Energy Outcomes of COP 17: Department of Energy & World Wildlife Fund briefings

Energy

16 February 2012
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy (DoE) briefed the Committee on the energy outcomes of the Conference of Parties (COP17) on climate change. DoE could not brief the Committee on the final outcomes, as the formal report on COP17 still had to be prepared by Department of Environmental Affairs and presented to Cabinet, but the DoE instead would focus on the 25 energy sector side-events that took place at the South Africa Climate Change Response Expo. These events were hosted by DoE in partnership with both local and international energy stakeholders. The side events covered areas such as building energy efficiency, diversity of energy mix towards a low carbon economy, nuclear energy, carbon capture and storage, transport fuel efficiency and biofuels, financing climate actions in Africa, and instruments and policy frameworks. Five of the ten flagships projects at this Expo related to the energy sector, and the Department had learned several lessons, including the need to upscale renewable energy projects, to deal with financing and regulatory framework incentives to stimulate markets and enable investments, and build capacity and undertake communication. Both government and the private sector needed to support research and development. The DoE was developing carbon mitigation and national mitigation targets, and the disaggregated figures for various renewable energy projects were outlined. Members noted that the DoE would give further reports on the outcomes of COP17 negotiations, questioned some targets, asked about the financing challenges, and how the DoE had calculated the disaggregated figures. They asked for timeframes for capacity building, more information on the DoE’s role in policy decision-making, how much would be allocated to research and development, and what was done to address the lack of technology in South Africa. A list of Clean Development Mechanisms was requested. Members also asked what proportion of investment was expected from the private sector, what had been done to increase awareness, the role of the South Africa National Energy Development Institute, and the Upington project, and when the energy efficiency strategy would be finalised.

The World Wildlife Fund (WWF) for Nature also briefed the Committee, noting its view that energy was a pivotal sector, that South Africa had done much to avert the breakdown of the Kyoto Protocol, but that far more was needed, including financing. South Africa must move to a low-carbon economy, and WWF suggested that every economic sector should adopt a low-carbon development approach, pointing out that although government was concerned about the cost of implementing a carbon tax, it would in the long run be more costly should such a tax not be imposed, and that the poor would be hardest hit by the effect of climate change. WWF believed that incentives for good carbon-strategies were necessary. It supported integrated energy planning and said that a full externality costing was needed on renewable energy. It expressed concerns about fracking and shale gas usage. Members asked for clarity on the unbundling of transmission and generation of electricity, asked where WWF suggested that responsibility for maintenance of renewable energy should fall, questioned if there was a focus on reforestation, and for a further explanation on how the carbon budgeting concept would work. They questioned whether a “top-down” or “bottom-up” approach would be more appropriate, as well as the views of WWF on tax on financial transactions for the Green Climate Fund. It was noted that this Committee would discuss the matter further with the Standing Committee on Finance, and that the Committee must examine monitoring reporting and verification further, and monitor the Climate Change Technology Centre.

Meeting report

Chairperson’s opening remarks.
The Chairperson of the Committee noted that about 80% of climate change issues were energy related and this meeting had been called so that Members could be appraised of what had taken place at the Conference of Parties (COP 17), from an energy perspective. Parliament would have to report on the role it played in COP17, and in the run up to that meeting. Several other portfolio committees would be receiving similar briefings.

Energy Outcomes of COP 17: Department of Energy briefing
Ms Mokgadi Modise, Chief Director: Clean Energy, Department of Energy, presented the briefing on the energy outcomes of COP 17. She noted that the formal report on COP 17 on Climate Change had not been completed yet, and until that was done, the Department of Energy (DoE or the Department) could not present on all the outcomes, but the presentation today would focus on side issues. Once the formal report was finalised and submitted, the Department would brief the Committee on it more fully.

