INTELLIGENT BRANDS // Green Technology
Liberate economic development
for renewable energy companies
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With government refreshing its drive to build
renewable energy capacity, Waldo Adams, Executive
Director for Projects at Economic Development
Solutions, says it’s time for companies to renew their
focus on economic development outputs.
L
icences 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
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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 benefited
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 30 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. n
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