November 29, 2023

JAMES MACKAY: SA has a grand opportunity to implement win-win energy transition

SA is on the cusp of an exciting new era of enormous economic opportunity and technological innovation. The government, partnering with business, has the potential to unleash historic levels of investment, job creation and economic growth as part of its vision to create a secure, sustainable energy sector.

Delivering this win-win scenario will require ongoing collaboration between the government and the private sector, as well as broad societal consensus on the practical reforms needed to achieve a just energy transition. SA’s high dependence on a coal sector that has long served the economy will make the transition even more challenging, but we do not have time for ideological squabbles about technologies; we need all energy sources to end load-shedding and grow the economy.

The good news is that progress has already been made in collaboration between government and the private sector. The delivery partnership backed by a pledge from more than 130 CEOs from SA’s leading companies is already focused on the practical reforms needed to achieve a just energy transition through economic growth.

The launch last year of the presidential energy action plan resulted in the national energy crisis committee (Necom) being established as a collaboration between government, business and Eskom. There is growing confidence that a turning point has been reached in the energy crisis and steady progress is being made towards ending load-shedding. Accelerating investment in new generation, and with rooftop solar capacity nearing 5GW, the energy sector is rapidly changing.

However, the longer-term energy transition will remain challenging. Global experience has shown that while the energy transition from fossil fuels to clean renewable technologies is well under way, it is never without contradictions or bumps in the road. Russia’s invasion of Ukraine had a profound effect on global energy security as well as the cost of materials and capital.

Momentum lost

This has stalled the pace of the energy transition in many developed economies, in which reverting to the use of fossil fuels and failed renewable auction rounds have underscored how even the most well conceptualised and funded energy transition plans are vulnerable to disruption.

Post the 2016 Paris Climate Change agreement, SA was widely regarded as helping set the pace for global decarbonisation. Much of that momentum has been lost in the intervening period and many other countries, including the Brics nations, have subsequently overtaken SA. We have started to make up for lost time — climate legislation is being finalised in parliament and international financial support for SA’s decarbonisation journey has been negotiated.

Now is the time to act. The energy crisis and national partnership have to be leveraged to focus on delivery in 2024:

  • Eskom must continue to focus on progressing power station turnaround plans to improve plant availability. This is the quickest way to end load-shedding and grow the economy.
  • Efficient access to and rapid expansion of the transmission grid, including urgently beginning to crowd in the skills, expertise and resources needed to prepare for and implement the Transmission Development Plan of 2022. Transmission is the backbone that provides reliability and delivery of energy services, and it will be ring-fenced into a New Transmission Company in 2024.
  • Increase in the scale of dispatchable power to support demand peaks and the system variability caused by renewable energy. Battery storage for shorter response and gas-to-power for peaking and long duration are widely agreed as the solutions, and there will be an exponential increase in public and private procurement windows for these technologies in 2024.
  • Passing the Energy Regulation Amendment Bill, which was introduced to parliament in August, will provide a strong signal to investors and the international community that SA is moving forward on sector reform. The bill provides the legislative basis for a new independent transmission company and the shift to a competitive electricity market.
  • Continue to unlock energy investment and job creation through efficiency drives that are cutting red tape, reducing transaction risk and costs, and focusing on bringing municipal utilities into the energy transition.

The stakes could not be higher. If SA fails to adequately reform its energy sector it will revert to the crisis of severe load-shedding, increasingly lose access to global markets for key exports, face the prospect of unaffordable carbon taxes in these markets, and experience even higher levels of unemployment and poverty.

The unjust outcome could also arise in which access to affordable, reliable, carbon-neutral energy will rapidly become a function of income. Given SA’s socioeconomic reality, it will worsen inequalities. This is why there is an overarching emphasis on the need for a “just” energy transition.

The energy transition should not be viewed as a threat to SA’s economic wellbeing, but rather a moment of technological disruption with enormous potential socioeconomic upsides for the country. These opportunities exist even though achieving the energy transition will be tough because of the scale of investment and expertise required, as well as the tight deadlines set, which combined leave little or no room for mistakes.

However, if the required reforms are implemented by the government with the support of business, billions of rand of investment will be made into the SA economy over the coming decades — the largest-yet capital investment. This scale of investment will help reinvigorate local manufacturing, create millions of direct and indirect jobs, put SA on a higher economic growth trajectory and mitigate the effects of climate change.

SA has the expertise and goodwill to ensure it succeeds. We can join other nations in the developed and developing world that are leaders in turning the crisis of climate change into an economic opportunity that will provide energy, jobs and prosperity for generations.

• Mackay is CEO of the Energy Council of SA.

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