She reminded Members that Africa held only 2% of the Clean Development Mechanism (CDM) projects. There was an urgent need to increase participation of both South Africa and of the continent in CDM projects. Standardised baseline information was needed to assist participating countries in the CDM projects. The baseline studies were currently undermined by lack of data, and emphasis was therefore placed on the need for country oriented studies and standardised involvement of the private sector as custodians of projects. There was a need to broaden the currently-microscale CDM projects. Over the past three years, there had been increased commitment.

The DoE and the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat had co-hosted the 12th Designated National Authority (DNA) Forum, which was held in Durban in November 2011. This DNA Forum provided opportunities to exchange views and share experiences relating to CDM.

The DoE had also hosted 25 energy sector side events at the South African Climate Change Response (CCR) Expo, and these events were hosted in partnership with both local and international energy stakeholders. The side events covered several areas, including building energy efficiency, diversity of energy mix towards a low carbon economy, nuclear energy, carbon capture and storage, transport fuel efficiency and biofuels, financing of climate actions in Africa, necessary instruments and policy framework. In addition, five of ten flagship projects demonstrated at the South Africa CCR Expo were from the energy sector. They included the Solar Water Heating, Cere Wind Concept, Solar Park Concept, Comprehensive Community Solar Energy Project, Energy Efficiency and Demand Side Management, and Energy Efficient Housing.
 
The Department identified several lessons that it had learned from the energy sector side events. It would be necessary to scale up renewable energy projects, as well as the financing and regulatory framework for incentives to stimulate markets and enable investments in the renewable and the energy efficiency sector. Strong interventions in human and institutional resources were needed to build capacity. There should be communication to raise stakeholder awareness and understanding of the challenges and the opportunities. Both government and private sector needed to support research and development, to increase innovation.

Ms Modise said that the DoE was now gearing itself up to develop carbon mitigation and national mitigation targets for the sector and persuade the private sector to work towards those targets. She reminded Members that it was recently announced that the first 28 bidders for the renewable energy programme would provide some 1415.52 MW of power to the South African national grid from wind and solar projects, and there were also further plans for 3700MW of renewable energy as part of the integrated resource plan for South Africa. The Department would have to work with international partners on such an ambitious programme. She added that the technologies had been disaggregated as follows: Solar – 631.53MW, Wind – 633.99MW, and CSP -150MW. More windows of opportunity would open up in March and August 2012, which would intensify South African efforts to increase renewable initiatives, as well as enhancing the roll out of energy efficiency programmes.

Discussion
Mr L Greyling (ID) said that he had not heard as much as he would have liked about energy efficiency. This would help to get South Africa out of its energy crisis, but was not being utilised as it should be. He asked DoE to address this point in greater depth, and indicate what its intentions were in this regard. The launch of the South African Renewables Initiative (SARI) seemed to indicate that the right kind of multilateral financing instrument was found. However, he noted that the targets had changed from 23GW to 19 GW. He asked the Department for clarification on this point.

Ms Modise reminded the Committee that the DoE would be returning to the Committee to report further and explain the outcomes of the COP17 negotiations. Cabinet had decide that the process and the negotiations would be led by Department of International Relations and Cooperation (DIRCO) and the Department of Environmental Affairs (DEA). It was those two departments that must produce the formal report, although DoE would then report back on the contents. The focus of today’s presentation was on the side events and what had been learned from them.

Ms Modise explained that when SARI was in its conceptual phase, there was a suggestion that 23GW should be the target, but this had changed to 19GW as the steering committee developed its operational plan, as this was considered a more realistic target.

Mr E Lucas (IFP) expressed his concerns that the biggest culprits in degradation were the developed countries, who had caused most of the problems. He said that South Africa should be complimented on the steps it was taking. However, he thought it would be difficult to get funds for renewable energy interventions because of the uncertainties.

Ms Modise confirmed that financing was a challenge; not simply the accessing of finance, but also the manner in which projects were packaged. Investors needed to be given a degree of certainty for their investments for the long term, and government had to take that into account to make sure that its policies did give clarity and certainty for the future.

