Can Eskom manage a just energy transition for South Africa?

Established in 2020, Eskom’s Just Energy Transition (JET) Office focuses on achieving net zero carbon emissions in South Africa by 2050 without negatively impacting society, jobs or livelihoods. JET general manager Mandy Rambharos answers our questions.

What are the key challenges and opportunities for a just energy transition in South Africa?

With coal-fired utilities accounting for 88% of South Africa’s electricity, the challenges for transition to renewables are not simply funding, but they are also the socio-economic issues that will arise when coal plants close down. While their closure will bring environmental benefits, they will have a major impact on social structures.

Our challenge has been to determine how to balance meeting the goals of decarbonisation, environmental equality and huge benefits for water-saving in a semi-arid country, with people losing their jobs.

We need solutions in terms of Eskom’s JET plans, repurposing plants to enable a return of economic benefits to those areas where plants are shut down. We are looking at how to create opportunities for people in those areas.

Our plan is for repowering and repurposing existing power plants to contribute to a demand for renewables in South Africa. If you are committed to renewables then you also encourage local manufacturers and industrialists to move into the area.

We used to have manufacturing capability, but government policy was unclear on renewables and manufacturers left the country, taking with them much of that capability. There is now a huge opportunity to reignite that.

There are still many people who are holding on to the coal agenda. We need to up the ante in terms of awareness and communication around the opportunities. The environmental impacts are clear.

Coal still accounts for most of the country’s energy supply. What are you working on, and what else can be done to help drive down that share more quickly?

We are currently monitoring technologies to see what techniques will be best to help address the high proportion of coal-driven energy.

For example, solar battery storage is the lowest cost option for us right now, but because of the requirement for grid stability and system flexibility, we do need a certain amount of gas to support the new infrastructure and we would need to import this gas from a neighbouring country.

We need first of all to check the viability of investing in gas to supplement the renewables system

Are there any particular techniques you are deploying to facilitate necessary finance?

Eskom is a highly indebted company, so the first challenge to overcome looking at the transition plan was how we will manage to finance it all.

We put together an overall South Africa Just Energy Transition plan, with the electricity sector being the first phase of that plan. This received cabinet approval and formed the basis of the $8.5bn deal that was struck at Cop26 last year.

It’s not money in the bank yet, but it comprises pledges by the UK, US and the EU. Negotiations continue on the basis that there is a deal on the table that we can start using.

Eskom meanwhile has good relationships with its multilateral banks and development finance institutions.

For example, Eskom already has fully financed its flagship Just Energy Transition project for a renewable plant to shut down one of its coal power plants this year. This includes creating a skills and retraining school there, to re-educate people and enable them to participate in the renewables industry.

South Africa has some of the world’s lowest renewables tariffs. Why is this and does it bode well for the future in terms of renewables?

The low renewables tariffs in this country are largely down to the global drop in renewables technology. The cost of PV panels, for example, has fallen by about 80%.

But the price of electricity is not cost-reflective. Eskom is selling its product for less than it costs us to make. The price of electricity in South Africa has been artificially low for many years and we still need to get to cost-reflectivity in the country, but in a struggling economy this is a difficult discussion to have.

However, overall in the long term, as we shut down coal plants and replace them with renewables, we will have to address this.

What political changes would you like to see occur in South Africa that would help a just energy transition?

From an energy policy perspective we need certainty of demand for renewables in order to attract the necessary investment and the industrial policy needs to support local manufacturing. As a manufacturer you wouldn’t invest in a country where you don’t know if it will commit to building a certain level of renewables per year.

The industrial policy needs to support local manufacturing. At present, industrial policy is not conducive to investors coming in, due largely to onerous localisation requirements. We need a phased-in approach to introducing localisation in the country.

If you look at India and Vietnam, they changed their localisation policies so that they could attract investors, and once they had done so they were able to start ramping up on their localisation requirement. But at the moment localisation requirements are so high in South Africa that it is actually deterring investors.

So the two biggest things I think must change are energy policy and industrial policy.

Do you see a chance of those changes happening anytime soon?

We’ve been in discussion with government for a long time, but I don’t know. There seem to be certain positive moves in terms of some of the energy policy changes in the last couple of months, but I am not sure realistically how long it’s going to take especially for the industrial policy to change.

We have to learn by doing. We have to start implementing projects now. We won’t get everything right when it comes to repowering and repurposing, but if we don’t start now then it’s going to be too late.

We can’t deny a just energy transformation is happening, and we need to get on the bandwagon and to start implementing projects, learning by doing. No time like the present.