The EU is considering increasing the grant funding it will contribute to support SA’s transition to green energy, but wants an implementation plan from the government outlining its transition before finalising the details.
The EU’s ambassador to SA, Sandra Kramer, told Business Day on Thursday that the EU, which has already committed about €35m to support the “just part” of the just transition, was “trying to up the €35m because of the importance of getting the ‘just’ part right”.
As one of the international partners in SA’s Just Energy Transition Partnership (JETP), the EU has indicated that it will contribute about $1bn of the total $8.5bn funding package as announced at COP26 in Glasgow in 2021. The other partners are the UK, the US, France and Germany.
The EU’s contribution will include about $1bn in “highly concessional” loans from the European Investment Bank towards SA’s decarbonisation plans and a transition to renewable energy.
Kramer, who was attending an SA-EU green hydrogen dialogue session in Johannesburg, reiterated that the JETP partners are supportive of the SA-owned and SA-led decarbonisation strategy and would support potential projects tabled by SA.
The EU and other partners have endorsed the Just Energy Transition Investment Plan (JET-IP), which President Cyril Ramaphosa presented at COP27 in Egypt last year and would offer support based on this plan, she said.
The JET-IP has three main development pillars: transforming the energy sector away from coal; establishing a green hydrogen economy; and developing electric vehicle capabilities for local use and manufacturing such vehicles.
“What we are looking for now is an implementation plan that the government of SA will provide,” Kramer said.
Once an implementation plan is available, the EU and other partners will then be able to “become more specific” about how their financial contributions will be directed and applied.
“We will wait for SA to give us a more detailed implementation plan before moving forward,” Kramer added.
The presidency declined to say when an implementation plan for the JET-IP will be available when asked by Business Day, adding that engagements with all partners continue.
Implementation plans around the JET-IP “would be finalised with the partner countries. There has been no official correspondence from any of the partner countries indicating a delay”, the presidency said.
The SA government has expressed concern that only a fraction of the JETP funding will be in the form of grants, with most of it in concessional and commercial loans that will add strain on the fiscus.
Ramaphosa appealed to rich nations at COP27 to make more grant funding available as SA seeks to raise the R1.5-trillion required for the JET-IP.
Daniel Mminele, who heads the presidential climate finance task team, told MPs last year that less than 4% of the JETP funding package will be in the form of grants.
The $8.5bn package will contribute about 12% of the total amount needed to implement the investment plan.
Although it has already been endorsed by the cabinet, there has been some resistance to the JET-IP within the ANC, specifically because of its focus on phasing out coal and repurposing coal-fired power stations at a time when the country is facing a crippling energy shortage.
According to Kramer, there is no doubt on the part of the EU that Ramaphosa and his government remain committed to the JET-IP and that SA is “keen to move forward with the JETP”.
During the green hydrogen dialogue session, Kramer said she hoped that as the EU progressed with the JETP with SA, there would also be some specific research & development projects for green hydrogen.
“We are co-operating on an international level to promote research & development projects that could support the scale-up of green hydrogen globally,” she said.
The EU, together with “like-minded countries like SA”, wants to set up a framework for a global hydrogen market and “create a rules-based market” for hydrogen-based solutions that includes harmonised environmental and safety standards, Kramer added.
Green hydrogen
At a green hydrogen summit in Cape Town last year, Ramaphosa said the country has the potential to produce between 6-million and 13-million tonnes of clean hydrogen and derivatives a year by 2050.
Infrastructure SA, a programme within the department of public works & infrastructure, has already identified a pipeline of 19 green hydrogen projects valued at more than R300bn.
However, to get the projects off the ground, SA will first have to secure offtake agreements and the necessary finance.
For example, reaching the green hydrogen production volumes mentioned by Ramaphosa would require the installation of between 140GW and 300GW of renewable energy. That would be between four and seven times more than SA’s total installed generation capacity.
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