By extending the life of its coal-fired power stations, South Africa is at risk of becoming a global pariah and losing exports to its largest trading partner – the European Union.
The comments from Swilling and Duvenage were in response to electricity minister Kgosientsho Ramokgopa’s plan to delay the decommissioning of coal-fired plants to alleviate load-shedding in the short term.
The African National Congress (ANC) has approved the plan to extend the use of Eskom’s coal-fired plants earmarked for decommissioning.
“The NEC supports the approach that as we prioritise load-shedding, we will need to re-visit our decommissioning schedule to balance energy security and our climate commitments,” President Cyril Ramaphosa said in his closing address to the ANC’s National Executive Committee.
The plan to keep using the dirtiest fuel for longer may also delay the transition to cleaner fuels and access to $8.5 billion of funding from rich nations for closing coal plants.
The updated schedule will be determined by several factors, including modelling to estimate projected future capacity from various sources.
The cabinet may approve the new schedule by the end of June, and no units will be shut down until the new schedule has been finalised.
The strategy would result in the increased use of fossil fuels to mitigate electricity shortages in the country.
South Africa’s Integrated Resource Plan stated that by 2030 the country must have decommissioned 11,000MW of coal-fired capacity.
The plan does not make financial sense
Professor Mark Swilling said the plan “does not make any financial sense”, jeopardising the $8.5 billion funding from developed states to transition to renewable energy.
According to Swilling, extending the life of South Africa’s coal-fired plants will also cost more than the estimated R1.5 trillion transition to renewables.
Finance Minister Enoch Godongwana, in the budget, has prohibited Eskom from investing in new-generation capacity and must prioritise investment in distribution and transmission.
This forces the utility to engage the private sector to invest in its ageing coal fleet. However, investors are reluctant to do so, given the global push for renewable energy and many board resolutions prohibiting new investments in coal-fired electricity generation.
OUTA CEO Wayne Duvenage added that creating another plan to tackle load-shedding increases confusion and uncertainty among investors.
This inhibits investment in new generation projects and slows the implementation of reforms.
The plan also contradicts previous government interventions such as the Just Energy Transition Plan (JETP) and the Integrated Resource Plan (IRP), which aim to increase renewable generation while decreasing the use of coal.
Both Duvenage and Swilling said that South Africa “must stay the course” with the JETP and IRP as it gives the country the best chance of ending load-shedding quickly.
Loss of exports
South Africa also risks losing exports to its largest trading partner, the European Union (EU).
The EU has recently implemented carbon-border taxes, which impose progressively higher import taxes on products made using carbon-intensive energy sources, such as coal.
The EU’s Carbon Border Adjustment Mechanism may put up to R27 billion worth of South African exports at risk in the short term.
South Africa’s iron, steel and aluminium exports will be hard hit, and following a transition period, plastics and organic chemicals will also be used.
If Eskom’s coal fleet is kept in operation for the foreseeable future, South African exports will be heavily taxed and ultimately uncompetitive within the EU.
Swilling warned that this would result in South Africa becoming a global pariah that cannot stick to its ethical commitments.