Any new investment by SA in coal-fired power generation would be inconsistent with the spirit and intent of a $8.5bn funding package proposed by the UK, US, Germany, France and the EU to expedite the country’s transition to green energy, a representative of the US Treasury told a conference in Cape Town on Tuesday.
Further investments in fossil-fuel based power would also be inconsistent with the country’s commitment to limit emissions to between 350-million tonnes and 420-million tonnes of carbon dioxide equivalent — a reduction of between 20% and 33% — by 2030, according to John Morton, the US Treasury’s climate counsellor, who addressed the Enlit Africa conference via a video link.
The landmark climate finance agreement was announced at the COP26 climate conference in Scotland in November last year, under which rich countries will provide $8.5bn to help SA, Africa’s biggest polluter, manage the “just transition” of its carbon-intensive economy.
While enjoying the support of President Cyril Ramaphosa, other government officials including mineral resources & energy minister Gwede Mantashe are sceptical of the agreement which they say will pressure SA to move away from coal, its prime source of energy.
The Just Energy Transition Partnership (JET-P) wants to aggregate development finance “to accelerate the decommissioning of high-emitting assets” such as coal-fired power stations by investing in renewable energy, said Morton.
While SA has made progress in carrying out necessary reforms, the US, as one of the donor partners, had to be “cognisant of new and avoidable challenges to SA’s clean energy future” he said. “We would be concerned about any public steps that suggests new coal has any place in SA’s future energy mix,” he said.
Morton’s comments are at odds with SA’s energy plans as outlined by the mineral resources & energy department. According to the Integrated Resource Plan (IRP) of 2019, the country plans to add 3,000MW of gas power and 1,500MW of coal-fired power generation to the energy mix by 2030.
Morton’s assertions that SA could become wholly reliant on renewable energy were also challenged by Eskom CEO, André de Ruyter.
De Ruyter, who was speaking at the same event as Morton, said the state-owned utility has run about 100 modelling exercises to see if 100% of Eskom’s energy supply could come from renewable sources, but none of the scenarios did not require access to dispatchable power from coal or gas “at the flick of a switch”.
“Eskom will remain a significant user of coal for a long period of time, eventually [the share of coal] will reduce dramatically, but we will continue to operate coal-fired power stations way beyond 2035,” he said.
Gas also had to the potential to play a role, especially if it could be supplied from domestic sources, De Ruyter said. As an alternative to coal, about 3,000MW to 6,000MW of gas-fired power would be enough for the generation system to achieve stability over a 20 to 30 years while SA “migrates to a low carbon future”.
Outlining some of the specifics of the US’s contribution to the $8.5bn in funding Morton said there were “a range of instruments” from “a variety of sources” available, subject, in some cases, “to the availability of bankable projects or appropriations”.
“We envisage that the US contribution to the $8.5bn could include loans, equity investments, grants finance for technical assistance, feasibility studies and pilot projects from a variety of US agencies.”
Morton said that even though this amount was a historically large commitment from donor countries to a single country’s energy transition, it wouldn’t be enough alone to support the full requirement of SA’s transition.
However, he said that “public capital paired with key policy and regulatory reforms will enable the $8.5bn to unlock significantly more in private finance”, which was why SA’s commitment to “key ongoing and future reforms” in the energy sector was important.
Policy reforms such as the unbundling of Eskom into separate generation, transmission and distribution units, and raising the registration threshold for privately-owned generation facilities to 100MW from 1MW were important policy signals to show that the SA government was serious about reforming the energy sector.
“In our view, some of the most important policy reforms that are still needed to unlock the flow of private capital include [ensuring] Eskom’s solvency, [putting in place the] necessary transmission network to support large renewables expansion and a holistic strategy to provide for affected communities including coal workers and those supported by coal workers,” Morton said.
erasmusd@businesslive.co.za
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