Investment plan

The Just Energy Investment Plan will be released for public comment following the unveiling of COP27

South Africa’s Just Energy Transition Partnership (JET-P) investment plan, which will aim to unlock $8.5 billion in concessional finance for decarbonization projects as well as support programs for coal workers and communities, is currently being considered by Cabinet ahead of its planned launch. during the COP27 climate negotiations to be held in Sharm El Sheikh, Egypt next month.

Addressing a Standard Bank climate conference on Tuesday, the Minister for Forests, Fisheries and the Environment Barbara Creecy also reported that the JET-P investment plan, once launched, would be released for public comment.

“We obviously ask you to watch it, to understand it, to see how it lays out a vision of how we would like to accompany the transition in these three sectors. [of electricity, electric vehicles and green hydrogen].

“And what we sincerely hope is that [the plan] would create the appetite of the private sector and begin to mobilize the significant amounts of funding that we will need over the next ten years,” Creecy said.

She again stressed that while the $8.5 billion offered by JET-P partners from France, Germany, the United States, the United Kingdom and the European Union would result in around 150 billion rand, they were nevertheless well below the more than 1 rand. – trillions of dollars South Africa needs over the period to transition to an energy system aligned with the decarbonisation commitment it made at COP26 in Glasgow, Scotland in 2021.

Creecy highlighted the economic risks of not moving fast enough to decarbonise, pointing out that Italian and Indian buyers of South African forest fibers used in the manufacture of clothing had warned her as minister responsible for forests that they would seek other sources of supply unless South Africa halves the carbon content of its forest fiber by 2030.

With some of the country’s major trading partners planning to impose carbon border adjustment measures from 2026, Creecy warned that even without such restrictions, South Africa’s top exports by value would become vulnerable. changes in global demand as countries decarbonize.

That said, she pointed out that the country’s recently adopted just transition framework insisted that the transition be implemented in a way that would ensure not only that it enhanced energy security, but also helped the country to address economic inclusion, job creation and poverty reduction.

“The climate transition must help us meet our global challenges as developing countries.”

“INEVITABLE” TRANSITION BUT NOT A “BINARY DEBATE”

Speaking on the same platform, the CEO of Eskom André de Ruyter described the energy transition as inevitable, saying “you just can’t hold back this wave with your bare hands, it’s going to happen”.

Nonetheless, he disputed the proposition that the transition was a “binary debate” between coal and renewables.

“Eskom, and therefore South Africa, will be a huge consumer of coal for a very long time.

“So the idea that we will somehow succumb to pressure from the ‘North’ to sterilize all our natural resources in order to satisfy pressure from international lenders is simply not supported by the facts. “

Instead, as South Africa’s old coal fleet reached retirement age, it was uneconomical to extend its life in a context where renewables provided the new electricity. the cheapest and could be built faster than any of the alternatives.

There was also an appetite, De Ruyter noted, on the part of investors to make “risk-based investments” in renewable energy, without government guarantees, citing as an example the land lease agreement of ‘Eskom recently announced in Mpumalanga for a possible 2,000 MW of new capacity.

He then challenged South African bankers to “start taking more risk” and wean themselves off their “reliance on national treasury guarantees”.

“Now I know it’s tied to a single buyer model, [but] as soon as we open the market, I think we should move away from national treasury guarantees.

De Ruyter was also strident in his view that the bulk of JET-P funding should be directed to Eskom.

“The money, if we’re serious about decarbonization, should be directed overall to Eskom, because that’s where you have your cheapest and fastest route to decarbonization.”

He questioned the diversion, at this stage, of concessional funding towards green hydrogen, given that the industry was dependent on excess electrons, water and grid capacity; preconditions that were not currently in place in South Africa.

He also questioned the extension of concessional financing to manufacturers of electric vehicles, which “would undoubtedly pass on the benefits of concessional financing to their shareholders”.

“I don’t know if the Germans, the French and the Americans will agree to grant concessional financing that will end up in the pockets of the shareholders.

“So a lot of debate is still going on in this space but, of course, I think the Eskom case is compelling.”

Creecy, on the other hand, argued that South Africa needed to accelerate its electric vehicle and green hydrogen strategies, especially in light of the energy crisis in Europe which would ultimately accelerate the energy transition on that continent, despite the short-term reaction to the Russian invasion of Ukraine, which precipitated much higher coal consumption.

“What I find very interesting is how the current energy crisis is causing Europe to say that it is going to skip the gas phase and that it is going directly to green hydrogen.

“And that’s why it’s very important that we have to get into this race, and we have to get into this race extremely fast, because Egypt and Morocco are already positioning themselves and obviously they have a geographical advantage over us because that they could run pipelines to Europe.

That said, gas and Africa’s right to invest in indigenous gas resources emerged as a strong theme of the meeting, with African business luminary Dr. Mo Ibrahim calling “ridiculous” the emerging argument that African gas projects should not be funded, especially when such funding had already been disbursed for projects that had much of their production exported.

CEO of Standard Bank Corporate and Investment Banking Kenny Fihla argued that an immediate ban on non-renewable projects in Africa “was neither realistic nor fair” in the context of widespread energy poverty.

“The transition from non-renewable energy requires a gradual and measured process.

“We therefore see certain oil and gas projects as essential elements of the energy transition, especially on the African continent,” Fihla said.