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The opportunities for business and society

It is now inevitable that Eskom in the shape and size which we have known for decades will soon cease to exist, that we are already beginning a fundamental transition towards a lower-carbon future, and that a private-sector, job-creating competitive electricity sector is at last beginning to emerge.

Eskom has established an exco-level Just Energy Transition office which is tackling its remit with alacrity – by 2022 it aims to have in place financing options for its own green build as well as frameworks for appointing EPC contractors. By 2023 it envisages having installed its first additional PV capacity at the Arnot, Duvha, Lethabo, Majuba, Komati and Tutuka coal-fired stations as well as its Sere wind farm, ramping up its own production of renewable electricity dramatically by 2025.

While Eskom is still unclear on how much renewable electricity it will be asked to generate itself, it is gearing up to play a leading role of the generation of such energy to 2030. The Just Energy Transition office’s current 10-year renewables plan is not just about Eskom planning for its own account; it appears to accept that some measure of PPPs will be required. It estimates the capex requirements for its renewables plans at R44 billion for photovoltaic and R62 billion for wind.

On 17 August 2021 Eskom CEO Andre de Ruyter said Eskom had in mind seeking green funding for 7,400MW of clean electricity and at least 244MWh battery storage. It hoped to implement this within five years.

We all agree that our country urgently needs to generate jobs – quality, sustainable jobs. Coal is not the job creator it once was; today this mining sector supports just 90 000 jobs, a number which continues to decline. Renewables can create more jobs than coal.

We list here some of the ways in which South African business can, immediately and to the year 2030, generate income and create jobs while delivering transformation and energy.

  • IRP 2019 leaves open many of the questions about where and how our electricity will be sourced post-2025. Eskom has publicly said it supports expediting the utility-scale procurement of almost 14 000MW. In 2030 the private (non-Eskom) sector should be generating a very substantial part of our national requirement.
    Following the announcement, in March 2021, of the winning bids in terms of the Risk Mitigation Independent Power Producers Procurement Programme, a great deal of invaluable IP was doubtless “left on the table”. With the relaxation in licensing, unsuccessful RMIPPPP bidders could doubtless turn much of the knowledge and effort they put into their bids to account. (EY-Parthenon’s recent report on private renewable projects estimates that this project pipeline could create 102 000 local jobs while requiring an investment in excess of R500 billion – most of which, it says, can be sourced from the private sector.)
  • Relieving onerous licensing obligations on private-sector generation which doesn’t necessarily sell to Eskom was lifted to 100MW as of August 2021 – a breakthrough which Eskom itself has championed and which it appears departmental officials had resisted. Green financing for viable projects, it is universally agreed, is plentiful.
  • Eskom is supporting the reinstatement of so-called Section 12L tax incentives for energy efficiency. Manufacturing Circle members should too.
  • There are emerging signs that contracts under the Negotiated Pricing Arrangement might soon become a reality for Eskom and non-Eskom customers. (Both the long- and short-term frameworks for such arrangements are in place and Eskom has already started forwarding applications to Nersa.)
  • Increasingly, government favours using state funding mechanisms to support private-sector power generation. One vehicle is the DTIC’s critical infrastructure programme (although its remit is not limited to energy). There are other funds available.
  • A form of intervention in faltering municipal distribution now seems inevitable. How much of this will be delivered through Eskom’s “active partnering” approach is unclear but this problem has to be fixed and it will almost certainly open up opportunities for, particularly, HDSA-owned SMEs.
  • Fabrication and installation of an envisaged 8 000km of transmission lines represents a major opportunity for all kinds of manufacturers and those involved in “stringing”. By focussing more effectively on the actual implementation of local content requirements, the authorities will hopefully help address the under-utilisation of our renewables-manufacturing capability – and help to create jobs.
  • Our reliance on heavily carbon-dependent Scope 2 emissions poses a significant threat to exporters. In July 2021 the European Commission released its plans to impose carbon taxes, under a new carbon border adjustment mechanism, from 2026. Decarbonising our energy supply will ultimately benefit exporting manufacturers, improving their competitiveness.
  • In March 2021 an additional three renewable energy development zones were proclaimed, bringing to 11 the total number of these REDZs. These now include Emalahleni (Witbank), Klerksdorp, Kimberley and the Overberg as well as solar and wind hot spots in the Northern and Eastern Cape. Geographic areas for some nine “strategic gas transmission pipeline infrastructure” phases, totalling several thousands of kilometres, were also announced.
  • De Ruyter spoke in August of Eskom potentially catalysing the growth of green manufacturing. Noting that only 1,000 electric vehicles had been sold in South Africa since 2015, De Ruyter floated the possibility of Eskom using its own need for electric vehicles to act as an “anchor market” for the local motor industry.
  • South Africa is uniquely positioned to exploit own-use and export opportunities relating to green hydrogen. And even blue hydrogen.
  • Repurposing decommissioned power plants, for instance, towards water supply, will require a great variety of products and services.
  • Last year Germany grew the share of renewables in its power mix to almost half – 46% to be precise. We lag far behind. Very far behind. But it’s a fact that our worst acreage for solar is better than Germany’s best solar acreage. And we have many more days of sunshine than they do. Germany also has the problem that its wind farms are sometimes subjected to such severe storms that they generate so much power that it can overwhelm the grid. Local industry will be incentivised by the JET (possibly with OEM partnerships) to make a variety of equipment, including transformers, meters and LV backbones.
  • Battery manufacture will be critical to the inevitably increased reliance on renewables.

Eskom’s Just Energy Transition office estimates that to 2030 in six of the next nine years (from 2022) job-creation opportunities in its own (Eskom’s)  PV and wind construction and operations and maintenance will exceed 100 000 annually. It puts the figure for the other three years at over 50 000.

Mining and then burning coal to generate electricity are not the job creators they once were. And coal is very bad for the health of many South Africans. Recently Greenpeace claimed that the area around the Kriel (coal) power station in Mpumalanga was the second worst for sulphur dioxide concentrations in the world, second only to a very dirty nickel -refining complex in the Russian Arctic. Eskom itself admits that coal-generated electricity causes fatalities – although it puts the annual death toll at a fraction of what others claim.

Unlike almost every other country, South Africa’s Just Energy Transition is happening not just because of the need to do our bit for the drive towards "nett zero" and the world’s +2° C challenge and our international commitments but because our very survival is tied to transforming our electricity sector. We can’t afford to build any more big coal-fired or nuclear power stations. And we don’t have the time.

Simply stated, our risks are greater than anyone else’s. But so are our opportunities.

What should business do now?