2. THIS IS WHAT HAPPENS WHEN YOU DON’T …

3.  Renewable Energy target of generating 3725MW by year 2030. i.e.10% current generation  Target is realistic in the medium term, based on the circumstances of our country, noting that integrating renewable energy is new to us.  My focus today is not to look at our ambition or vision around renewable energy targets but ……  Find ways to bridge the gap between our policy framework and practicality of implementing renewable energy within Municipalities.  We know where we want to go (Policy) :Deciding how to ( Practicality )  Limited time - Focus on 2 practical challenges of introducing renewable energy for Durban, incorporating examples of small scale renewable energy and large scale renewable energy :  Financial sustainability of Municipalities when introducing small scale renewable energy  Decision of renewable energy verse cheaper non-renewable energy with careful consideration for social dynamics FOCUS AREA 1 : FINANCIAL SUSTAINABILITY FOCUS AREA 2 : AFFORDABILITY OF GREEN ENERGY FOR DEVELOPING CITIES CONTEXT DRIVEN

4. Must understand context of energy flow in SA to appreciate my position and challenges. Vertically Integrated Generation and Transmission structure owned by Eskom (Government entity) 278 Municipalities ( IM HERE ) is responsible for distribution of electricity service. i.e. connection, metering, billing. Operating a distribution grid is capital intensive with financial recovery over a period of time via tariffs. In order for the grid to remain sustainable, there has to be people using electricity from the grid. –Model Distribution tariffs include costs to operate and maintain the grid as well as cross subsidies.

5. Bridging the gap 1 : How to prevent the loss to the Municipality ? The cost of small scale GRID TIED PV systems are becoming cheaper ( < $1 per watt) & in direct competition with the grid. Generation/Transmission of coal fired electricity averages at $0.04/kWh. Distributing that kWh can cost a further $0.05 /kWh + subsidies $0.02/kWh. Considering distribution/subsidies - small scale PV is CHEAP !!! Promoting small scale renewable energy reduces energy sales and in turn reduces revenue to local government and subsidies to the poor. Bridging the gap 2 : How to maintain cross subsidies for the poor ? Bridging the gap 3 : Will the distribution grid / business become obsolete as time goes on… Cost of PV Electricity Cost Payback Period 2008 2020 Illustration Only utilitydive.com pv-magazine.com 1

6. 0.5 million families live in informal settlements without water, electricity, formal housing Economic growth : 2% Unemployment rate: 25 % Local government is under pressure to deliver services in a cheap, efficient manner with limited funding in tough times. South Africa is rich in coal supplies and can burn low grade coal for electricity. Electricity is generated and transmitted to various parts of SA at $0.04/kWh Bridging the gap 4 : Can Renewable Energy be affordable and fit for us? Bridging the gap 5 : Will developing counties lose competitiveness because of expensive renewable energy Bridging the gap 6 : What is the balance between affordability and clean energy ? Bid prices for large scale solar plants average between $0.085 $0.10/ kWh – 150% more expensive, less predictable !!! Flickr.com 2