304-page document sets out SA’s energy transition plan

A R1.5-trillion South African investment plan to begin transitioning the economy away from fossil fuels over five years sets out how billions of dollars in climate finance will be tracked and details potential investments.

They include ArcelorMittal’s plan to make steel on the west coast using green hydrogen produced by Mainstream Renewable Power in a project worth as much as R69.2-billion, and Hive Energy’s R100-billion green ammonia facility at the port of Coega.

The Just Energy Transition Implementation Plan, overseen by the office of President Cyril Ramaphosa, outlines targets and assigns institutions to oversee the transition across six areas, according to the document.

Those are electricity, new-energy vehicles, green hydrogen, skills development, improving the implementation capacity of municipalities, and economic development in the coal-dependent province of Mpumalanga.

“South Africa’s ambitious commitment will be implemented in accordance with our domestic transition plans, which includes dealing with our current energy crisis, and in support of our foremost task of reducing poverty, unemployment and inequality,” Ramaphosa said in a foreword to the 304-page plan.

Ramaphosa’s spokesman, Vincent Magwenya, didn’t answer calls seeking comment.

Next year, renewable energy and the manufacturing of components and equipment needed for that industry, energy efficiency and shifting the country’s freight transport onto rail from roads will be added to the investment areas.

Delayed

The completion of the plan, which has been delayed by at least eight months amid opposition by trade unions and some politicians concerned about the potential impact of the energy transition on coal-dependent jobs, is a key step to unlocking US$8.8-billion pledged under a pact known as the Just Energy Transition Partnership with Germany, France, the UK, the US, the EU, the Netherlands and Denmark.

More than $2-billion of additional funding has been pledged by countries including Spain, Switzerland and Canada outside that agreement. It has been approved by cabinet and will be announced at the Cop28 climate summit in Dubai, which begins on 30 November.

Read: Komati: how South Africa botched its first coal power-plant transition

The partnership was initially announced at Cop26 in Glasgow in 2021 and is meant to serve as a prototype for similar plans in Indonesia, Vietnam and Senegal.

Initial steps under the implementation plan include the creation of a registry to record projects being undertaken under its aegis. In 2024, a funding platform will be established to match providers of grants with beneficiaries.

The report lays out plans for R498-billion of investment in electricity generation over the next five years, almost evenly split between solar and wind power. Under the plan, just over R23-billion has been allocated to battery storage. It’s expected that 6GW of generation capacity can be added annually.

Generation projects that are being considered show that the private sector could provide R300-billion of investment over that period, the report shows. A further R250-billion is needed to strengthen the national grid.

Incentives worth R71-billion to kick-start the production of electric cars and explore the use of fuel cells to power vehicles are laid out in the plan and it details hundreds of billions of privately funded green hydrogen projects that are being considered.

Read: South Africa’s coal heartland is ill-prepared for the energy transition

Still, the switch from fossil fuels is expected to impact coal-dependent communities in Mpumalanga, which hosts 56 active coal mines and more than 80% of South Africa’s coal-fired power plants. As many as 400 000 direct and indirect jobs are at risk, the president’s office said in the report. Money will need to be spent providing alternative employment, according to the report.  — (c) 2023 Bloomberg LP

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