$99 Billion is a Huge Goal: The Pursuit of Renewables in South Africa (By NJ Ayuk)
By NJ Ayuk, Executive Chairman, African Energy Chamber (www.EnergyChamber.org)
South Africa has been setting a positive example for its approach to ensuring a just energy transition. Not only is South Africa embracing renewable energy projects, but it is also wisely pursuing several proactive measures to generate the necessary funding.
One such approach is the Renewable Energy Independent Power Producer Procurement Program (REIPPPP), which focused on incentivizing private-sector investment in biomass, wind, and small hydro. The government operated the program between 2011 and 2015 to address energy poverty and extend access to clean electricity. This effort gave South Africa over 6,000 megawatts (MW) of renewable generation capacity. Due to its success, the program was re-launched as part of the country’s 2019 integrated resource plan.
The REIPPPP is fostering a just energy transition complete with job creation and economic transformation. By harnessing significant private sector expertise and channelling investment, the program is fostering grid-connected renewable energy at competitive prices.
And this is huge for the people of South Africa.
We at the African Energy Chamber continue to be impressed with the success of the REIPPPP. In the Eastern Cape province, for example, the program has created more than 18,000 jobs and set up 16 wind farms and one solar energy farm. Perhaps more importantly, the province also experiences less load shedding (scheduled power outages) as a result of these efforts.
South Africa also introduced a carbon tax in June 2019. In January 2022, the government increased the tax rate from under $8 per tonne of carbon dioxide equivalent (tCO₂e) to $9/tCO₂e and announced that the rate will continue to rise, to $30/tCO₂e by 2030 and $120/tCO₂e beyond 2050.
More recently, in November 2022, South Africa announced its Just Energy Transition Investment Plan (JET IP). The five-year plan outlines how South Africa will reduce emissions to 420 million tCO₂e by 2030 and identifies the investment needed for the transition to clean energy.
$99 Billion Is a Huge Goal
According to the chamber’s new report, “The State of South African Energy,” a just energy transition will require almost $99 billion (1.8 trillion rands) over the next five years. And South Africa has moved significantly closer to that target, thanks to the $8.5 billion (131 billion rands) pledge from the multinational International Partners Group (IPG), $33 billion (131 billion rands) from the private sector, and $10 billion (184 billion rands) from the public sector.
This is great — but more needs to be done to fully bring South Africa’s just energy transition to fruition.
While a nice chunk of the necessary funding has already been secured, South Africa needs additional investors (domestic and international) to step up and fund grants, guarantees, and concessional loans. Investment will also be required in infrastructure to aid the decommissioning and repurposing of coal-fired power plants, increase the integration of renewables, and upgrade existing transmission and distribution networks.
Importantly, this includes funding new value chains to take the place of phased-out coal to prevent the socioeconomic collapse of communities in regions that depend heavily on coal production. Because we can’t forget, in the shuffle, that eliminating coal means erasing an entire industry’s worth of livelihood. We need to make certain that those who rely on coal — not only for their energy needs but also for their jobs — aren’t simply left out in the cold.
Other Measures to Consider
We commend South Africa for its proactive measures to embrace renewables. Now, it will be important to be diligent about keeping the momentum going.
As we reported in “The State of South African Energy,” the Electricity Regulatory Act of 2021 led to 6 GW of renewable generation capacity through private sector projects by bumping up the licensing threshold from 1 MW to 100 MW. This is forward progress. However, we noted that an even higher threshold would have fostered greater investment in large utility projects. For example, the government should consider signing multi-decade land lease agreements with independent power producers to generate even greater renewable capacity.
Because in the meantime, widespread national blackouts and load shedding have become daily occurrences since 2007. Eskom Holdings, the government-owned national power utility that generates 90% of the electricity used in South Africa and 30% of the electricity created on the continent, can’t keep up with demand — especially in light of its antiquated and inadequate coal fleet. These outages disrupt the daily life of the general public and damage profits of businesses.
To create a more competent and competitive power market, South Africa has announced a restructuring of Eskom into three legally separated entities for generation, transmission, and distribution and to establish an independent transmission system operator. We at the Chamber are all for this idea, but we’re sad to report that it remains up in the air.
And how about expanding solar? South Africa has proposed schemes to foster rooftop solar with feed-in tariffs and tax incentives. This could play a tremendous role in a just transition, with a two-fold benefit: incentivizing both the residential and commercial sectors and alleviating load shedding. And Eskom itself has hinted at accelerating investment in renewables. As yet, unfortunately, we are still waiting to see any of this.
Green Energy That’s Beneficial for South Africa
As we’ve seen, the South African government is making strides in adopting policies to aid a just energy transition from coal to renewables.
The result of these new policies is that the nation is starting to see the benefits of solar PV and onshore wind energy as a replacement for coal. In fact, as we reported in “The State of South African Energy,” coal power generation is on track to decrease from 210 terawatt hours (TWh) in 2021 to 73 TWh in 2050. At the same time, we expect carbon intensity to drop from 829.38 kg CO₂e/MWh to 250 kg CO₂e/MWh as renewables continue increasing.
We at the chamber just hope that policymakers continue to roll out concrete measures that incentivize investment at this critical juncture.
To read more about South Africa’s energy ambitions, download the chamber’s full report (https://apo-opa.info/42oP0Ra).
Distributed by APO Group on behalf of African Energy Chamber.