The electricity minister’s proposal to extend the life of Eskom’s coal-fired plants could jeopardise the country’s ability to secure financing for its just energy transition (JET) programme and further delay the publication of the revised Integrated Resource Plan (IRP), according to people familiar with the matter.
The proposal to ease load-shedding that has been presented to the cabinet by Kgosientsho Ramokgopa includes “a relook at the shutdown schedule” of Eskom’s coal power plants”, said his spokesperson, Nombulelo Nyathela.
“Cabinet noted the presentation by minister Ramokgopa and directed that a further assessment of the electricity situation and measures to be taken be addressed at the next [National Energy Crisis Committee] meeting [to] be convened as speedily as possible,” the government said in another statement.
The decommissioning and repurposing of coal-fired power stations are consistent with the country’s Integrated Resource Plan (IRP of 2019 and are also key elements of SA’s international climate change commitments contained in its updated carbon emissions reduction targets — the nationally determined contribution that was revised in the run-up to COP26 in Glasgow in 2021.
Business Day understands that Ramokgopa’s proposals were endorsed by the ANC’s national working committee (NWC) on Monday and are due to be presented to the party’s national executive committee (NEC) when the structure meets at the weekend. The NEC is the governing party’s highest decision-making body and its decisions are traditionally adopted as government policy.
Should the cabinet endorse Ramokgopa’s proposals to extend the lifespan of certain Eskom coal plants, “the revision would have to be reflected in the revised IRP”, according to an official privy to the discussions.
“It [the revised IRP] was supposed to be out in March 2023 but now there are still discussions with stakeholders and hopefully the draft revised edition will be published by May,” said the official, who spoke to Business Day on condition of anonymity.
“We don’t talk to speculation. The IRP is under review and the department intends on completing the process so that there is certainty in the energy sector,” the department of mineral resources & energy said.
The IRP 2019 defines SA’s energy transition path until 2030, mandating the decommissioning of about 12GW of coal-fired power by 2030 and the expansion of 18GW of private sector-led renewables in the same time frame.
SA’s ambitious, revised nationally determined contribution, through which the country committed to cut carbon emissions 20%- 33% by 2030, served as the basis for a funding agreement worth $8.5bn with rich nations at COP26.
The Just Energy Transition Partnership between SA and the international partner group — France, Germany, the UK, US and EU — is almost exclusively targeted towards decarbonisation in SA’s energy sector as set out in the IRP 2019.
About $2.5bn of the $8.5bn JETP funds will come from the multilateral climate finance institution Climate Investment Funds (CIF) in the form of $500m in grant and concessional loan financing that will be leveraged to obtain a further $2bn in concessional loans.
This funding is being made available through the CIF’s Accelerating Coal Transition programme. Of the $500m to come from the CIF, $350m is earmarked for the decommissioning and repurposing of Eskom’s Camden, Hendrina and Grootvlei coal power stations.
In response to a request for comment on the possible implications for the Just Energy Transition Partnership should the SA government decide to proceed with plans to delay the decommissioning of some coal-fired plants, the US mission to SA would only say “the US government remains committed to supporting SA to meet its nationally determined contribution as agreed at COP26”.
It is clear that failure to decarbonise and move away from coal would curtail SA’s access to finance for the just transition, said Gaylor Montmasson-Clair, an economist at Trade & Industrial Policy Strategies, a policy think tank. Such a move would also jeopardise market access for SA exports to countries and regions, such as the EU, that are in the process of introducing carbon import tariffs on carbon-intensive products, he said.
“SA is free to make its own choices [about decarbonisation], but then we have to bear the consequences of those decisions, and we need to consider those impacts very seriously given the potential opportunity cost,” Montmasson-Clair said.
He questioned the rationale behind spending money on extending the life of nonperforming assets when that money could rather be spent on building renewable energy and storage which would be a more cost-effective option for increasing generation capacity.
Asked how the delay in the decommissioning of some coal-fired plants might affect SA’s ability to achieve its nationally determined contribution the department of forestry, fisheries & the environment said the government remained committed to meeting “immediate challenges while working towards a decarbonisation process”.
“President [Cyril] Ramaphosa is on record that the government will be ensuring that our country must balance energy security and a just transition to meeting our climate commitments.
“This must be achieved in a pragmatic way, taking into account our realities, and our economic and climate aspirations,” said the department’s, spokesperson, Albi Modise.
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