EDITORIAL: Ramokgopa’s coal plant refurbishment plan will cost us dearly

The biggest variable in SA’s energy future is where the money will come from to fund it all. Further uncertainty on this is also the biggest risk created by the enigmatic new electricity minister Kgosientsho Ramokgopa’s suggestion that the planned end-of-life decommissioning of coal-fired stations should be delayed. Such a move could make SA unattractive for any funder, private or public, that is willing to invest in the energy sector, or in other programmes that would support climate-change adaptation and mitigation.

SA’s energy and climate-change financing needs are astronomic. Eskom’s own calculations estimate that about R1.2-trillion is needed, before 2030, to install sufficient new generation capacity to bridge the current gap of about 6,000MW and provide adequate electricity supply in future.

Of that funding requirement, just short of R1-trillion will have to be invested in new generation capacity, including between 50GW and 60GW of variable generation capacity from renewable sources, 10GW of storage and 6GW of “peaking” capacity such as gas-fired power.

The rest of the money, about R130bn, is needed to build 100 new substations and 8,000km of transmission lines by 2030 to create enough grid capacity to bring all the new power online.

The World Bank estimates that we will have to invest R4-trillion up to 2050 to meet our energy transition needs, plus an additional R2-trillion in just transition projects, and R2-trillion in resilience and adaptation.

It is highly unlikely that SA will be able to provide the necessary funding through the fiscus. It will have to rely on increased access to local and international public and private finance.

Already, as the Presidential Climate Commission points out in the draft of its long-term electricity plan for SA, capital markets are concerned about climate change and will not provide capital to industries that are not aligned with the requirements of climate science. That many SA and international lenders and banks having policies that prohibit investment in new coal proves this.

Herein lies the danger of Ramokgopa’s suggestion that SA should buck the global trend, which is to move away from coal, and instead invest in the refurbishment and prolonging the life of coal-fired power stations.

Not only would such a plan direct billions of rand away from critical developments in the energy space, such as investment in upgrading the transmission grid, it would also continue to lock SA into a reliance on expensive coal-fired power when there are cheaper, renewable power alternatives available, and lock the country out of benefiting from the type of concessional finance that is available now for developed countries to invest in the decarbonisation of their economies.

Ramokgopa’s suggestion also seems to ignore the fact that some of the funding already pledged to SA to support its just energy transition is targeted specifically at the decommissioning of coal-fired stations.

SA’s much-vaunted $8.5bn Just Energy Transition Partnership (JETP) with the US, EU, Germany, France and the UK hinges on SA sticking to its global commitments to cut carbon emissions —  largely through switching to low-emission sources of energy.

Roughly $2.5bn of the $8.5bn will come from the multilateral climate finance institution Climate Investment Funds (CIF) in the form of $500m in grant and concessional loan financing that will be leveraged to obtain a further $2bn in concessional loans. This funding is being made available through the CIF’s Clean Technology Fund and is specifically earmarked for investment in renewables.

SA also qualifies to receive $500m from the CIF through its Accelerating Coal Transition programme. However, access to this funding depends, as the name suggests, on SA getting out of coal.

At the Presidential Climate Commission’s National Colloquium on SA’s long-term electricity plan in the context of the just transition on Friday, minister of forestry, fisheries & environment Barbara Creecy reminded us that the UN Paris Agreement makes clear that developed countries have a responsibility to finance the transitions in developing countries.

Creecy went as far as to say that the $8.5bn pledged by SA’s JETP partners was an “obligation” rather than a favour.

While it is one thing to argue that some more developed countries such as the US, China and Germany, which through carbon-heavy industrialisation contributed most to the climate challenges the world faces, should hold some responsibility for what it will cost to adapt to these challenges, it is the height of hypocrisy to lecture rich nations about their “obligation” to fund our future energy needs when the minister of electricity is suggesting that they pay for extending coal-fired energy. Only one of the ministers is right. We need to stick to the plan and get out of coal.