Business charts roadmap to South Africa’s energy Just Transition
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South African business is throwing its weight behind the transitioning power generation from fossil fuel reliance to net-zero emissions requiring the deployment of 150GW wind and solar capacity by 2050.
This is almost four times the total capacity of South Africa’s coal power plants today, needing an investment of R3 trillion within the next 30 years.
In an ongoing study aimed at clarifying the pathway, the National Business Initiative (NBI), Business Unity South Africa (Busa) and the Boston Consulting Group (BCG) this week said business would support an enhanced level of ambition in the nationally determined contribution (NDC) that would see the country committing to a range of 440 to 350–370 metric tons clean emissions by 2030.
The research initiative has the support of captains of industry and chief executives from a variety of blue chip companies in the petroleum, banking, construction, automotive, banking, transport and other sectors of the economy.
“However, this enhanced ambition would have to be conditional on the provision of the requisite means of support by the international community. In this light the business community will play its part to work with international and local partners to develop a portfolio of fundable adaptation and mitigation projects that will build resilience and achieve deep decarbonisation,” business said.
Seven of South Africa’s key export markets have all set net-zero targets, including the European Union (EU), China, the US, the UK, Japan, and South Korea.
The South African economy would face mounting trade pressure as trade partners implement their low-carbon commitments, the study said.
South Africa ranks in the top 20 most carbon intensive global economies on an emissions per gross domestic product (GDP) basis, and in the top five amongst countries with GDP in excess of $100 billion (R1.5 trillion) per annum.
In the mining sector, three of the four most significant minerals in South Africa’s commodity footprint are at risk given the global efforts to curb emissions: thermal coal, Platinum Group Metals (PGMs) with mainly palladium, and iron ore. The fourth mineral is gold.
The study found that the bulk of South Africa’s exports comprised carbon intensive commodities from the mining, manufacturing, and agricultural sectors, which would become less competitive in markets in a future decarbonised world. These sectors also provided the majority of employment of unskilled labour at a regional level.
The coal mining sector currently provided almost 400 000 jobs in the broader economy, with about 80 000 direct jobs and 200 000 to 300 000 indirect and induced jobs in the broader coal value chain and economy, according to the study. The impact was even broader when it is taken into account that, on average, each mine worker supported five to ten dependants. This implied a total of 2 million to 4m livelihoods.
Added to the mix were the country's unique triple challenges of inequality (highest Gini coefficient in the world), unemployment (greater than 30 percent) and youth unemployment (greater than 50 percent), and poverty (more than half of South Africans living in poverty) provide a key context to the transition, the study said.
The report said to reach net-zero by 2050, South Africa would need to speed up deployment of renewable energy capacity; at least 4GW of renewables would need to be installed every year – roughly 10 times the current pace of new-build.
To help fund this journey and ensure competitive cost of capital, access to international green finance would be required to succeed.
The degradation of this coal fleet, coupled with the delayed commissioning and under-performance of Medupi and Kusile, had been a significant contributor to load shedding in recent years.
Energy shed has increased from 190 GWh in 2018 to 1350 GWh in 2019 and 1800 GWh in 2020, approximately 10 percent of annual hours. Given the downward trend in the Energy Availability Factor (EAF) from 72 percent in 2018 to 65 percent in 2020, the low reliability of power supply and the need for load shedding was likely to persist.
Sectorally, the pathway for coal required an update on policy stance to have no new coal and no new conventional nuclear built to 2030 and beyond, the study found.
Decisions had to be made on which power stations would be repowered/repurposed and how the split of gas vs renewable energy versus battery compared to compared against decommission).
The study said on decommissioning in particular, there must be clarity and alignment on committed decommissioning amongst key stakeholders as well as financially viable solutions to support early decommissioning of coal plants
With renewable energy, the need to increase allocation from 20GW to at least 30GW by 2030, as well as the fast-tracking of the procurement of RE power so that at least 30GW was procured by 2030, 100GW by 2040 and 150GW by 2050, it said.
BUSINESS REPORT ONLINE