Coal JET

New coal ‘inconsistent’ with spirit of $8.5bn climate partnership, US Treasury warns

New coal ‘inconsistent’ with spirit of $8.5bn climate partnership, US Treasury warns

New coal ‘inconsistent’ with spirit of $8.5bn climate partnership, US Treasury warns

7TH JUNE 2022

BY: TERENCE CREAMER
CREAMER MEDIA EDITOR

Any public steps by South Africa that were suggestive of new coal having a place in the country’s future energy mix would be inconsistent with the intentions of the Just Energy Transition Partnership (JET-P) signed at COP26 in November, US Treasury climate counselor John Morton has cautioned.

The partnership, which was also signed by France, Germany, the UK and the European Union (EU), includes an offer of $8.5-billion in climate finance to support South Africa’s transition from coal and negotiations are currently under way to convert the offer into an investment plan ahead of COP27, scheduled for Egypt in November.

“While South Africa has made great progress in carrying out necessary reforms, we must be cognizant of new and avoidable challenges to South Africa‘s clean-energy future.

“When it comes to new coal, we emphasise the need for a continued shared commitment to the climate ambition South Africa put forward in the JET-P and its goal of an energy transition.

“And we would be concerned about any public steps that suggest new coal has any place in South Africa‘s future energy mix,” Morton said during a recorded address to the Enlit Africa conference, under way in Cape Town.

“Any new coal generation capacity would be inconsistent with South Africa‘s updated Nationally Determined Contribution (NDC) and would be inconsistent with the spirit and intentions of our shared partnership, which aims to expedite South Africa‘s transition away from coal and toward a cleaner and greener energy future.”

Morton said the US was sympathetic to South Africa‘s energy security needs and praised recent reforms designed at facilitating new private investment, including the increase in the licensing threshold on embedded generation projects to 100 MW and moves to unbundle Eskom and create an independent transmission entity.

He emphasised, however, that the US government saw the expansion of renewables as the most promising and economical path forward.

South Africa’s Integrated Resource Plan of 2019 (IRP2019) still includes an allocation of 1 500 MW of new coal to be introduced before 2030 and government has indicated that it plans to continue with the implementation of the plan, which is widely considered to be outdated, while pursuing a review.

Speaking ahead of Morton’s address, Department of Mineral Resources and Energy deputy director-general Jacob Mbele indicated that government intended implementing a procurement pipeline of 13 000 MW by 2027 as catered for in Section 34 Ministerial determinations that facilitate procurement in line with the IRP2019.

“We intend to issue, during this financial year, a Section 34 determination for the remainder of the capacity allocations in the IRP,” Mbele said, stressing that these allocations were made up primarily of renewable-energy technologies.

Morton argued that the JET-P and the “initial pledge” of $8.5-billion seeks to support South Africa achieve “the most ambitious end of its revised NDC which aims toward a 1.5 oC global warming trajectory”.

“In our view, some of the most important policy reforms that are still needed to unlock the flow of private capital include: Eskom solvency, building out the necessary transmission network to support a large renewables expansion to meet the lower end of the NDC and a holistic strategy to provide support for effective communities, including both coal workers and communities supported by coal.”

COMPREHENSIVE INVESTMENT PLAN

He reported that the development of a “comprehensive investment plan” was viewed as the next key step, as such a plan would act as the “North Star of this partnership” and define where and how South Africa felt the finance would be best directed.

“While we are awaiting an investment plan to guide this financing, we envision that the US contribution to the $8.5-billion could include loans, equity investments, [and] grant finance for technical assistance, feasibility studies and pilot projects from a variety of US government agencies.”

Federal Republic of Germany Consul General in South Africa Tanja Werheit also offered further insight into Germany’s contribution to the package.

She revealed that 20% of its $800-million contribution would take the form of grant finance, while the balance would be disbursed as loans.

Werheit stressed, too, that as a multi-decade undertaking the JET-P should be directed by the government of South Africa and supported by the international partners.

“This is of course a big challenge and a huge task.

“But let’s not forget that this is also the biggest opportunity of our times . . . as the JET-P could become a blueprint for many other countries and for many other regions.”

Meanwhile, EU Delegation to South Africa head of cooperation Bernard Rey indicated that the bloc was willing to direct grant finance towards research, capacity building and social dialogue on the transition, while the European Investment Bank would extend loans in support of transition projects.

He argued that the JET-P was also fully aligned with the EU’s overall approach to the African continent, where the bloc was gearing up to support infrastructure investments of €150-billion under the Global Gateway Investment Package, including investment in green electricity and green hydrogen. 

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