SA will reject green financing that hurts fiscus

• ‘Coal will remain part of energy mix beyond 2030’

The government will not accept funding for the transition from coal to renewable energy from international partners if it places a burden on the fiscus, President Cyril Ramaphosa said on Thursday. “This commitment from international partners does not mean we need to accept any unfavourable terms, especially if the financing arrangements could impact negatively on the public fiscus,” Ramaphosa said, signalling that the government will be more comfortable with grants. The US, UK, Germany, France and EU agreed at the COP26 conference to mobilise R131bn in concessional finance and grants over the next three to five years to assist with SA’s energy transition.

The government will not accept funding for the transition from coal to renewable energy from international partners if it places a burden on the fiscus and reaching SA’s developmental goals, President Cyril Ramaphosa said on Thursday.

“This commitment from international partners does not mean we need to accept any unfavourable terms, especially if the financing arrangements could impact negatively on the public fiscus,” Ramaphosa said during a question-and-answer session in the National Assembly, signalling that the government will be more comfortable with grants.

The US, UK, Germany, France and EU agreed at the COP26 UN Climate Change Conference to mobilise R131bn in concessional finance and grants over the next three to five years to assist with SA’s energy transition.

A significant proportion of the funding is expected to be used for Eskom’s just transition plans, which includes decommissioning and repurposing old coalfired power stations in line with the Integrated Resource Plan [IRP] 2019, which provides a blueprint for SA’s energy mix until 2030.

SA is considered to be the world’s 12th-biggest emitter of greenhouse gases, and is dependent on coal for more than 80% of its power. The government further intends to invest in new low-emission generation capacity such as renewables, to increase energy efficiency and to pursue industrialisation based on green technology and to shift to the production of electric vehicles.

Ramaphosa told MPs a joint negotiations team will be established between SA and the partner countries to discuss an investment plan and financing modalities, including the terms and conditions of the funding offer. This process is expected to be finalised over the next six months to a year.

“It will be done transparently and we will all get to know what it entails,” he said.

The pace and scale of decommissioning coal-fired power stations will be determined by the need to maintain security of energy supply and the extent to which financial support for a just energy transition enables a higher level of ambition, Ramaphosa said.

However, in terms of the IRP and the revised Nationally Determined Contributions — the country target to reduce greenhouse emissions — coal will remain part of the energy mix beyond 2030 even as the share of renewable energy sources significantly increases, he said.

The Paris Agreement, which set global climate change targets in 2015, places an obligation on developed economies that are responsible for close to 80% of historical emissions, to provide support to developing economies to adapt to the effects of climate change and transition to a lower-carbon future.

Ramaphosa said the government is determined to “go through the transition that does not leave anybody behind.

“And in any event some of our [coal] fired power stations are coming to an end ... we have said it will be impossible to close down every [coal] fired power station in the country, but we should embrace renewables and Eskom is moving in that direction,” Ramaphosa said.

DA leader John Steenhuisen asked Ramaphosa about the government’s stance on coal in light of the indications by mineral resources & energy minister Gwede Mantashe that he would push back against its complete elimination. The president said Mantashe’s views are aligned with the government’s stance.

“Mantashe is a coal miner. His love for coal is deep. His love for coal miners is even deeper. When you listen to him, have that at the back of your mind. However, having said that, Mantashe’s position on the issue of transition is well aligned with government. What he has been saying is that we need to manage our way through the transition very carefully and ensure that no-one is left behind.”

Turning to the load-shedding crisis, Ramaphosa said the government is looking at removing all regulatory hurdles to allow local government entities to generate or procure their own power without hindrance.

“I would like to see municipalities move ahead to generate electricity so that we can derisk electricity supply. If we have one entity providing electricity, if it falters it means the entire country is at risk. Let us allow local generators. Be assured that national government will not obstruct municipalities at all,” the president said.