South Africa’s ambitious plan to transition away from coal was endorsed at the recent COP27 climate conference in Egypt where officials from Britain, France, Germany, the United States, and the European Union signed pledges of $8.5 billion to help fund its initial steps. Currently South Africa relies upon coal to generate up to 87% of its electricity, but by the end of the decade the nation wants to close more than half its aging, unreliable coal-fired power stations and replace them with new solar and renewables. Yet today state-owned energy provider Eskom is struggling to provide consistent electricity. But despite the climate benefits, citizens and miners fear the plan may end up costing hundreds of thousands of jobs, lead to the privatization of Eskom and rapid market liberalization as operators race to construct solar farms near existing coal facilities. Lead blogger and podcaster Michael Buchsbaum reviews the situation. Read part 1, part 2, and part 3 of this series.
Keeping the lights on
With a population of roughly 60 million, coal-dependent South Africa is by many estimates the world’s 13th biggest source of climate-warming greenhouse gases.
However, the nation continues to be rocked by power outages, locally known as “loadshedding” as its network of government-owned, aging and poorly maintained coal-fired power plants operated by Eskom fail to provide either reliable or affordable electricity.
After nearly a decade of mismanagement and charges of corruption under previous governments, Eskom increasingly can’t keep the lights on.
As its old plants plug along, trying to provide above 80% of South Africa’s intermittent electricity, the company’s two newest coal-fired power stations, the Medupi and Kusile facilities, continue to be plagued by cost overruns and design flaws. More than a decade after construction began, their combined 9GW of capacity still doesn’t flow to the grid.
With a daily shortfall of around 4,000-6,000MW of power – about 10% of demand, record-levels of loadshedding have cost South Africa’s economy over $2.3 billion through 2022 according to early estimates.
Eskom’s reliability problems and increasing costs are even ironically pushing its coal mining suppliers to develop their own green energy power systems to keep deep mines running.
To help Eskom decommission half of its 45,000MW of installed coal capacity by 2035, in April the company published a request for proposals (RFP) to allow private operators to lease land around its coal-fired plants and construct new solar farms to supply the grid with more electricity.
Under Eskom’s plan, the state-owned company will auction off parcels of land in Mpumalanga – home to 12 of its 15 coal-fired power plants and about 85% of the mines that supply them– so that private power producers can build out renewable energy capacity and readily access the company’s available transmission lines.
Eskom has nominated over 89,000 acres of land in the province, much of it impacted by mining, as suitable for re-purposing into solar sites.
However, regulators are capping the maximum amount of electricity generation capacity per project at 100MW while leases will be for a minimum period of 20 years. Additionally, the land will remain Eskom’s property for the duration of the lease.
By November, Eskom had already secured contracts for over 2GW of new green generation capacity.
Climate Pact Spurs Billions in Funding
Days before COP27’s opening, the country announced the decommissioning and transformation of its first coal-fired plant, the Komati power station, into a renewable energy generation site.
Retaining its existing transmission infrastructure, Eskom will rebuild the plant into a 150 MW battery fed by some 150MW of solar and 70MW of wind power capacity.
The World Bank, which provided the bulk of the $497 million in project funding, hailed it “as a reference on how to transition fossil-fuel assets for future projects in South Africa and around the world.”
Positioning itself as the “champion of the South” in the global effort to curb carbon emissions, as COP27 convened, Cyril Ramaphosa, South Africa’s president, unveiled an ambitious investment plan for a Just Energy Transition (JETP) to phase out the nation’s coal power.
By 2035 Eskom plans to shut down nine power stations and eliminate 15GW of coal power.
The plan’s estimated nearly $100 billion costs through just 2028 raised many eyebrows. However, with an initial $8.5 billion in secure support from the UK, U.S., Germany, France and European Union over the next five years, Ramaphosa hopes their new climate pact will catalyse further financing.
The first $2.6 billion support for the JETP will be allocated through the Climate Investment Funds Accelerating Coal Transition Investment Plan, followed by $1 billion each from the US, EU, France, and Germany, and $1.8 billion from the UK.
As of this writing, the South African government has not added any new major funders to this list.
While other donor nations hesitate, the reality is that enabling the continent’s most-industrialized nation to rapidly build solar and wind plants at a blistering pace over the next decade won’t be cheap. Shutting down all of its coal units requires at least 53 gigawatts of new clean energy capacity to come online by 2032 to ensure grid reliability.
Worries of unjust transition
Given that the country’s energy transition will put hundreds of thousands of jobs at risk, investing in reskilling workers in affected industries is crucial.
“Coal fleet closure will directly impact about 90 000 coal workers in the mines and power plants of the poverty-stricken Mpumalanga province where the sector is concentrated, having dire consequences for the extended number of livelihoods supported by workers in the sector, both in Mpumalanga and elsewhere in the country,” the plan states. The entire value chain — from mining and electricity production to end-use sectors — employed almost 200 000 people in 2020.
The Brookings Institute estimates in their Country Climate and Development Report published by the World Bank in October 2022 that the JETP could create as many as one million jobs from 2023 to 2050, which will be several times higher than the number of jobs projected to be destroyed (about 300,000).
However, the country’s biggest union, the National Union of Metalworkers of South Africa (NUMSA) has warned that JETP will only intensify privatization, further pushing a country where over 55% of people are already living in poverty and 46% are unemployed further into debt.
To prevent this, in partnership with the Cape Peninsula University of Technology’s South African Renewable Energy Technology Centre, Eskom is establishing a retraining facility at their now closed Komati plant.
With the help of $2.17 million in support from the Global Energy Alliance for People and Planet, the plant will also be repurposed into a factory to produce micro-grids, agri-voltaic plants and mobile solar-power units built out of old shipping containers.
The short-term ambition is to employ 500 full-time workers churning out 900 units a year, which in turn can help provide back-up electricity as the grid challenges continue.