Mr K Moloto (ANC) said that he had expected the DoE to give more information on what happened in Durban. He asked the Department how it came to the disaggregated figures, and what informed the calculation.

Ms Modise said that the disaggregated figures for renewable energy technology were informed by technical, financial and socio-economic issues. It was also important to consider the unique issues in South Africa, such as lack of water.

Mr J Smalle (DA) asked the Department to provide timeframes for the capacity building interventions. He also asked the Department to explain its role in policy decision-making to ensure that South Africa reached its targets. He requested clarification on the percentage of funding to be allocated to research and development (R&D) over the next three to four years, and asked if this would increase. He understood that there were outside investors, but he was interested in the role of the Department itself.

Ms Modise responded that the DoE worked with a range of institutions, including the Council for Scientific and Industrial Research (CSIR) and the Department of Trade and Industry (dti) in integrating sectors and subsectors of the energy component. The DoE would work toward increasing the R&D component as it rolled out the technology. This must also be informed by what was happening on the ground.

Ms N Mathibela (ANC) asked how the DoE was dealing with the fact that South Africa did not have the capacity or technology to put many of the interventions in place. She was not sure that borrowing from other countries was necessarily the correct way to go.

Ms Modise agreed that at present, South Africa did not have some of the technology and for the moment it was importing. South Africa would need to take a host of issues into account before it could localise the technology. She noted that South Africa still had some areas that did not have electricity at all. Empowerment, health, education and energy were all core issues, and access to energy was a priority for government. There were still spatial planning misalignments, and this too needed to be rectified.

The Chairperson asked if the Department could give a list of the CDM projects that were running, and their status. Such CDM projects would help raise the profile of energy issues in the region. He informed the meeting that he was trying to engage with the Pan African and Southern African Development Community (SADC) bodies, as to where meaningful engagement on energy matters could take place. He asked what role the legislators could play.

Ms Modise promised to send more information on the CDM projects to the Committee.

The Chairperson asked about prospects for further investments, and what proportion was expected from the private sector. He also asked why one of the South African companies did not make it into the bidding process for the renewable energy provision.

Ms Modise responded that the level of interest had increased. The President had made commitments at Copenhagen in 2009, and so the world now wanted to know what South Africa was doing to reach its targets. More interest had been noted, as there was an increase in requests for information. The announcement of the bids also was indicative of South Africa’s progress and readiness to make the commitment. In regard to the company who had not succeeded in the bid, she noted that it was likely that this company had not passed the DoE’s criteria.

The Chairperson asked the DoE to outline the investments in the areas of communication and awareness, saying that this was important to open up the markets.

Ms Modise said that there had been discussions at the National Economic Development and Labour Council (NEDLAC) level, and the Department had tabled a campaign strategy that would filter information and technology from urban to rural areas. In electricity, the focus would be on grid technology and the need to reach the areas currently off the grid. Government Communication and Information Systems (GCIS) had just concluded an energy efficiency measures campaign and said that a National Strategy was needed whereby all actors, including government, civil society and business, would participate in distributing information and technology to all citizens of the country. If the effort was well coordinated at national level, then the message would be properly conveyed and resources would be properly utilised. DoE noted that the private sector was participating. The strategy had been signed off, and the Chief Executive Officers of several companies who were members of Business Unity South Africa (BUSA) had, at COP 17, signed pledges. The DoE was now engaging with those companies to mobilise and optimise resources.

The Chairperson also asked about the role and initiatives of the South Africa National Energy Development Institute (SANEDI).

Ms Modise confirmed that SANEDI was playing an important role in innovation, and had become independent. Its strategic plan would be aligned to country priorities. SANEDI could brief the Committee separately.

The Chairperson enquired into the Comprehensive Community Solar Panel Project, and whether the 150MW was linked to the project in Upington. 

Ms Modise responded that this project was not linked. The Independent Power Producers (IPP) programme was separate from the Solar Park programme. The Upington project was a feasibility study, and was work in progress.

