With lights back on, S.Africa embraces green transition
With South Africa’s power crisis now over, President Cyril Ramaphosa’s new government is again embracing an accelerated energy transition that could threaten future investment in the country’s coal industry.
After two years struggling to keep the lights on, Eskom has gone more than 130 days without rotational power cuts, known as load shedding. The situation has improved so much that the state utility announced last week it had to cut operations because it was producing so much power.
“We are generating so much more than what we need, and to protect the grid you pull back generation from some of those units,” Minister of Electricity and Energy Kgosientsho Ramokgopa said in a media briefing.
The Energy Availability Factor (EAF), a measure of Eskom’s power plant performance, was above 71% in the past week. The EAF for the year to date is 62% as compared with 55% in the comparative period in 2023.
The situation provides Ramaphosa and green supporters with more freedom to push for a quicker phase out of coal. Eskom is by far the biggest buyer of South African coal, taking more than 100 mt/y, or roughly half of the country’s production.
“For decades our reliance on coal was a competitive advantage because it allowed us to produce electricity cheaply,” Ramaphosa said at a recent climate change conference. “But the world has changed and this dependency has come to pose significant risks.”
Ramaphosa said the country must “embrace a managed transition to a low-carbon economy,” or face significant disadvantages as trading partners like the European Union begin to impose carbon pricing systems.
“Our emissions-intensive energy system is likely to increasingly undermine our competitiveness in global markets,” the president said. “We are facing a climate emergency. Indecision and slow action are not an option.”
Ramaphosa last month signed into law a new Climate Change Bill, which imposes mandatory emissions curbs to ensure an energy transition that is “not constrained by policy contradictions”.
“We have to start preparing for a precipitous decline for domestic and global coal markets by about 2035, possibly close to zero by 2040,” said Dipak Patel, the Commission’s head of Climate Finance & Innovation at a recent coal conference in Johannesburg.
“I would really urge all those who are particularly invested in the coal value chain to start looking at pivoting strategies if their corporates are going to remain healthy into the medium to long-term future.”
The Presidential Climate Commission (PCC) has been one of the biggest advocates of an accelerated energy transition, which Western nations are aggressively pushing for South Africa with the promise of billions of dollars in green financing.
As part of the Climate Change Bill, the Commission was promoted from a largely advisory role to an official arm of the state.
However, any significant move against coal will likely face tough resistance from Minister of Mineral and Petroleum Resources Gwede Mantashe, one of the industry’s biggest cheerleaders.
Following June’s general election, Mantashe was reappointed to the Cabinet with a slightly smaller portfolio covering minerals and petroleum resources. Ministerial responsibility over electricity and energy, including Eskom, has now been given to Kgosientsho Ramokgopa.
“With the effective demotion of Minister Gwede Mantashe by removing energy and electricity from his oversight and control…the (passage of the) Climate Change Act, and the elevated role of the PCC, it introduces a new policy coherence for the gradual phaseout of coal in the years to 2035, 2040 and 2050,” said Chris Yelland, an independent energy analyst.