How Repurposed Capital, Innovative Technology and Energy Security can stimulate Economic Transformation A High Level Corporate’s perspective
ENERGY INDABA THEME The Energy sector’s contribution to stimulate economic growth, development and job creation… THE PRIVATE SECTOR HAS TO BE ENGAGED TO LEVERAGE FINANCING AND INVESTMENT TO MEET ENERGY INFRASTRUCTURE INVESTMENT NEEDS THROUGH SECURITISABLE PPA’s, REIPPPP AND OTHER PROGRAMS. SUCH PROGRAMS WILL ALLEVIATE PRESSURE ON THE FISCUS AND STIMULATE ECONOMIC GROWTH AND DEVELOPMENT WHILST IMPROVING THE WELFARE OF SOCIETY AS A WHOLE. WE AT INOVASURE ARE OF THE OPINION THAT THE REAL PROBLEM BEGINS WITH THE INCAPABILITY OF MUNICIPALITIES NOT BEING ABLE TO COST EFFICACIOUSLY MEASURE AND RECOVER THE USE OF THE POWER THEY DISTRIBUTE TO THEIR USERS. THE PRESENT METERING SYSTEMS ARE DYSFUNCTIONAL AND NEED TO BE ADAPTIVELY REPLACED WITH PROPER MEASUREMENT DEVICES AND SYSTEMS . THIS ACTION HAS TO TAKE PLACE ACROSS THE BOARD IN ALL MUNICIPALITIES. IT IS ESTIMATED THAT AN INCREASE OF AN ADDITIONAL 25% OF EXISTING MUNICIPAL DISTRIBUTION CAPACITY CAN BE EFFECTED SHOULD A RENEWABLE SO- CALLED “ENERGY VAULT” (BATTERY STORAGE ) SOLUTION BE DEPLOYED, WITHOUT IT RESULTING IN ESKOM ADDING MORE GENERATION CAPACITY . THERE ARE AN ESTIMATED 5.6 MILLION USERS THAT HAVE TO RECEIVE OR REPLACE NON FUNCTIONAL SMART METERS WITH INTELLIGENT DISTRIBUTION DEVICES MEASURING TIME OF USE ENERGY.
SOME DEFINITIONS OF ENERGY SECURITY The IEA defines “Energy Security” as the uninterrupted availability of energy sources at an affordable price. Energy Security has many aspects: Long-term Energy Security mainly deals with timely investments to supply energy in line with economic developments and environmental needs. This not a PUSH or PULL EFFECT, it is a neutral balancing matrix. On the other hand, short-term Energy Security focuses on the ability of the energy system to react promptly to sudden changes in the supply-demand balance. The implication of this is that EXCESS energy should be in store to off-set unnecessary surprises. According to the Department of Energy , Energy Security ensures availability of energy resources and access to energy services, in an affordable and sustainable manner, while minimising the associated adverse environmental impacts. Potential threats to Energy Security include scarce and depleting energy resources, minimising environmental impact, geopolitical instability and inadequate energy infrastructure. To ensure a continued security of energy supply, it is essential that a coordinated and integrated approach to energy planning, preferably on a PULL EFFECT basis, which takes into account these complex issues, is undertaken regularly - hence the reason why we are here today. InovaSure’s definition of Energy Security To provide Energy Security: Through excess energy availability, provided through an adaptive and optimally balanced mix of technologically advanced-, environmentally compliant- and sustainable energy supply sources; With the lowest possible Weighted Average Cost of Capital (WACC) through the use of securitisation structures which are ultimately underwritten by PPA’s, Eskom & Municipal balance sheets, as well as effectively secured by 5.6 million users of intelligent distribution devices (smart meters).
EXTRACT OF WHITE PAPER ON RENEWABLE ENERGY November 2003 QUOTE: Technologies that should be further developed and implemented in South Africa in the short- term to meet the proposed target of renewable energy generation include the following: solar water heating, biomass (including bio-fuels), landfill gas, small-scale hydro, wind and solar electric technologies. In the long term, Renewable Energy technologies should be used to harness substantial wave, tidal and ocean current resources. Fuel cells using hydrogen e.g. generated from renewable energy resources, will also become commercially viable at some stage. Research and Development into cost effective energy storage systems utilising Renewable Energy will be encouraged. Local manufacture of Renewable Energy technologies will be promoted in order to limit the cost of imported equipment and to benefit from economies of scale, as well as creating employment opportunities. UNQUOTE Very little has changed since 2003.