The Chairperson asked when the DoE’s strategy would be aligned to the White Paper on Climate Change.

Ms Modise explained that the Sector Strategy could only be unpacked after engagement with DEA on the COP17 report. She reminded the Committee that the whole energy sector fell into “one pot” and had to be separated out. The Sector Strategy should be finalised by 2013.

The Chairperson enquired when the energy efficiency strategy would be finalised.

Ms Modise said that the Energy Efficiency Review strategy was far advanced and the deadline for the final strategy was set at May 2012.

The Chairperson noted that after May 2012 the Committee would want to interact with various sectors and stakeholders on this Strategy.

The Chairperson concluded that substantial information had been generated from the side events at COP 17, which the DoE should make available. Parliament had also played a role in COP17, with several activities to empower Members to understand the processes.

World Wildlife Fund (WWF) for Nature briefing
Mr Morné Du Plessis, Chief Executive Officer, for World Wildlife Fund for Nature, noted apologies from Ms Tasneem Essop. He noted that World Wildlife Fund for Nature (WWF) regarded energy as the most pivotal sector that had to be taken seriously. Many discussions were held during the COP17 meeting, and South Africa had a number of difficult issues to debate. The economic crisis had “set the scene” for failure at COP17, but WWF believed that South Africa had achieved the objective of preventing a breakdown of the Kyoto Protocol. Although some innovative measures were introduced, there was still a massive ambition gap that needed attention. The Green Climate Fund structure was created in Durban and had been put in place, but financing was needed; WWF believed that it was only a question of time before the money would be made available for appropriate mitigation and adaptation actions. Scientific projections had noted the likelihood of a four-degree increase in temperature, which had serious implications for countries with the least capacity to respond to the effects of climate change. South Africa would face a carbon constrained future and could not continue as it was currently operating. It would have to move to a low carbon economy, which would give the country a competitive edge, and he suggested that South Africa should choose to be a market leader rather than sit back.

WWF noted that each economic sector, including the energy sector, should adopt the low carbon development approach to planning. China, which had been a major emitter, was on its way to becoming a leader in products that responded to climate change. It would be impossible to have a low carbon economy while South Africa continued with its current high carbon-emission activities. WWF was aware of the government’s view that carbon tax was too expensive to implement, but thought that the cost of not having such a tax was even higher. Mr du Plessis again emphasised that those who had the least options and capacity to adapt – namely the poor - would be hardest hit. Imposition of a carbon tax would ensure that costs could be priced effectively. South Africa should think about incentivising good behaviour, particularly in relation to the poor. He suggested that carbon tax needed to start at a low initial level.

WWF supported integrated energy planning but it was aware that there was an over-reliance on mineral resources, and concerns about concentration of wealth and power. If a full externality cost was included, renewable energy would be a competitive, cost effective energy source, but proper costing was needed. WWF expressed its concerns about fracking and shale gas usage, noting that the methane gas emitted was twenty times more potent than carbon dioxide.  Carbon emissions alone for shale gas, was worse than for coal. Hence shale gas was not a low carbon solution. South Africa needed to start to make investments and move towards low carbon solutions.

Discussion
The Chairperson said that WWF had departed from the focus of the meeting, which was to discuss the energy outcomes of COP17. Issues of shale gas and fracking would be further discussed after reports were drawn and public hearings were held.

Mr Greyling said that one of the biggest outcomes from COP17 was the agreement to reach a global treaty by 2015, which would then be in force by 2020. South Africa was one of first to agree to this, so it would have a legal commitment to reduce emissions. In this context, the reference to shale gas by the WWF was relevant, because the Committee would need to be aware of the country’s choices when the report was tabled.

Mr Moloto asked if the reference by WWF to implications on the South Africa energy sector included the unbundling of the distribution of the transmission and generation of electricity. Some work had been done on the generation sector, which included IPPs. He asked why WWF would want Eskom to be divested of transmission responsibilities.

