Ramaphosa's R1.5-trillion just transition plan will not override South Africa’s energy policy

South Africa’s recently announced R1.5-trillion Just Energy Transition Investment Plan (JET IP) is not a replacement of existing energy plans, but rather a decarbonised addition to the country’s energy future, and therefore makes room for fossil fuels such as gas.

The plan, announced by President Cyril Ramaphosa on Friday in a special briefing, is set over five years between 2023 and 2027, and focuses on shifting the country from coal-fired electricity, producing electric vehicles and investing in green hydrogen. JET IP is expected to assist the country in meeting its Nationally Determined Contributions (NDCs) target range of 350-420 Mt CO₂-eq (million tonnes of CO₂ equivalent) by 2030.

Read more in Daily Maverick: “Funding a greener future – Ramaphosa outlines South Africa’s R1.5 trillion three-step energy transition plan”

Joanne Yawitch, head of the JET IP secretariat, told Daily Maverick the implementation modalities of the plan were yet to be developed.

“The approach taken was to look at the scale of need in the next five years that is necessary for South Africa to be on a trajectory consistent with the updated NDC and for the finance that is mobilised to support this. The greater the finance, the greater the ambition that is possible.

“The plan is about a scale of need much bigger than the $8.5-billion… and it’s saying that this money should be used in ways that are catalytic, that really start to support and put in place investment that will get us on to the NDC track, which is the way in which the plan is framed,” said Yawitch.

The watershed finance deal dissected

Last year at COP26, South Africa secured $8.5-billion in financing towards its just transition from fossil fuels. The financing — from the European Union, Germany, France, the US and UK — came in a mix of grants, concessional and commercial loans and guarantee instruments.

Read more in Daily Maverick: “South Africa secures ‘watershed’ finance deal to reduce coal reliance”

According to the JET IP, The initial $8.5-billion is focused on decommissioning coal plants, expanding and strengthening transmission grid and distribution infrastructure, supporting economic diversification in coal regions and deploying renewable energy.

Not a policy replacement

“Our assumption is that we will need some system balancing and peaking of support that could come from sources such as gas or storage. The plan focuses on renewables’ low emission technologies… [The plan] is written within the framework of the country’s energy policy; so it takes [into account] the current IRP and the overall South African policy and environment in energy and climate…

“We weren’t trying to make a policy-making exercise, what we’re saying is, ‘Here’s what there is in the policy environment, and this is a plan (JET IP) that can work within it with all the changes that are happening’,” said Yawitch.

Oil and gas exploration 

On the Friday that Ramaphosa announced the JET IP plan, Department of Mineral Resources and Energy Minister Gwede Mantashe said on TV news channel eNCA that oil and gas exploration would start in the Karoo.

“Our decision is going to be sustainable if we access oil and gas on our shores… we are going to issue a proposal for that shale gas in the Karoo,” Mantashe said, adding that samples had been verified in another country. “Oil; we chased Shell out of the Eastern Cape… we should drill the shores of the Northern Cape… and discover it and use it.”

Read more in Daily Maverick: “ ‘Drill, baby, drill; gas, baby, gas’: African energy ministers solidify pro-fossil fuel position ahead of COP27”

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Perrine Toledano, Director of Research and Policy at Columbia Center on Sustainable Investment (CCSI) told Daily Maverick South Africa has been good in defining a transition from fossil fuels as a business opportunity, particularly around green hydrogen and electric vehicle development.

“[South Africa has two sides; not wanting to really give up coal, but being quite forward-looking in the energy transition.

“It is in the interest of Africa to embrace a transition. There is a real business case for Africa to embrace fully the energy transition and not to continue with fossil fuels because they have never paid well for the continent; that is the argument we are making,” said Toledano.

Africa’s roadmap to decarbonising 

Toledano is also an author of a report by CCSI titled Roadmap to Zero-Carbon Electrification of Africa by 2050: The Green Transition and the Role of the Natural Resource Sector (Minerals, Fossil Fuels, and Land).

In the report, the authors argue that decarbonising African countries is not only good for the environment, but also an opportunity to attract “bankable and highly attractive investments”. The report also focused on African nations developing resources for capacity in renewable energy, increasing the capacity of the African Development Bank to frontload infrastructure investments, as well as investing in green electrification and digitalisation.

African just transition an opportunity for investment 

“I do think that Africa can actually do more in the value chain of solar and wind; that’s a second chance to industrialise for these industries. And you do have plenty of assembly lines and a few factories in Africa. It’s an opportunity to reposition themselves on the global value chains,” said Toledano.

South Africa secured €600-million (R10.7-billion) from France and Germany to further its decarbonisation agenda; an announcement made at the global climate talks COP27 in Sharm el-Sheikh, Egypt. The countries each pledged  €300-million towards financing for the country’s shift from coal.

Read more in Daily Maverick: “SA secures R10.7-billion loan from European nations for focus on cleaner energy sources”

As the climate conference convenes and global leaders and experts gather to decide how best countries can go about reducing their carbon emissions in an effort to limit the devastating effects of the climate crisis, gas is often touted as a transition fuel from coal to renewable energy sources.

“There is this illusion that you can explore and develop within a couple of years. For sure there is a [fossil fuel] market. The track record for African markets from exploration to first projection is 12 years, because it takes forever to go through all the phases. So in 12 years, the market might hopefully look completely different. Africa needs to be cautious of the cost of production of reserves,” said Toledano. “Having a gas field is not having gas, and having gas is not having gas infrastructure… and sometimes these aspects are forgotten.” DM/OBP