What is a just energy transition and how does it get started?
Over the past two years the idea of a just energy transition — the process of shifting to cleaner energy technologies in a way that does not leave vulnerable communities exposed — has become part of the political and economic landscape. But, while workshops were held and talking happened, with so many stakeholders and such diverse interests it has never been clear how to get the ball rolling.
Eskom CEO André de Ruyter has now kicked off play, giving politicians and social partners something to respond to. His proposal that Eskom retire some of its coal assets more quickly than previously planned and replace them with 7,400MW of renewable generation capacity and battery storage, financed by climate change concessional finance, is on the table.
But to make it fly there are several moving pieces, parts and people to propel in one direction. The first is the National Treasury. The overriding goal of public finance management over the past three years has been to reduce Eskom debt, and with it the state’s contingent liabilities, not to increase them. The Treasury will have to guarantee any loan Eskom takes in this case.
The belated entry of the Treasury into the discussion has only become possible because of the presence of a new finance minister. Tito Mboweni, Enoch Godongwana’s predecessor, was unfortunately never available for such a conversation. There is hope that it can happen now.
Godongwana’s initial response to the just transition discussion has been to indicate that Eskom’s existing guarantee space — about R40bn — could be available as an interim offering. But the notion that Eskom should take on more debt when it is not able to service its current burden of R400bn, and only does so from Treasury bail outs, will be a difficult one for SA to stomach.
An earlier version of a climate change transaction, championed by President Cyril Ramaphosa’s expert task team on Eskom, which involved the swap of some of Eskom’s old, expensive debt for climate concessional debt in return for a faster wind-down of coal, is not completely off the table. But it looks complicated and difficult to achieve by comparison.
The simpler version has captured the attention of the presidential climate commission, a multi-stakeholder group established for the purpose, among other things, of advising on the transition. The commission looks likely to throw its weight behind it.
The second moving part is the department of mineral resources & energy, as well as its minister, Gwede Mantashe, the custodian of the Integrated Resource Plan (IRP) 2019. It is the IRP, the country’s long-term energy plan, that directs decisions on when power stations are commissioned, and when they are shut down.
So far, the department and Mantashe continue to believe “clean coal” is something that is commercially viable, despite all evidence to the contrary. Mantashe said last week that for SA to shut down coal plants and mines prematurely, leaving a valuable natural resource in the ground, would be “economic suicide”.
The third is trade unions. SA unions have been hostile to renewable energy, regarding the entry of independent power producers into the electricity supply industry as a precursor to the privatisation of Eskom. While they are wrong, they are correct that it means more private provision and a liberalised market. Here at least De Ruyter’s plan has something attractive for unions and those in the ANC who cherish a large state sector. He has also done them the favour of giving Eskom an opportunity to have a future, beyond that of the predictable utility death spiral.
Nor are Mantashe or the unions wrong to worry about the human and economic implications of shutting down coal. The most important part of the just energy transition is mitigation of the impact on the working class and poor. In the simplest sense, some coal station plant workers can be absorbed into new industries in the way De Ruyter hopes to do when the Komati coal station is decommissioned and replaced with a manufacturing outfit assembling containerised microgrids.
But this is not possible for most people and communities, and someone will have to pay the transition cost. Most of those who made their money out of coal, and who benefited from cheap electricity, are long gone. SA has an astonishing 6,000 ownerless and abandoned mines, mainly in Mpumalanga.
As well as large benefits, not least mitigation of climate change, there are large costs to the transition. But what is certainly not going to happen is that it is slowed or stopped. As history has shown us, obsolete technologies are swept away. The best plan to deal with that, the laggards will learn, is to at least have one.
• Paton is editor-at-large.
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