|Energy: Merkel urges Eskom to move towards renewables
SA's trajectory towards renewables continues, with a powerful foreign dignitary encouraging the President last week to make good on generating and using this energy source, and the Mineral Resources and Energy Minister last week opening doors for industries to self-generate energy, writes Legalbrief. On a visit to SA last week, German Chancellor Angela Merkel cautioned the country, and Eskom in particular, on the enormous task that lies ahead in the power utility’s quest to cut down its reliance on coal. According to a City Press report, Merkel – addressing University of Pretoria students at the campus’ Future Africa Auditorium last week – said a long road lay ahead for Eskom as it sought ways to generate and use more renewable energy. She said in her discussion with President Cyril Ramaphosa and Eskom CEO André de Ruyter she had learnt that the country relied on coal-powered energy for almost 80% or 90% of its electricity consumption. ‘It will be a herculean task for SA’s Eskom but the most immediate action the country can take is introducing more renewable energy sources in the national grid,’ said Merkel. Under Merkel’s administration, Germany has become known as the world’s first major renewable energy economy. The share of renewable electricity rose from just 3.4% of gross electricity consumption in 1990 to exceed 10% by 2005. And under Merkel’s tenure since 2005 that figure has grown to 46.3% of consumption. Merkel said part of her engagements with Ramaphosa had included discussions around the energy crisis in SA as well as engagements between delegates from her country’s renewable energy sector. She added that SA should also explore other options such as natural gas, dependent obviously on the reservoirs in the country. ‘Government can also introduce taxes for CO2 emissions to do more towards the sustainability of the environment,’ she said.
Mineral Resources and Energy Minister Gwede Mantashe last week had industry abuzz at the Investing in African Mining Indaba, in Cape Town with the possibilities of self-generation of electricity. SRK Consulting director and principal consultant Andrew van Zyl said there was no better time to consider opportunities for the use of renewables in mining, according to a Mining Weekly report. ‘While Eskom’s baseload supply is still vital to keep mines running, independent power generation from renewable sources holds value for a few reasons. These relate to issues of rising electricity prices from the grid, as well as to mines’ environmental commitments and future carbon tax liabilities,’ said Van Zyl. ‘As renewable energy technology has lowered the cost of solar and wind energy, for instance, private producers now have the opportunity to peg a portion of their future energy costs. Being partially off-grid will also make mining companies less vulnerable to the full impact of load-shedding, which is very disruptive to continuous operations as found in the mining industry,’ he said. He also highlighted the mining industry’s commitment to a greener future and to lowering the carbon footprint of mining operations. ‘It, therefore, makes sense for mines to be considering alternative sources of energy to augment coal-fired power. While contributing to their environmental goals, it could also potentially reduce their carbon tax exposure,’ he said. ‘Building internal energy generation capacity from renewable sources is likely to become a more popular mechanism for mines to send the right message to lenders,’ he said.
Similarly, Deloitte Africa's leader in energy resources and industrials, Andrew Lane, said shifting SA’s energy production away from coal will be a most daunting task, but government must consider the value that this will add to its economy as oppose to the burden it will impose. Lane spoke to Fin24 on the sidelines of the mining indaba. Aside from government’s proposals to ease Eskom's manifold struggles, a prominent theme that emerged at the indaba was contention over whether SA was shifting from coal power fast enough. Lane said decarbonisation would become a much more prominent issue for SA in the coming years and that every bit of progress made in government policy documents such as the Integrated Resource Plan was significant. ‘Backing clean coal is probably a good compromise. We live in a world of technological developments. If people can create self-driving cars, then purely clean coal might be possible. I believe the Minister is genuine in asking people to invest,’ said Lane. Lane said the decision by several major banks to withdraw funding for metallurgical coal projects was significant, and could play a role in guiding SA even closer towards decarbonisation. ‘It was huge. Investors are becoming much more vocal. Many financial institutions have said they won’t fund coal anymore. We need to think of the value of decarbonisation and not just the cost,’ Lane said.
The winds of change have been blowing globally too. Leading mining company Anglo American advocated for sustainability in the mining industry as pressure mounts for the industry to embrace climate change. According to a Cape Times report, Mark Cutifani, the CE at Anglo American plc, told the 7 000 delegates at the indaba that the mining industry’s immediate challenge was to do things differently to find new, safer, more sustainable and cost-effective ways. This month, BlackRock, the world’s biggest asset manager, which manages R104.8trn, said it was putting climate change at the centre of its investment strategy. It said it would exit investments that present a high sustainability-related risk. Cutifani said the industry needed to ask itself some tough but necessary questions about its values. ‘Simply put: we need to connect the future of mining with emerging and next-generation societal values. These are the values of increased transparency, responsible technological innovation, sustainability and shared prosperity – all of which are emergent in our world and are shaping a very different future society,’ said Cutifani. He said that mining had a long-term role in shaping the energy transition, but going into this transition, the industry needed to ensure that mining was ‘climate-smart’ with ideally no or little negative climate impact. Mantashe said the department was working with Anglo American on using hydro-fuel cells as an energy source for the mining trucks.
However, there was also skepticism of the plans to establish an electricity generation business outside Eskom, with some deeming it nothing more than ‘government talk’. Economist Mike Schussler cautioned against more ‘government talk’. ‘It is good that mining companies can generate their own power. We need to get more power in the country and Eskom should not be the only solution. It would mean we get less load-shedding,’ he said. ‘But getting the state to provide the second power company is not ideal. The government does not have money to invest in more power, it must be left up to the private sector to open up the provision of electricity, as is the case in many countries in the world right now,’ he said. Border-Kei Chamber of Business CEO Les Holbrook described a second power supplier as ‘just another structure that government will manipulate and corrupt’. ‘He (Mantashe) needs to focus on how to bring the IPPs (independent power producers) on board. They can help immediately and there will be no need for costly structures, going on a wild goose chase,’ said Holbrook.