South Africa’s energy sector needs urgently to transition fully to renewable energy options ahead of looming deadlines by major markets, including the EU and US, which will, in the next decade, reject products manufactured with fossil fuel sources, analysts warned. Photographer: Kevin Sutherland/Bloomberg
South Africa’s energy sector needs urgently to transition fully to renewable energy options ahead of looming deadlines by major markets, including the EU and US, which will, in the next decade, reject products manufactured with fossil fuel sources, analysts warned. Photographer: Kevin Sutherland/Bloomberg

‘Transition to renewables faster or pay the price’

By Banele Ginindza Time of article published Aug 20, 2021

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South Africa’s energy sector needs urgently to transition fully to renewable energy options ahead of looming deadlines by major markets, including the EU and US, which will, in the next decade, reject products manufactured with fossil fuel sources, analysts warned.

This as the EU and the UK announced a proposal to ban the sale of new cars with internal combustion engines by 2030 to 2035.

“Certain importers are now looking to add higher tariffs depending on how products are produced. Fossil fuel-driven production will attract much higher tariffs,” said Vuyo Ntoi, the co-managing director of African Infrastructure Investment Managers.

Ntoi said if South Africa did not move to a cleaner energy base, there could be an enormous impact for the economy, after the US, in its budget deliberations, recently raised the bar for renewable energy production, while the EU is setting up a carbon border tax to protect their manufacturing against products deemed to be contaminated by fossil fuels.

The move would hit particularly South Africa’s automotive industry, which accounted for 13.9 percent of all South African exports last year. Europe accounted for 72.8 percent of total vehicle exports.

Paul Boynton, the chief executive of Old Mutual Alternative Investments, said all logistics, infrastructure planning and investments needed to be built around the shape that a more sustainable future would take.

“If you look towards the future, carbon footprint and supply chain will become an increasingly critical metric when it comes to sustainability and exports,” Boynton said.

Ntoi said it was encouraging to see policy, such as the announcement that private entities can generate up to 100 megawatts in renewable energy for their own use, promulgated into law.

“While developing countries may well get some leeway, the topic of sustainability in developed countries is top priority, making it prudent for South Africa to get on board sooner than later,” he said.

Delivering the keynote address at the Dr Hendrik Johannes van der Bijl Memorial Lecture on Tuesday night, Eskom chief executive Andre de Ruyter said South Africa had to beneficiate its solar and wind acreage, particularly because Eskom intended to retire 22 gigawatts of coal-fired generation capacity over the next 15 years.

He said the cost of renewable energy technologies continued to decline and would add generation capacity sooner than other technologies, thus reducing the risk of load shedding.

“It is clear that we have an opportunity to pivot away from Eskom’s carbon-intensive history and lay the groundwork for a cleaner and greener electricity supply industry, and it is more than an opportunity; it is an economic, social and environmental imperative,” he said.

Meanwhile, Webber Wentzel analysts said although the gazetting of the amendments to allow firms 100MW of embedded production was commendable, there were some grey areas, particularly the main amendment to Schedule 2 of the energy regulation authority, which now provides that operating an electricity generation facility, with or without storage, with a point of connection to the transmission or distribution grid, with a capacity of no more than 100MW, is exempt from licensing by, but will require registration with, the National Energy Regulator of South Africa.

“Firstly, it is uncertain whether an exempted electricity generator can sell electricity to multiple end-use customers. Secondly, generation facilities that are commonly referred to as off-grid facilities seem to be covered by the exemption that provides the operation of any generation facility with or without energy storage provided irrespective of capacity, the facility does not have a point of connection,” they pointed out.

Jason van der Poel, Alexandra Felekis and Mzukisi Kota from Webber Wentzel said it was unclear whether the reference to “where there is conveyancing of electricity through the transmission or distribution power system” in the distribution licence exemption was intended to exclude the operation of distribution lines that connect behind the meter.

They said in respect of the trading licence exemption, “reseller” was defined as a person who purchases electricity from a trading entity to sell it to a customer, but “trading entity” was not defined.

“It is questionable whether the operator of an exempted generation facility would be required to obtain a trading licence in order to sell electricity to an end-use customer.  In our view, the answer is negative,” they said.

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