The massive investment committed to help SA transition to clean energy may start flowing into the country in the second half of next year, once funding agreements have been finalised.
This week the US, UK, Germany, France and the EU agreed at the COP26 UN Climate Change Conference to mobilise R130bn in concessional finance and grants over the next three to five years to assist with SA’s energy transition.
The world’s 12th-biggest emitter of greenhouse gases, SA is currently dependent on coal for more than 80% of its power. The transition will include investments in renewable projects and other innovative technical developments, and investments in areas such as electric vehicles and green hydrogen.
Valli Moosa, deputy chair of the Presidential Climate Commission, which advises the government on how to mitigate climate change, says during the next six months a financial consortium that will include developmental finance institutions from participating countries will work out the details of the deal and how it will be administered.
Once all parties have agreed to terms and conditions, funding will likely start being released during the second half of the year.
“This is a proper finance facility with a number of components,” Moosa said.
Discussions about the transition started early this year. “A lot of work has already been done. The process is not at the beginning stages. We are quite advanced — I think the time frames are realistic. We have to put these details to the financing consortium,” said Moosa.
Already the global customers for our export products are demanding that the carbon content of those products be reduced
— Valli Moosa, deputy chair of the Presidential Climate Commission
The concessionary elements of the deal will be provided by the governments of the countries that have committed the funding and their state finance institutions, he said.
The commission will be “completely opposed to a programme that is dictated to us by somebody else. The programme must meet our national needs and interests. That’s how it is going to be. We will communicate our view to the government which will be doing the detailed negotiations of the deal.”
He described the partnership for a just transition as a game-changer.
“SA has a desperate need to reindustrialise and realise higher levels of economic growth, and that won't happen by looking at old technology. It will happen with new technologies, renewable energy efficiency.”
SA intends to decommission and repurpose or repower coal-fired power stations, invest in new low-emission generation capacity such as renewables, increase energy efficiency and pursue green industrialisation such as manufacturing using green technology and a shift to the production of electric vehicles.
According to a statement issued by the UK High Commissioner, to limit the effects of climate change the international community needs to collectively halve global greenhouse gas emissions by 2030 and achieve global net-zero CO² emissions by 2050, while strongly reducing other greenhouse gas emissions.
Moosa said SA's exports “will face challenges and will become more and more uncompetitive if our exports have much higher carbon content than others”.
Even though there are no border adjustments now, “we will be short-sighted to assume carbon border adjustments are not coming. Already the global customers for our export products are demanding that the carbon content of those products be reduced,” he said.
Funding of new energy efficiency solutions will cater for communities that will be affected by the closure of coal power plants.
Simon Nicholas, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, said it is important that the initial suggestions around concessional refinancing of Eskom in return for earlier coal power plant closures has since expanded to include funding for new developments in electric vehicles and green hydrogen that can create new jobs with a better long-term outlook than jobs in coal.
This agreement provides a framework for a just transition to occur — much will depend on making sure the technology transition really is just for South African communities.
Lebogang Mulaisi, labour market policy co-ordinator at Cosatu, said at the Business Day Dialogues webinar that unions would want to be part of the social planning and design of the programmes that will be targeted at communities that rely on coal power stations.
“The social and labour plans are going to be of critical and key importance. Issues of jobs will be key and we want to see how well that can be factored into such transitions,” Mulaisi said.
“If we want workers to transition they will need skills and this needs to be embedded in the design and planning.”
Nicholas said in the longer term a switch from reliance on ageing and badly maintained coal-fired power plants to reliance on smaller, widely distributed wind and solar installations backed up with power storage will produce a much more reliable power supply than SA has at present.
Nicholas added that a switch from reliance on coal-fired power to reliance on ever-cheaper renewables will see the cost of power generation drop. This should result in cheaper power tariffs for South African consumers, including businesses, helping them to thrive and support jobs across the economy.
