BUSINESS INTEL
Nerves around policy uncertainty
By Roula Inglesi-Lotz
To grow the number of energy sector infrastructure projects requires innovative , evidence-based policy propositions and implementations .
Roula Inglesi-Lotz ( RIL ), president of the South African Association for Energy Economics ( SAAEE ), answers some questions posed by The Civil Engineering Contractor ( CEC ) regarding the need for greater debate within the energy infrastructure sector .
CEC : In what way is policy uncertainty hampering the roll-out of new energy infrastructure projects ?
RIL : Ongoing financial volatility policy uncertainty , especially around the country ’ s energy supply-mix future , creates nervousness among foreign capital investors , project developers , and financial institutions with regard to the roll-out of new energy projects . Delaying the announcement or implementation of national policies , such as the Integrated Resource Plan ( IRP ) or the carbon tax , does not allow long-term strategies and proper planning of risk . Investors rely on continuity of policies and certainty for the future , and they would choose the most attractive opportunities that will ensure the lowest risk and highest return in the long-run . South Africa ’ s currency , which is characterised by high volatility and sensitivity to exogenous shocks , presents investors with a predicament too .
CEC : How could this uncertainty be improved , in your view , by SAAEE ’ s lobbying of government ?
RIL : Quoting the 2018 president of the International Association for Energy Economics ( IAEE ), David Knapp , “ Take
36 - CEC August 2018 the politics out of policy .” The sector is in great need of policies that are evidencebased and unbiased , with the ultimate purpose being the improvement of the current living conditions of everyone in South Africa . The energy sector is in need of leadership that will be prepared to make the right decisions and follow the right path , no matter how difficult . In addition , the sector is in need of collaboration of different ‘ lobbies ’: collaboration , debate , and engagement . Only then will policymakers promote and implement policies beneficial to the majority of the sector . The public sector as well as the private sector and academia can only benefit from the exchange of ideas and research outcomes that SAAEE aims at . Most developing countries lack robust institutions and continuity in their policies that will provide investors with a fertile ground for further investment . Having that would lead to job opportunities through economic development .
CEC : Is South Africa falling behind in terms of energy innovation ? How do we — and our engineering skills — compare internationally ?
RIL : Technology spillovers , especially in energy applications , tend to create ‘ laziness ’ in certain countries : why innovate when they can import innovative solutions ? South Africa , to my mind , is not one of those . The country has shown that it has the capacity and skills to be a pioneer in energy R & D , while at the same time appreciating the benefits of adopting existing technologies ( albeit , not always adapting them to South Africa ’ s unique conditions ). Energy researchers work on technological improvements of existing applications as well as new products and processes in the country . Engineering is traditionally and currently a career choice for the country ’ s youth . Various research institutions as well as research funding institutions show , in practical ways , their support to such technological developments and training of individuals . Where do we get it wrong then ? The answer lies in the financial planning and management , and in the economics . The sector tends to innovate for the sake of innovation ; there is a greater need for quality , appropriate , and well-directed innovative solutions ; for solutions that can be absorbed in the production process and in the everyday life of residential consumers with relative easiness and low cost . Otherwise , the country ’ s energy R & D expenses will yield no societal benefits and the crowding out from other economic sectors will be proven crucial .
CEC : What are the challenges and opportunities facing the sector ?
RIL : This country is one of the powerhouses of the African continent ; a fact which gives us great responsibility for the future . Lack of access to safe , reliable , affordable , and environmentally friendly energy services is the primary developmental problem of the continent . In addition , the current power generation plants as well as the national transmission and distribution systems of African countries are under pressure , so new and innovative solutions are needed to tackle the lack of