Renewable Energy Fund

Significant expansion of the South African economy during the past few decades resulted in consequent and (substantial) increased growth in electricity demand without the necessary growth in the supply side. Currently, the majority of electricity in South Africa is generated from burning fossil fuel (there is one nuclear power plant in the Eskom fleet), the South African Government has determined to source energy from the broadest spectrum of proven renewable technologies. The driver of the need for diversification in the energy mix is the Department of Energy (DoE) being the policy department within Government for energy. The South African Integrated Resource Plan (IRP), promulgated in May 2010 by the DoE, calls for an 18GW renewable energy programme over the next 20 years.

The DoE, with the support of the National Treasury, has embarked upon the creation of an enabling environment conducive for private sector investment in the energy sector as well as the procurement of the first phase of the renewable energy programme from independent power producers (IPPs). The National Treasury also supports the procurement of renewable energy through its role as lead department on public finance, which includes involvement in indirect and direct support of the programme, and through the technical advisory support that has been provided through the Public-Private Partnership (PPP) function.

During the last few months, the National Treasury has been approached by many international donor countries that would like to increase their contribution to renewable energy funding in South Africa. The establishment of a facility such as the proposed renewable energy fund is seen as one of the important steps to ensure the long-term affordability and sustainability of the renewable energy programme in South Africa. The intention of the facility is to lower the cost and impact of renewable energy on the economy by leveraging private sector investment with the more affordable climate change donor and concessionary funding under the supervision of the National Treasury and other relevant departments. The planned outcome is to have a more affordable programme which could contribute to an increased participation of renewable energy in the energy mix in South Africa. Such a funding facility could also assist in other climate change initiatives in need of affordable private sector investment as identified by government as a priority for example energy efficiency, transport and water related projects.

With its mandate to oversee national public finance arrangements, including those relating to overseas donor assistance, the National Treasury is best placed to co-ordinate the establishment of a conduit to channel possible foreign donor assistance and concessionary finance contributions into a central facility capable of disbursing funds at concessional rates to individual IPP projects in the renewable energy program as well as to ensure optimisation of such funds in the interest of South African consumers.

Furthermore, it is the intention of the Government to identify the available climate change instruments such as carbon credits, etc. and optimise the use of such facilities to the benefit of the country as part of the mix of available ???funding??? support to the renewable energy program. It will be expected of the Transaction Advisor to provide advice on these matters. The role of the National Treasury is to ensure that these funds from donors and concessionary financiers to South Africa are channelled through a well-structured and well-managed conduit into local approved mechanisms for disbursement and the proper management on receipt from donors of such funds, to the benefit of the country.