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Thursday, July 21, 2011

Renewable-energy industry growth pains


Icon of Wind TurbinesImage via Wikipedia
Locally, greenhouse-gas (GHG) pollution and, to a large extent, water consumption associated with electricity, are viewed as binary. Let me explain this analogy: it is obvious that the use of electricity by one person results in pollution by international standards; however, the reduction thereof presents a positive outcome for the environment.
This assumes a homogenous electricity/energy supply. By this I mean that all electricity/energy in South Africa is considered to be equally filthy. At present, this is about correct with regard to electricity in South Africa, but is not the case in many other parts of the world where the sourcing of electricity, gas or heat is comparable to entering into a cellphone contract in South Africa.
There are a few suppliers of the product or service and we pick the option that suits us. One can choose the energy option (gas or electricity, for example) or the specific supplier (electricity from company A, as opposed to electricity from company B) to fit one’s needs. If one of the ‘needs’ is a decreased pollution rate per unit of energy bought, then suppliers can be picked on that basis.
There is this looming world where the environmental impact (GHG production and water requirement) associated with a product will be monetised and added to the price of the product – and bear in mind the electricity price structure and the price of a new car illustrate this is not a looming world, but already a reality.
It is imperative to expand renewable-energy production in South Africa. This will progressively reduce our national electricity grid emission factor or at least offer clients the option to buy green electricity.
Products made in South Africa could be better positioned to remain internationally competitive if the associated environmental impact of the product is progressively reduced. This view on possible decreased future international competitiveness is an extreme and long-term one. This context also relates to the fact that the large-scale roll-out of renewable-energy projects is only achievable in the longer term. A long-term aim (increased renewable energy) could then address a possible long-term risk – reduced competitiveness owing to the comparatively high environmental impact of South African products.
Nedbank Group is interacting with the growing world of renewable energy on various levels, with various goals in mind.
The group’s facilities are a testing ground where the feasibility of ideas and technology can be investigated before launching a product to the outside world. One example is the banking group’s Du Noon branch, in the Western Cape, which is partially powered by a wind turbine and a battery bank. This is a pilot project and it is hoped that economies of scale will lower the cost of future installations.
The bank is also developing product offerings and driving renewable-energy technologies into the homes of its clients. As an example, solar water heaters are offered to clients as an alternative to traditional electricity geysers should their existing geyser malfunction or burst. Financing renewable-energy technologies is an exciting emerging market with endless possibilities.
Nedbank Capital, as an investment bank, has been involved in financing renewable- energy projects.
Another interaction that Nedbank has with the renewable- energy field is on regulatory developments that impact on the sector. There are many interacting pieces of legislation in various phases of development. Currently, the most contentious development is the proposed carbon tax.
The group’s constant input into legislation is publicly available. Frequently, submissions to government will not be under the Nedbank banner, but rather under the respective intermediate industry body. Nedbank views its role in guiding and influencing the developing regulatory system pertaining to renewable energy as critical. Engaging proactively with regulatory bodies is deemed to be endlessly more valuable than simply reacting to legislation. The sustainability unit works closely with various external institutions across the world in its endeavours.
Currently, the renewable-energy industry is an extremely difficult space to be in. Paradoxically, its existence and future are generally acknowledged as a given. I wonder if the motor vehicle industry had the same growth pains about a century ago. For people using horses and carts as a means of transport, cars could have been seen as expensive, unreliable and uncompetitive at first. Obviously, times have changed. Now, using horses and carts for transport is viewed as a cute holiday activity by many. I am looking forward to the day when we can come across a dusty magazine (or whatever form media will take then) and view the burning of rich fossilised hydrocarbons as a cute idea that people can only see at museum exhibitions.
  • Lotz is a carbon specialist at Nedbank - sustainabilitycarbonspecialist@nedbank.co.za


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