My Power Station Press Release 26th November 2011: David Lipschitz’s Renewable Energy Jobs Plan

Eskom is the only organisation legally allowed to sell electricity to the electrical grid in South Africa. Anyone else has to apply and go through big hurdles to supply the grid. This is uncompetitive and doesn’t help to grow the economy. Government says that billions of Rands are needed to start the renewable energy or “green” industry, but government have been making these promises since the publication of the 2003 White Paper on Renewable Energy and so far this has cost private investors, entrepreneurs and venture capitalists hundreds of millions of Rands and the only people who have made any money are the lawyers and bankers who have helped these investors (and job creators) try to increase the wealth of the country. What we need now is action and not more rhetoric, especially on the eve of the COP17 (Council of Polluters or Conference of the Parties 17th) Conference.

David Lipschitz, Energy Expert at My Power Station, with over 4,000 hours of R&D invested since November 2008, says:

What South Africa needs is very simple:

1. “Reverse Feed” to be legalised, ie electricity producers besides Eskom should be allowed to supply the grid with electricity. Currently Eskom has a monopoly on selling its electricity to the grid which is uncompetitive and unfair.
2. “Net Metering” to be legalised. Electricity producers should be able to buy and sell electricity at the same price, ie if a user buys electricity at R1.29 per kwh, then that user should be allowed to sell electricity at R1.29 per kwh. An alternative to this is for a user to be able to buy energy at R1.29 but to be able to sell it at 90 cents (30% off) during off peak time and sell it at R2.58 (100% more) at peak time. There are lots of possibilities.
3. “Time of Use Tariffs” to be legalised for anyone with no service charges. This will incentivise electricity service providers to buy or produce energy in cheap periods (23 cents per kwh) and sell it at peak or expensive periods (R2.30 or R4.00) per kwh. Note that as the market frees up, electricity prices will change by the minute, just like the spot markets where prices change constantly. Independent electricity producers will be able to buy or produce electricity in cheap periods and sell it in expensive periods.

Note that private investors would need to buy special electricity meters or have two meters, one for importing/buying electricity and one for exporting/selling electricity. This would be at no cost to government and would create yet another industry in special meters. These meters can be manufactured in South Africa.

South Africa doesn’t need any special job creation plans. We just need good old fashioned deregulation and leveling the playing fields so that everyone including people in townships can compete on a level playing field.

If government wants to give incentives, then here is a plan:

1. Private homeowners can invest in Renewable Energy system before tax and before VAT, like businesses. This will save homeowners in the 40% tax bracket 52% of their investment cost. eg a business wishing to install a 16 KW roof top system might spend R30 per watt on the installation at a total cost of R480,000. A homeowner would need to earn R912,000 (R57 per watt) to buy this R480,000 (R30 per watt) system! And this assumes that cash is invested. If debt is used the cost is even higher and the potential saving even bigger.
2. Renewable Energy Capex for businesses to be fully tax deductible in the first year.
3. R&D (amortisation) costs in RE to be fully tax deductible in the first year.
4. Government can pay 30% of the capex costs of RE systems as happens in other countries.  This 30% represents the cost that government would have spent in any case on building power stations to satisfy the demand.  In Germany a 50% rebate is given and Feed In Tariffs. A 30% rebate would mean that the R480,000 system previously mentioned would cost R336,000 and would bring the price per watt down from a potential R57 per watt to R21 per watt! Private homeowners would save 63% of their investment cost and would be incentivised firstly to install systems and secondly to install bigger systems.
5. R57 – R21 is R36 per watt.  The fiscus currently has about R30 billion in Green Funding available with more being added all the time.  830 MW of Roof Top Photovoltaic (PV) systems can be installed before the fiscus runs out of money. First come first served! At an average roof size of 3 KW, 276,000 houses could have roof top PV installed and there could be a combination of private roof top and business roof top where businesses sometimes have 500 KW of roof top space available. If half is given to business and half to homeowners, we still 90 businesses and 138,000 houses getting before tax and rebated systems. Assuming a ratio of 500 watts per person installed per day, over a 10 year period at 200 working days per year, to install 830 MW, 830 installers would be employed. Plus sales people, designers, manufacturers, maintainers, inspectors, marketers, etc. Perhaps making over 10,000 people employed very quickly using money that has already been collected as green taxation. The average monthly salary of these people would be R39,200 per month and government would recoup Corporate Tax, PAYE, VAT, etc, when these people spend, so the cost to the fiscus will actually be less than R30 billion. My R39,200 per month is based on 830 MW * R57 per watt. Makes R47 billion. Divided by 10 years is R4.7 billion per annum divided by 10,000 people is R470,000 per annum is R39,200 per month.

If government does all this, jobs will be created automatically by private investors.

Note that China will create 11 million jobs in the Green Industry in the next 5 years.

South Africa can only compete with this if it is clever, ie by doing things to allow non-Eskom IPPs (including homeowners and businesses) access to the electrical grid which will help to dramatically grow the country and automatically create jobs at low cost.