LUNGILE MASHELE: Just energy transition hobbled by government inaction

There is no denying the symbiotic, perhaps parasitic nature of organisations and the communities in which they operate. What has been recognised is the importance of greater awareness of an institution’s surroundings, stakeholder engagement, and social and labour plans. Most organisations have created awareness alongside municipalities by providing solutions to the vast needs contained in integrated development plans. 

At the start of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) 30% of the scoring was allocated to economic development (ED) elements and 70% for price. These elements include job creation, local content, ownership, management control, preferential procurement, enterprise development and socioeconomic development​. Supplier development was recently added. 

The REIPPPP was structured so that ​a minimum of almost ​​1​% of revenue was allocated to ED initiatives within a 50km radius of the project site. Over the years​ most organisations easily surpassed this target, spending ​even 3​% ​or more ​of revenue. It was agreed that implementation of these ED elements was not only necessary, but successful.

On May 16, government​’s​​ inability to resolve the challenges arising from the Preferential Procurement Policy Framework Act (PPPFA), and it being nullified by the courts, led to the effective​ scrap​ping​ of ED requirements for the procurement of 513MW of battery energy storage at substations. By reducing the ED element of the bid to 10%, which is neither obligatory nor a qualifying criterion, government has done away with the requirement for local content, ownership and job creation.

This means ​a foreign​ entity can come into ​the ​SA market​ with its own equipment, labour and materials and ​own, ​supply​, install and operate​ ​the country’s ​battery energy storage infrastructure​. Until the regulations are changed this will also affect future REIPPPP bid windows, which promise at least 15,000MW of new capacity in a super bid window.

Th​e current ED scoring structure as contained in the battery energy storage system programme does not bode well for the communities where future projects will be taking place. These new geographic locations include Mpumalanga and KwaZulu-Natal, which are already fraught with socioeconomic tension and increased project sponsor dependency. 

With the stalling of the REIPPPP largely due to a lack of grid capacity, ​the ​private ​offtake market​ ​is ​eclipsing ​the ​REIPPPP with an estimated pipeline of 5,000MW-​9,000MW of mostly renewable energy projects, to be located all over the country in urban and peri-urban areas. There will be increased focus on these projects not only by the sponsors but by local government and ​communit​ies​.

The question ​then ​becomes​: ​with the increased need for energy, a nonexistent social compact, increased inequality and energy projects sprawling into urban areas​, ​how will this new private and public capacity address unemployment, increase local content, local value chains and ownership, ensure black management control and preferential procurement, enterprise development and meaningful socioeconomic development?

Add to that the scramble for grid access — a national asset that should, by definition, serve the public good — and the question of the ED contribution of all renewable energy projects (public or private) becomes even more pertinent. 

How does government get the private sector, which is not bound by PPPFA, to plough back into the communities they operate in so that project development is mutually beneficial and not disruptive and extractive​? How does SA leverage the almost 24,000MW of planned new capacity for industrial growth, local manufacturing, new enterprises and local ownership, and therefore recirculation within the SA fiscus?

This is the critical moment where the​ just ​portion of the energy transition needs to be at the forefront​,​ otherwise we risk a social catastrophe. There have already been reports of REIPPPP projects being targeted by the “construction mafia”, yet government is encouraging enormous build programmes without offering any social cushioning to developers or communities.

Unchanged, the path the renewable energy sector is on in SA is doomed to make costly mistakes and continue to aggravate communities and local value chains that are desperately looking to survive in their home grounds. Now is the time for the difficult and intentional work towards achieving a just transition. 

• Mashele is an independent energy economist.