Blueprint for transition from coal is too ambitious
Attempts to meet the targets set out in the draft Integrated Resource Plan could have serious consequences
Reliable, cost-effective electricity is vital not only to improving people’s lives but to the economy’s ability to attract investment and create jobs. Our Integrated Resource Plan must be carefully calibrated to ensure energy security is not compromised.
In particular, a rapid and aggressive transition away from coal will put the entire economy at risk. We need to strike the right balance. SA’s current draft Integrated Resource Plan is too ambitious; attempts to meet the targets could have serious consequences.
It is important to recognise that coal provides 76% of SA’s energy at present, and the country is still investing large amounts of money in new coal generation. In addition, the country has large reserves of coal. It is important that the nation gets a proper return on its investment in this technology.
At the same time, the coal industry employs 82,000 people earning more than R22bn a year and supports economic activity related to its value chain valued at R61bn a year. It is vital that we plan carefully to ensure new jobs are created to counterbalance those that are lost and that the economic contribution of the coal value chain is replaced. It is also very important to consider affordability: if electricity is too expensive, it will deter investment and also affect the poor.
One also needs to recognise that SA currently lacks a significant domestic renewable technology sector and thus its capacity to provide large numbers of new jobs is nonexistent. In addition, a high reliance on imported technology and skills will reduce the multiplier effect the industry will have on the economy as a whole.
The truth is that while renewable energy is making huge strides, it is not yet ready to provide the all-important base power that any economy depends on. It is subject to the vagaries of unpredictable weather patterns, which means energy generation will usually not coincide with energy demand. Energy storage is thus critical, but at present affordable mass energy storage remains a pipe dream.
The example of Germany is instructive. While it has been at the forefront of embracing and incorporating renewable energy into the power mix, it has experienced bumps in the road. The rapid transition to renewables led to the cost of electricity for households almost doubling between 2000 and 2017. In addition, even though it has a reputation for pioneering renewables, coal continues to provide 40% of its power.
Another consequence of a badly planned energy transition is that it will discourage investment in coal mining. This in turn would affect not only the industry’s ability to keep up supplies to SA’s own growing fleet of coal-fired power stations but also to supply coal to Asia’s high-growth economies.
At the same time, the environmental consequences of coal must be faced. However, there are emerging technologies that attempt to mitigate many of the downsides. For example, integrated gasification combined cycle and eutectic freeze crystallisation are leading technologies aimed at reducing the use of water, while carbon capture has become standard at many coal power stations globally to reduce emissions.
Again, the example of Germany is instructive: it has failed to meet its emission reduction targets despite huge investment in renewables because it failed to monitor increases in other sectors, such as transport and manufacturing. Electricity generated by coal is not the only cause of carbon emissions.
To summarise, Germany reduced its dependence on coal by only 10%. It has a strong domestic renewable energy sector and invested hugely in the transition. Even so, the cost of electricity doubled, this despite Germany’s position as a global leader in the adoption of renewables and committing significant skills and billions of euros to its efforts.
The draft Integrated Resource Plan 2018 proposes that SA reduce its dependence on coal by rather more (about 16%), but the country has neither local renewables know-how nor the ability to raise the capital sums needed. Compared with Germany, on a proportional basis SA’s transition targets are very ambitious.
We do need to make the transition, but it must be planned carefully in line with our socioeconomic realities and goals. Specifically, we recommend that the current 2030 goals be pushed out to 2050. A gradual transition will give us the chance to realise a return on our investment in coal, build a strong local renewables sector and manage the impact on the coal industry and economy as a whole more effectively.
• Mareda is CEO of Black Royalty Minerals.