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Just energy investment plan to be released for public comment after COP27 unveiling

Forestry, Fisheries and the Environment Minister Barbara Creecy

Forestry, Fisheries and the Environment Minister Barbara Creecy

18th October 2022

By: Terence Creamer

Creamer Media Editor

     

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South Africa’s Just Energy Transition Partnership (JET-P) investment plan, which will seek to unlock $8.5-billion in concessional funding for decarbonisation projects as well as for coal worker and community support programmes, is currently in the Cabinet process ahead of its anticipated launched during the COP27 climate negotiations to be held in Sharm El Sheikh, Egypt next month.

Addressing a Standard Bank climate conference on Tuesday, Forestry, Fisheries and the Environment Minister Barbara Creecy also reported that the JET-P investment plan, once launched, would be released for public comment.

“We are obviously urging that you would look at it, that you would understand it, that you would see how it lays out a vision for the way in which we would want to support the transition in these three sectors [of electricity, electric vehicles and green hydrogen].

“And what we're very sincerely hoping is that [the plan] would create appetite from the private sector and would begin to mobilise the significant quantities of financing that we're going to need over the next ten years,” Creecy said.

She again stressed that, while the $8.5-billion being offered by the JET-P partners of France, Germany, the US, the UK and the European Union would translate to about R150-billion, it nevertheless fell well short of the more than R1-trillion South Africa required over the period to transition to an energy system aligned with the decarbonisation pledge it made at COP26 in Glasgow, Scotland in 2021.

Creecy underlined the economic risks of not moving fast enough to decarbonise, highlighting that both Italian and Indian buyers of South African forest fibre used in garment manufacturing had cautioned her as the minister responsible for forestry that they would seek alternative sources of supply unless South Africa halved the carbon content of its forest fibre by 2030.

While some of the country’s main trading partners were planning to impose carbon border adjustment measures from 2026, Creecy warned that, even absent such restrictions, South Africa’s top exports by value would become vulnerable to changes in global demand as countries decarbonised.

That said, she stressed that the country’s recently adopted Just Transition Framework insisted on the transition being implemented in such a way as to ensure that it not only enhanced energy security but also assisted the country in dealing with economic inclusion, job creation and poverty alleviation.

“The climate transition has to assist us with our overall challenges as a developing country.”

TRANSITION ‘INEVITABLE’ BUT NOT A ‘BINARY DEBATE’

Speaking on the same platform, Eskom CEO André de Ruyter described the energy transition as inevitable, saying “you just cannot hold back this wave with your bare hands, it is going to happen”.

Nevertheless, he contested the proposition that the transition was a “binary debate” between coal and renewables.

“Eskom, and hence South Africa, will be a very substantial consumer of coal for a very long period of time to come.

“So the notion that somehow we will succumb to pressure from the ‘Global North’ to sterilise all of our natural resources to satisfy pressure from international lenders is simply not substantiated by the facts.”

Instead, as South Africa’s old coal fleet reached retirement age it was uneconomical to extend their lives in a context where renewables provided the lowest-cost new electricity and could be built faster than any of the alternatives.

There was also appetite, De Ruyter noted, from investors to make “risk-based investments” in renewable energy, without government guarantees, pointing by way of example to the recently announced Eskom land-lease deal in Mpumalanga for a possible 2 000 MW of new capacity.

He then challenged South African bankers to “start taking more risk” and wean themselves off their “addiction to National Treasury guarantees”.

“Now I know that it's tied up with a single-buyer model, [but] as soon as we open up the market, I think we should walk away from National Treasury guarantees.”

De Ruyter was also strident in his view that the bulk of the JET-P funding should be directed towards Eskom.

“The money, if we are serious about decarbonisation, should be directed by and large to Eskom, because that is where you have your cheapest and quickest decarbonisation route.”

He questioned the diversion, at this stage, of concessional funding to green hydrogen, given that the industry was dependent on there being excess electrons, water and grid capacity; preconditions that were not currently in place in South Africa.

He also queried the extension of concessional financing to manufacturers of electric vehicles, who would “no doubt pass on the benefits of concessional financing to their shareholders”.

“I'm not sure if the Germans and the French and the Americans will take kindly to extending concessional financing that will eventually find its way into the pockets of shareholders.

“So, a lot of debate is still going on in this space but, of course, I think the Eskom case is compelling.”

Creecy, by contrast, argued that South Africa needed to accelerate its electric vehicle and green hydrogen strategies, particularly in light of the energy crisis in Europe which would ultimately accelerate the energy transition across that continent, notwithstanding the short-term reaction to Russia’s invasion of Ukraine, which had precipitated far higher coal consumption.

“What I find very interesting is how the current energy crisis is now leading Europe to say that they're going to skip the gas phase, and they're going to move straight into green hydrogen.

“And that's why it's very important that we need to get into this race, and we need to get into this race extremely fast, as Egypt and Morocco are already positioning themselves and, obviously, they have a locational advantage over us because they could run pipelines into Europe.”

That said, gas and Africa’s right to invest in indigenous gas resources emerged as a strong theme of the gathering, with African business luminary Dr Mo Ibrahim describing as “ridiculous” the emerging argument that African gas projects should not be funded, particularly when such finance had flowed previously for projects that had a large portion of their production being exported.

Standard Bank Corporate and Investment Banking CEO Kenny Fihla argued that an immediate ban on non-renewable projects in Africa “was neither realistic nor fair” in a context of widespread energy poverty.

“The transition from non-renewable energy requires a gradual and measured process.

“We, therefore, view certain oil and natural gas projects as being critical components of the energy transition, especially in the African continent,” Fihla said.

 

 

Edited by Creamer Media Reporter

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