OPINION: South Africa's energy sector needs a transition plan
Extraction, hampered by water shortages and the depth of the coal reserves, will become more difficult.
Furthermore, global coal consumption has fallen for the past two years, a trend that will affect the demand for coal exports. Domestic use of coal for electricity and synthetic fuel production must reduce to meet our climate change commitments. These are all signs of a transition away from coal.
In a 2017 study by the Institute for Sustainable Development and International Relations (Iddri) and Climate Strategies titled Lessons from previous coal transitions, they looked at 6 different countries and the transitions they made away from coal.
The study illustrates what happened to countries that do not adequately prepare for the transition and those who do, with the particular intention of “facilitate(ing) the development of feasible coal transition scenarios in large coal producing countries today” like South Africa. We are currently standing at the precipice of such a transition.
Global decline in the demand for coal, loss of jobs in the coal sector, closing of coal fired power plants, mechanisation of the mining industry, a push for climate change commitments to be met and constant demands from the unions to have a just transition plan are all indicators. Just recently, two separate, but linked, processes got under way.
First, the Coal Transporters Forum (CTF), a small voluntary association that represents the interests of the coal truck drivers in South Africa, initiated legal proceedings in the Pretoria High Court in the form of an interdict. In their application, they have requested that the court prevent Eskom from signing any new Renewable Energy (RE) Power Purchase Agreements (PPAs) and that all existing agreements signed in bid window 4 of the Renewable Energy Independent Power Producer Procurement Programme, that did not comply with statutory regulations, be declared null and void.
Second, Cosatu, the union federation giant, has notified the National Economic Development and Labour Council of its intention to protest, demanding that all current PPAs be suspended and that Eskom must not sign any new PPAs. They have demanded that the RE sector be state owned.
The CTF and Cosatu have listed numerous reasons for their application/protest, some of which are premised on questionable information. That aside, one of the concerns of the unions - job losses without adequate job creation and reskilling of workers ie a lack of a just transition plan - is valid.
Transition is inevitable in the energy sector. This cannot be emphasised enough. The global trend of moving away from fossil fuels is gaining momentum and is an unstoppable wave of change.
There are a few interesting and important lessons to be highlighted in the Iddri study.
Firstly, “It is urgent to start anticipating the transition now to get the best results for workers, communities and businesses.” If we do not, we can all anticipate a large number of companies closing down, massive unemployment, a severely weakened economy and subsequent social unrest, because of the aforementioned. The study reveals that those countries that did not prepare for the transition suffered greatly in the aftermath.
Secondly, “The costs: prevention is better than the cure.” The study found that “the financial costs of worker reconversion and regional economic adjustment are often much smaller than the costs of failing to implement a transition.” Furthermore, no one should escape responsibility for the costs of the transitions including mining companies. These seem like obvious conclusions, but it is not so obvious if there is no consensus that the transition is inevitable and preparation is necessary.
In an ideal world, where the government is not mired in corruption, where resources are being utilised properly for the benefit of the country as a whole and not of a few elite, where the government has already dedicated money to research and development into technologies that ultimately brought manufacturing and production in and maximised the labour benefits from the RE sector, wholly state owned RE would work.
However, as it stands now, with scandal after scandal, with failing to prepare years ago, we have a system where private companies are in the market and are necessary to accomplish what needs to be done for a successful transition in the short time left.
The CTF and Cosatu’s actions have the ability to change the landscape of the game. The renewable energy industry, potentially one of the life boats in a just transition, is about to suffer a major setback.
Should Cosatu’s demands be met, it would discourage, if not scare off, potential investors. When the job losses occur because of the transition, the RE sector could provide employment to those who have lost their livelihoods.
We must come to terms though with the fact that the RE sector cannot carry all the weight of the transition.
Advocating for the protection of the fledgling RE sector does not mean demanding the end of the coal sector. It means protecting a sector that will provide the support South Africa will need when it transitions.
Private companies in the RE sector need to realise that to gain acceptance from organised labour they will need to engage in serious negotiations around the issues of bringing manufacturing and production into South Africa and increasing ownership of the RE sector by South Africans with both government and the unions.
The unions, on the other hand, will need to be open to such negotiations and accept private industry as a necessary part of the transition plan. I can only speculate that the underlying reason for Cosatu initiating their procedure with Nedlac was to begin these negotiations. If so, the government and private industry in the RE sector must grasp this opportunity with both hands.
They must begin by "forging basic consensus on the questions of 'whether and why' transition is essential between the government, companies, trade unions and other civil society organisations." A number of civil society organisations are attempting to get this discussion going, but the real driver of this process must be the government. Every stakeholder in the above mentioned list must compel the government to begin addressing this enormous subject. South Africa is in a unique position to learn from other countries that have already undergone a transition.
Time is not on our side. The study shows that it can take up to 25 years to successfully transition. The transition has in some aspects already begun. We cannot afford to vacillate. Whenever the opportunity arises, whether through public participation in parliament, open stakeholder meetings, political conferences, we should all attempt to bring this subject to the forefront and ask what is being done to bring about and implement a just energy transition plan.
Iago Davids is a member of the Cape Town based environmental group Project 90 by 2030.