POWER INFRASTRUCTURE ESKOM’S BALANCE SHEET IS IN TROUBLE. NATIONAL TREASURY AND DBSA AND OTHERS ARE UNWILLING TO EXTEND GUARANTEES OR ROLL OVER DEBT AND THE COUNTRY’s CREDIT RATING HAS DROPPED BELOW INVESTMENT GRADE. A MAJOR NATIONAL EFFORT IS NEEDED TO GET THE COUNTRY ON A GROWTH PATH AGAIN AND, AMONGST OTHER THINGS, PROVIDE ENERGY SECURITY AS A TOP NATIONAL PRIORITY. NEW CAPITALISATION / SECURITISATION MODELS NEED TO BE DESIGNED AND IMPLEMENTED , POST HASTE.. POLICY TERMS OUR NATIONAL UTILITY EFFECTIVELY HAS A MONOPOLY AND MAKES THE RULES FOR TRANSMISSION, GENERATION AND DISTRIBUTION.. THIS IS NOT HEALTHY GIVEN THE CURRENT STATE OF AFFAIRS. IN PRICING TERMS, OUR POWER IS REGULATORALY RESTRICTIVE BECAUSE OF NERSA’S ROLE – ENERGY PRICES SHOULD BE MARKET DRIVEN AS IS THE CASE WITH FUEL - BUT NOT WITHOUT CHECKS AND BALANCES IN PLACE TO PREVENT SUDDEN SPIKES, ETC. ESCALATION IN ENERGY PRICES ARE ABOVE INFLATION RATE. SKILLS THERE ARE NOT ENOUGH YOUNG INNOVATIVE ENGINEERS TO GROW WITH ENERGY PROVIDERS IN ITS NEW PROPOSED ROLE. ENVIRONMENTAL ISSUES DESPITE GREEN TECHNOLOGIES BECOMING CLEANER, COAL AND FOSSIL FUELS ARE STILL DETRIMENTAL TO THE ENVIRONMENT. TECHNOLOGICAL ESSENTIALS IF RENEWABLE OR ALTERNATIVE ENERGIES CAN ONLY CONTRIBUTE TIMEOUSLY, AT THE RIGHT TIME OR IN- TIME ENERGY, IT WILL PROVE TO BE VIABLE. RENEWABLES WITHOUT STORAGE DO NOT HELP SA’s PEAK– DEMAND DILEMMA AT THIS TIME THROUGH THE USE OF SO-CALLED “ENERGY VAULTS”, ENERGY SECURITY CAN BE ACHIEVED WITH MUCH QUICKER TURNAROUND THAN NUCLEAR OR COAL SOLUTIONS AND PROVIDE FOR THE FUTURE. SUSTAINABLE AND COST EFFICACIOUS RENEWABLE ENERGY WITHOUT STORAGE SHOULD BE DISCOURAGED.
SATISFY THE SUSTAINABLE NEEDS OF ENERGY DERIVATIVES SUCH AS WATER / EDUCATION / ICT / AGRICULTURE / MINING ETC. * CAUSE THE DEVELOPMENT OF OUR NATURAL RESOURCES THROUGH COLLABORATION MODELS * CAUSE THE AGRICULTURE AND FOOD PROCESSING SECTOR TO BE SUSTAINABLY ENHANCED * CAUSE THE MANUFACTURING INDUSTRY TO BENEFIT FROM NEW OEM PROVIDERS ENTERING THE MARKET(*) * CAUSE SMME FORMATION AND OPPORTUNITIES TO BE ENHANCED * THE INFORMATION COMMUNICATION TECHNOLOGY SECTOR TO FUEL THE NEW KNOWLEDGE ECONOMY * PROVIDE VIABLE NON-INTERMITTENT TELECOMMUNICATION INFRASTRUCTURE * CAUSE TOURISM INDUSTRY TO CREATE MORE SUSTAINABLE AND JOB OPPORTUNITIES AND CAPITALISE ON EXPANSION POSSIBILITIES * CAUSE THE HEALTH AND HOUSING SECTORS TO GAIN IMMENSELY FROM A REALIGNED ENERGY PROGRAM
LAND VALUE CAPTURING MODALITIES ARE DIRECTLY LINKED INTO ENERGY & WATER INFRASTRUCTURE. AN ENERGY TRADING AND TREASURY MODEL TO UNLOCK THE SECURITISATION CAPABILITY OF THE UNLOCKING OF A WATERFALL OF UNDERWRITING HAS NOT DONE BEFORE. THROUGH ENERGY SECURITY, EXISTING USERS WILL BE ENSURED AND INSURED OF A STABLE SUPPLY AND NEW USERS, WHO, AT THIS TIME, CANNOT ENTER THE MARKET BECAUSE OF A LACK OF ENERGY SECURITY. IF THE BUILDING BLOCKS OF SMART CITIES, VILLAGES AND COMMUNITIES ACROSS THE WORLD ARE UTILISED AS A BENCHMARK FOR SMART LIVING SECURITY, WHICH IS WHAT A COUNTRY ULTIMATELY WANTS TO ACHIEVE, THEN WE NEED TO MAKE SURE IT CAN SURVIVE THE TEST OF: * EFFICIENT AND PROPERLY CONSTITUTED GOVERNANCE * GREEN TRANSPORTATION (MOBILITY) * BROAD-BASED FINANCIAL INCLUSION * A MACRO ECONOMIC BALANCE * A SUSTAINABLE ENVIRONMENT AND EQUILIBRIUM OF NEEDS FULFILLMENT BEING MET RATHER THAN THE PRESENT * INEQUALITY OF ABUNDANCE TO SOME AND SCARCITY TO OTHERS.
PUBLIC SECTOR SPENDING
ESKOM’S SHARE OF THE INFRASTRUCTURE PIE
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