Financial Times perspective: South Africa’s green deal on coal power cuts fails to ignite

Use Spotify? Access BizNews podcasts here..Use Apple Podcasts? Access BizNews podcasts here..___STEADY_PAYWALL___.South Africa's green deal on coal power cut fails to ignite.Most money earmarked to aid the switch to renewables is unspent.By David Pilling.It was billed as one of the biggest achievements of last year's COP26 summit in Glasgow. Western nations agreed to provide $8.5bn of funds to help speed South Africa's transition from coal to renewable energy..Under the arrangement, known as the Just Energy Transition Partnership, or JETP, the US, EU, UK, France and Germany pledged to help South Africa shut its coal plants more quickly than scheduled while "supporting an equitable, inclusive transition"..South Africa's electricity grid relies on coal for roughly 85 per cent of its generating capacity. That is one reason the country is currently the world's 13th-biggest emitter of carbon dioxide. But it has some of the world's best conditions for solar and wind power, as well as the technological capacity to produce green hydrogen..So the hope is that, if north-south co-operation can reduce emissions more quickly, similar programmes could be rolled out in other coal-hungry countries, such as Indonesia and Vietnam.."Going into Glasgow, this was one of the big objectives of the UK and its key partners: how to help phase out coal in big countries," says Amal-Lee Amin, head of climate change at British International Investment, the UK's development finance institution. But the push for an announcement meant not all preparatory work was finalised, she adds. "The JETP was launched as a flagship project but there was very little detail.".Nearly a year on, some details remain sketchy. "I think that we underestimated how complicated it would be," says Barbara Creecy, South Africa's environment minister, referring to the lengths taken to draw up plans about the nature of the funding and exactly how it would be spent. "We had a chicken and egg situation," she says. "The South African government was saying: 'Give us chapter and verse on the money.' And the partners were saying: 'Give us the investments.' After much delay, we agree: 'Let's do both.'".Still, days before COP27 began in Sharm el-Sheikh, neither side had formally announced its plans. According to a leaked draft — described as broadly accurate by one South African official — some $4.6bn of the $8.5bn funding is earmarked as concessional loans with much of the rest made up of guarantees. Only $230mn, less than 3 per cent of the total, is grant money.."We are concerned that the deal not only adds to our debt burden, but ignores adaptation," says Sibusiso Mazomba, a climate advocate at the South African Institute for International Affairs. International donors, he says, are more interested in funding climate mitigation measures, such as renewable power generation projects, rather than helping upgrade infrastructure, such as the storm resistance of buildings, in response to more extreme climate..The question of how the $8.5bn will be spent is also becoming clearer. South Africa has set three priorities for the money: accelerating the transition from coal; shifting its carmaking industry from petrol to electric vehicles; and starting a green hydrogen industry. It has a $95bn five-year plan in which the $8.5bn is meant to play a catalytic role..A big problem in phasing out coal is the potential loss of jobs in a country with chronically high levels of unemployment and inequality. The ruling African National Congress has deep roots in the trade union movement, including in the National Union of Mineworkers. The government has allocated coal supply contracts, often as part of black empowerment schemes, to politically well-connected entrepreneurs who are reluctant to see a rapid move from coal..Officials have sought to use the idea of a "just transition" to bring labour unions to the negotiating table. "We know that we cannot do this transition if it is going to unfairly disadvantage workers and communities," says Crispian Olver, executive director of South Africa's Presidential Climate Commission. "We have to do the transition in a socially and economically responsible way that builds new sectors of our economy at a pace that can absorb people as the other sectors downsize.".Another problem is trying to retire coal plants when the grid is teetering on the brink of collapse. Years of mismanagement and corruption mean that Eskom, the state electricity monopoly, has been forced into rolling power cuts, euphemistically known as "load shedding". That has crippled businesses, which are forced to scale back production or invest in expensive back-up generators or provide their own power.."I do not see us retiring coal for a while," says Ivor Ichikowitz, a South African businessman in defence and aerospace, who said blackouts posed an existential threat to swaths of industry. "Everybody is now looking at how do we survive; just to keep warm and just to keep our industries alive. And we'll worry about climate change later.".One positive point, he says, is that wind and solar power could be added quickly, especially if the government further relaxed regulations. He would like to see Eskom shrink as old coal-fired power stations shut and the energy mix shifts towards renewable energy from private companies..But that vision has met resistance from an ANC that still has faith in the capacity of the state to improve equality and is reluctant to cede too much ground to the private sector.."We don't want to just see a repetition of the ownership and concentration patterns of the past," says Olver at the Presidential Climate Commission. "We don't want to just see a ramp-up of privatisation as we transition our energy systems." It is, officials say, a delicate balance of the country's social and energy needs and its climate obligations.."Is this a good model?" asks environment minister Creecy, referring to the $8.5bn package. "I guess the answer is it's too early to tell.".Copyright The Financial Times Limited 2022

Financial Times perspective: South Africa’s green deal on coal power cuts fails to ignite

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