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AfDB to set up facility to support South Africa’s just energy transition

African Development Bank president Dr Akinwumi Adesina outlines the bank's commitment to supporting South Africa's just energy transition in address to the fourth South Africa Investment Conference in Johannesburg. Source: SABC. Editing: Nicholas Boyd

24th March 2022

By: Terence Creamer

Creamer Media Editor

     

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African Development Bank (AfDB) president Dr Akinwumi Adesina says the development finance institution is ready to support South Africa’s transition from coal to renewable energy and announced that a just energy transition facility was being created by the bank to support the country’s transition efforts.

Speaking at the fourth South Africa Investment Conference in Johannesburg, Adesina said the bank, which had previously supported the financing of Eskom’s Medupi coal-fired power station, was now ready to support the utility’s shift to renewable energy, as well as South Africa’s drive towards net-zero emissions.

He reported that the AfDB was preparing to approve $400-million for Eskom’s own transition to renewables, while it was also supporting public and private solar and wind projects in the country.

“[But] net-zero cannot be achieved with zero financing,” he stressed.

“The African Development Bank, working in partnership with international partners, especially the G7 countries, plans to establish a just energy transition facility that will support South Africa to raise at least $27-billion to support its energy transition into renewable energy.

“We will do it, Mr President, without South Africa getting into debt,” Adesina said, addressing President Cyril Ramaphosa directly, but without providing specifics.

South Africa, he added, had the potential to be a global energy transition leader and deliver social and employment benefits in the process.

“If you move South Africa away from coal into renewable energy, it will reduce pollution and the negative externalities and impacts of carbon emissions on health and the environment.

“It is an excellent opportunity to recalibrate the Southern African economy to generate thousands and thousands of green jobs and power new green industries for a more competitive economy.”

Adesina also applauded the $8.5-billion offer made by the European Union, France, Germany, the UK and the US at COP26 in Glasgow, Scotland, to support South Africa’s just energy transition.

Speaking from the same platform, Ramaphosa reiterated that the Presidential Climate Finance Task Team, which is headed by former Reserve Bank deputy governor Daniel Mminele, had been established specifically to lead the mobilisation of funds being offered.

“This partnership will involve repurposing and repowering some of the coal plants that are reaching the end of their lives and create new livelihoods for workers and communities most impacted by this change,” Ramaphosa said.

Eskom CEO Andre de Ruyter said the energy transition, if implemented well, could provide an economic stimulus that could yield new industrial opportunities, together with 160 000 net additional jobs, including jobs for workers and communities currently linked to the coal value chain.

Eskom estimates that some 68 000 MW of mostly new variable renewable-energy capacity would have to be added to cater for the 22 000 MW of coal that the utility would be retiring by about 2035, as well as to cater for any growth in demand.

The cash-strapped utility saw itself contributing only 8 000 MW of that capacity, leaving 60 000 MW for private and municipal generators, which would require policy certainty and a level playing field to invest.

"We are going to set up an independent transmission system and market operator precisely to give investors the confidence that their bids into the power pool will be fairly adjudicated.

"So from our perspective, we are all systems go to make sure that this transition happens, that it happens quickly and that it is just," De Ruyter said.

ENERGY INVESTMENT PLEDGES

The President also formally received five investment pledges from energy companies and energy component manufacturers, including:

  • R16-billion by Scatec, of Norway, which will be invested in solar PV and storage projects in the Northern Cape as part of the Risk Mitigation Independent Power Producer Procurement Programme.
  • R3-billion from African Rainbow Energy, which would be invested in several renewables projects arising from the Renewable Energy Independent Power Producer Procurement Programme and from embedded generation projects;
  • R463-million from Bio2Watt, which is being invested in biogas facilities in Gauteng and the Western Cape;
  • R437-million from Seraphim, of China, to produce solar photovoltaic (PV) cells and modules at special economic zones in Coega and East London, in the Eastern Cape; and
  • R30-million by Polarium, of Sweden, to establish a production facility for lithium battery modules, in the Western Cape.

In his address, Ramaphosa highlighted the market reforms under way in the energy sector, which he described as the most extensive transformation in nearly a century, to help close an immediate supply deficit and boost long-term security of supply.

“In December last year Eskom met its deadline of establishing a separate transmission entity and is set to complete the process of unbundling into separate entities for generation, transmission and distribution by the end of this year.

“We are moving ahead to facilitate a competitive market for electricity generation, and the establishment of an independent State-owned transmission company.”

The President estimated the current deficit to be 4 000 MW, while Eskom and other commentators have indicated that it could be as large as 6 000 MW and would grow sharply in the coming few years unless capacity was urgently added to close the gap left by the scheduled decommissioning of several coal power stations, most of which were already unable to produce reliably as a result of maintenance neglect.

“Even as the country continues to experience intermittent load-shedding, we are moving with pace and determination to bring new generation capacity online in the shortest possible time.”

Besides government’s own procurement programme, Ramaphosa said government was working with the private sector to fast-track investment to unlock a potential 4 000 MW of embedded generation.

Edited by Creamer Media Reporter

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