EPD published MEMO on Community Development through RE IPPPP

Community Development through RE IPPPP

Challenges and opportunities to maximise the sustainable development potential for local communities in South Africa’s Renewable Energy Procurement Programme

Purpose

This memo informs about challenges and opportunities related to the economic development elements of the Department of Energy’s current Renewable Energy Independent Power Producer Procurement Programme (RE IPPPP).

Context

The South African RE IPPPP issued in 2011 aims to increase the share of renewable energy in the national electricity grid and stimulate growth in the renewable energy sector. Applications for renewable energy projects are developed by private companies, and selected bidders will sign energy-purchase agreement with government for the next 20 years on the green tariff basis. Applications submitted to the programme are assessed on the basis of their tariff and their contribution to specified economic development criteria. The economic development criteria in the RE IPPPP have been based on the Broad-Based Black Economic Empowerment (BBBEE) framework and include requirements in respect of job creation, local content, ownership and management control, enterprise development and socio-economic development.

Problem

This memo focusses specifically on the socio-economic development and enterprise development elements that are targeted at local communities in the vicinity of the renewable energy projects. These elements require that developers make a financial contribution of between 1.5% and 2.1% of total project revenue to communities to foster socio-economic development (this can include health, education, service delivery, arts and sports programmes) and support of local enterprise development. Developers are required, as part of their bid submission, to assess the needs of local communities and develop strategies to address these over the life of the renewable energy project using their financial contributions. Local communities are defined as settlements within 50 kilometres of the renewable project site.
Initial research undertaken by the Energy Research Centre (ERC) and the Community Development Resource Association (CDRA) highlights a number of issues in respect of these requirements, suggesting that the policy requirements in the IPPPP need further specification in order to maximise their benefits. There are currently no explicit guidelines given in the IPPPP for how developers should develop their strategies including the level of detail required in project and programme identification. There is no reference or guidance relating to community engagement or participatory approaches to development, appropriate governance structures or alignment with local municipal integrated development planning objectives. Preliminary interviews with developers reveal a multiplicity of approaches being followed. The private sector does not have in-house skills or direct experience related to community development and yet will be responsible for making significant investment decisions over a 20-year period for local communities. There is therefore an important need to specify development guidelines.

  • There is no focus in the development of long-term community development plans on sustainability or integrate broader climate change objectives. The IPPPP programme was developed in recognition of the need for South Africa to mitigate emissions, and these objectives should be reflected in planning long-term, low-carbon community development strategies.
  • Problems arise when attempting to align the conventional cycle of engineering projects with the process of achieving meaningful community development work. The scope of developmental activities should be clearly defined when the project is submitted for the tender, which can make it problematic to start engaging with communities about money and development projects before potential renewable energy projects have even been selected. This can lead to creating expectations and the intrusion of local politics and can damage the effectiveness of participatory development processes.
  • Over a 20-year period, larger projects may result in hundreds of millions of rands being directed at specific communities and there needs to be consideration at this point around the feasibility of actually being able to develop projects and initiatives of sufficient scale to match the required spend. This also implies that it be spent it in a manner that can best unlock the economic potential of local areas (rather than focussing on charitable projects, for example). Lastly, it may be pertinent to consider issues of equity and tensions within local areas where neighbouring communities may not see similar benefits directed at them.
  • The monitoring and evaluation mechanisms for the socio-economic development and enterprise development elements appear inadequate to sufficiently monitor the effectiveness of project interventions. Renewable energy companies will be evaluated on the basis of meeting their specified expenditure targets only, with no consideration of the impact of spend or the success or failure of development interventions.

Action

ERC and CDRA are currently looking into investment in the renewable sector in South Africa and how it can innovatively contribute to reducing poverty and inequality at a local level and contribute to national developmental objectives. The IPPPP space incorporates a diverse range of stakeholders, each with their own insights, interests and expertise. Any solution or way forward requires active engagement with, and the participation of, all those involved in order to develop a shared understanding of the issue. The potential for government policy, in partnership with the private sector, to stimulate long-term and low-carbon socio-economic development in the renewable energy sector in South Africa is analysed.

References

Harnmeijer, A., Lipp, J., Wlokas, H.L. et al. (2012). WWEC 2012: A bird’s-eye view of community renewable energy across the world

Tait, L. (2012). The potential for local community benefits from wind farms in South Africa, Masters Thesis, Energy Research Centre, University of Cape Town.

Wlokas, H.L, Boyd, A., Andolfi, M., forthcoming. The potential for local community benefits in private sector-led renewable energy projects in South Africa: an evolving approach. Journal of Energy in Southern Africa.