research Institute, with Technology Services International, NOVEM (Holland) and ETSU (UK), recently helped three large industrial firms - South African Breweries, South African Pulp and Paper Industries, and Anglogold's Elandsrand mine - identify more than five million Rands of energy efficiency investment that would pay back within one year ((Energy Research Institute 2000). The Efficient Lighting Initiative, funded by Eskom and the International Finance Corporation, will install 18 million compact fluorescent lamps (CFLs) over the next decade and a half, and is the most ambitious residential energy efficiency intervention to date (Bredenkamp 2000). This programme was only launched in 2000, however, so the investment is just beginning. In summary, although there are many promising programmes beginning related to efficiency, there is no good data on how much is invested in this subsector annually.

Based on the limited data available, therefore, it appears that the share of energy sector investment going to clean energy would be no more than half of one percent. This may have increased recently as the solar markets have started to develop, but it is not clear. Certainly renewable energy markets are poised to increase rapidly, given the appropriate policy framework. Energy efficiency, particularly in electricity use, is, however, potentially endangered by the restructuring of the electricity supply industry and the break up of Eskom (Clark 2000).

For this indicator, the value for 1 on the vector is supposed to be the 1990 share of clean energy investment out of total energy sector investment, while the value for 0 would be 95% clean energy investment relative to total. Because of the low levels of investment in clean energy, we can say that the 1990 was probably close to zero. The clean energy investment for which we have some data (solar home systems and solar water heating) were just under 48 million Rands, which is half of one percent of 8.5 billion Rands. This means that the vector value for 1998 is 0.994 (ie (0.95-0.005)/0.95).

Metric (actual data) for 1998: 0.005
Vector values for 1998: 0.994

Discussion

This and indicator number 6 are by far the most difficult to assess in South Africa - and this is likely to be true in many other developing countries. While it may be easier with more research to begin to track clean energy investment, tracking total energy sector investment will always be very difficult. It is also not clear how investments in energy transmission and distribution should be counted, because, for example, wires can carry renewable or non-renewable electricity. Our suggestion would be that this indicator is changed to something like clean energy investment as a share of energy sector GDP. Of course, in that case the goals would not be a value of 95%, but a much lower number since annual investment for the sector would be only a fraction of annual output.

Notes to SEW or next year's Observer-Reporter:

Following up with the major renewable and efficiency initiatives will be the main task for this indicator. Whether it be Eskom's wind and solar proposal, or industrial energy efficiency, the Observer-reporter will likely need to contact a large number of project developers to get a better estimate of investment in clean energy. We should also watch the DME off-grid concessions programme carefully, since this will be one of the largest renewable energy markets in the short run.