Mr du Plessis responded that WWF’s reference to transmission was in the context of renewable energy playing a role in dispersing energy production.

Mr Smalle asked for more comment from WWF on where responsibility for maintenance of renewable energy would fall.

Mr du Plessis said that with the kind of investment required to raise capital, the private sector played an important role.

The Chairperson asked how much focus was placed on reforestation in South Africa, which played a vital role in improving the environment. He also asked for further elaboration on the assertion that there was a potential for decentralisation of the supply ownership component, and the type of ownership that was referred to by WWF.

Mr du Plessis said that if South Africa was compared to other African countries, it had far less “classical forest” for Reduced Emissions and Degradation and Deforestation (REDD), but more savannah and woodland. Ecological systems also had capacity to sequester carbon. He described REDD was “a bit of a Cinderella”. WWF preferred the REDD Plus concept, which linked the plan to other social impacts. South Africa could do better by increasing its focus on forestation and ecology, and thinking of this in broader terms.

The Chairperson asked about the emerging carbon budgeting concept, and asked Mr du Plessis to explain how this would unfold.

Mr du Plessis said that the carbon budget concept relied heavily on science that underpinned the
International Performance Computing and Communications (IPCCC), yet science was often confusing. It was said that if the effects of climate change were to be kept in check, then emissions had to be kept below a certain level. A carbon budget would be set, which effectively would limit countries to emitting only a certain amount, over the whole world. It was difficult, in issues that were global, to see who was responsible, and the scale of their responsibility. Ultimately, South Africa would form part of the global carbon budget, and so it must be committed to cutting its fair share of the emissions. Different sectors would need to think about their own contribution and what they could do to reduce their own emissions. The carbon budget was a powerful concept to help focus the mind, and could be a powerful tool to achieve things at sector level. However it was also a sophisticated concept that required sophisticated thought. WWF acknowledged the importance of the discussion about energy efficiency, but said that if the carbon budget was not brought into consideration, there would be no targets.

The Chairperson noted that WWF was a civil society organisation. He noted the references to a “top-down” approach, and asked if there was also room for consideration of a “bottom-up” approach.

Mr du Plessis said that the Chairperson had made a good point. As part of civil society, WWF understood that the implementation would happen from the bottom up. However, in dealing with global issues of commonality, there also had to be emphasis placed on the “top-down” approach and understanding of the issues, and in addition the bottom up approach would not arrive at a budget.

Mr Moloto asked what WWF’s thinking was on imposing tax on financial transactions, when the transactions were not directly linked to carbon emissions, for the Green Climate Fund.

WWF said that a good case had been made out for the Financial Transactional Tax (FTT) to be de-linked. In relation to the Green Climate Fund, mitigation and adaptation costs were initially costed at about US$160 billion a year, subsequently reduced to US$100 billion. In looking at financial flows around the world, it would become easy to arrive at a small tax that would not affect the individual too much.

Mr Jaco du Toit, Project Officer, WWF, said that it was important to bring the equity dimension into the FTT tax as the underlying concept behind the tax was that people who could afford it should be taxed, whilst buffering poorer people.

The Chairperson said that it was necessary to ensure that the momentum on engagement of issues was maintained, as this addressed production and consumption for the benefit of everyone. It was important to link up the concepts with energy efficiency. It was also important for the Committee to look at Monitoring Reporting and Verification (MRV), and how to become involved in this, for national, regional, continental and global engagement. He trusted that WWF would assist Parliament with information.

The Chairperson also noted the need to monitor the Climate Change technology centre. The use of  advanced technology was important and provided an important opportunity for South Africa to be a market leader. He hoped that the “bottom-up” approach would still be maintained as people on the ground had to be involved in climate change. Members would, at a later stage, receive climate change toolkits that they could take to their constituencies for dissemination, as interventions must ensure the contribution of communities to all efforts. He also noted that this Committee would, at a later stage, have to engage with the Standing Committee on Finance on the carbon tax.

The meeting was adjourned.


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