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Picture: BLOOMBERG
Picture: BLOOMBERG

SA, the world’s 13th-biggest source of greenhouse gases, will need to spend $250bn (R3.919-trillion) over the next three decades closing down its coal-fired power plants and replacing them with green energy, according to a study. 

In addition to closing down the country’s coal-fired plants and building wind and solar power plants, money will need to be spent compensating coal-dependent communities whose livelihoods are threatened by the change, The Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University said. Most of the money will need to come from the private sector, according to the study. 

The estimate comes as the country, which relies on coal for more than 80% of its electricity, is negotiating $8.5bn in climate grants and concessional loans with some of the world’s richest nations. The potential deal, announced at the 2021 COP26 climate summit in Glasgow, envisages SA retiring some of its coal-fired power plants. 

“The $8.5bn pledge can be a catalyst to unlock this $250bn,” researchers said in the study released on Thursday. “It should offer the global blueprint for transition finance.” 

The deal, some details of which are expected before the COP27 climate summit in Egypt later in 2022, is being negotiated between SA and a group consisting of the US, UK, France, Germany and the EU. 

With its ageing coal-fired power infrastructure, much of which is nearing the end of its design life, and an economy heavily dependent on the dirtiest fossil fuel, SA is regarded as an ideal nation with which to forge an energy transition deal that could be mirrored in talks with other nations. Vietnam, Indonesia and India are seen as countries that could start similar talks to those being pursued by SA because of their dependence on coal. 

Coal accounts for more than 5% of SA’s GDP and the coal industry employs 125,000 people, each with between three and 10 dependents. 

Under the plan presented in the study, the country would need to install 5GW of renewable energy capacity annually until 2050. That would create 5,000 jobs a year over the next decade in construction, operation and maintenance of the plants, the researchers said.

Wind and solar

SA is “home to some of the best solar and wind resources globally, offering economic opportunities through an accelerated energy transition”, the researchers said.

The researchers envision expenditure over 30 years as follows:

  • $125bn on 150GW of solar and wind power plants;
  • $18bn on 33GW of battery storage;
  • $8bn on 5GW of pumped hydro storage;
  • $18bn on 30GW of natural gas-fired power generation;
  • $50bn on improving the power transmission and distribution networks;
  • $24bn to close the coal-fired power plants owned by Eskom by 2040; and
  • $10bn to compensate affected coal workers and to rehabilitate the environment at idled coal mines.

Financing for the programme will need to come from the private sector in both SA and the rest of the world, the researchers said. 

The Public Investment Corp (PIC), which oversees R2.34-trillion of mainly government worker pensions, the Development Bank of Southern Africa and the Industrial Development Corp (IDC) should play a role, the researchers said.

“The majority of the $250bn needed for SA’s just energy transition can be funded by private finance investing into scaling renewables and other enabling infrastructure,” the researchers said. “About a third of the funding will be needed from capital providers, with a mandate that is not entirely commercial” to support the social costs of the transition. 

More stories like this are available on bloomberg.com
Bloomberg


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