Mixed messages on renewables may appease political allies but will not mobilise the investment we need

For some, President Cyril Ramaphosa’s recent letter in support of energy policy reform was a welcome sign of a more strategic and forward-looking approach to our electricity system. To others, it is a veiled indication that the energy status quo prevails and that the reform process is concerned only with attracting investment, with little attention to democratic governance or decarbonisation.

Richard Worthington

Richard Worthington matriculated in Bloemfontein, got a BA degree at Wits in 1984, returned to South Africa in the mid-1990s and joined Earthlife Africa Johannesburg. He has since worked on energy and climate change issues in the NGO sector including serving WWF-SA for five years to 2013. He is currently a project manager at the South African office of the Friedrich Ebert Stiftung and writes in his personal capacity.

Intransigent: A polite way to describe the obstructive stance of the minister and department of mineral resources and energy, with regard to modernisation (decentralisation, decarbonisation and democratisation) of our national electricity system; also applicable to a critical mass of government, allied unions and private sector interests resisting decarbonisation of our energy supply and economy as a whole, despite an increasing proportion of the financial sector rejecting this stance.

There are myriad risks arising from the overheating of our climate system, with different degrees of immediacy for different people (social partners in the parlance of social compacting), globally and locally. For the financial sector in South Africa the primary concern is referred to as “transition risk”: risk arising not from the impacts of greenhouse gas emissions, but from the prospect of effective response as agreed to multilaterally in Paris in 2015 – though this falls short of the climate action that youth are demanding worldwide.

In South Africa we have a large overlap in our opportunities to address these areas of risk. Reviewing the carbon footprint of listed assets, which in 2012 analysis was at least double any credible emissions trajectory (in terms of the Paris Agreement) or carbon budget for the entire country, is fundamental not only to minimise stranded assets, but also to managing the rapid mitigation of climate impacts as (or if) we get serious about avoiding emissions as a matter of urgency.

Most immediately, as the president stated in his weekly letter on 24 August, we must align the Economic Recovery Plan in response to the pandemic with a low emissions development strategy: “An important aspect of this new economy is that it must be able to withstand the effects of climate change. A climate-resilient economy is necessary to protect jobs, ensure the sustainability of our industries, preserve our natural resources and ensure food security,” he wrote.

This brings us back to the electricity system, the very urgent need for more generation capacity and the intransigence that persists even with a crisis acknowledged. This extends to the National Energy Regulator (Nersa), e.g. in requiring six months to provide concurrence with something they had implicitly approved just months earlier.

Recent small steps towards procurement of renewable capacity have been welcomed with relief, but the opportunism and deal-making remain focused on fossil fuels. Potential contributors to the electricity system are faced with the Independent Power Producer (IPP) Office, recently brought into the DMRE under Minister Gwede Mantashe, though the institutional arrangements are opaque.

While the IPP Office won international acclaim in its early years, implementing the Renewable Energy (RE) Procurement Programme, this was stalled by the state-owned utility five years ago at the point that Power Purchase Agreements (PPAs) were ready for signing. The merits, risks and socioeconomic impacts of these PPAs have been hotly contested and the IPP Office committed to a substantial review of process, terms and conditions to be applied to suppliers independent of the state-owned utility, but first the interrupted procurements – bid window (BW) 4 – were completed. The IPP Office is now tasked not only with the next round of RE procurement (BW5), but also IPPs wanting to burn coal and gas.

Despite years of discussing a review of the terms and conditions for REIPPs, Engineering News reports that “IPP Office CEO Tshifhiwa Bernard Magoro says it is premature to share details of the possible changes that could be made in the BW5 bid documentation relative to previous rounds. Nevertheless, he confirms that increasing black participation in the full REIPPPP value chain, including ownership, as well as raising the level of local content, are key priorities for government.”

These are issues that social partners were engaging even before the programme was stalled and were later raised among key concerns prompting legal and strike action by unions, inter alia rejecting the IPP procurement programme (or backdoor privatisation).

How on earth could it be “premature to share details”? Could the CEO of the IPP Office really imagine it is better to spring these “possible changes” on people at the same time as they are applied in a bidding process, rather than to discuss them with social partners – as an overdue matter of urgency? At what point will the energy regulator – ostensibly protector of the public interest – be consulted on such changes?

Perhaps the IPP Office sought guidance from Nersa and it was the lead regulator for electricity (Sibusiso Gumede – erstwhile consultant to the fossil fuel industry) who came up with this idea, which would be consistent with a leaning towards liberalisation. It is certainly not consistent with the president’s call for reform guided by social compacting, or his assurance that “concerns that have been raised about energy policy uncertainty are being addressed on an ongoing basis” in his weekly letter of 28 September.

For some, the president’s letter in support of energy policy reform was a welcome sign of a more strategic and forward-looking approach to our electricity system. To others, it is a veiled indication that the energy status quo prevails, at the pleasure of DMRE, and that the reform process is concerned only with attracting investment with little attention to democratic governance or decarbonisation. Evidence for the latter view includes the inauspicious statement that “the crucial first step in this reform process was the release of the Integrated Resource Plan [IRP] last year.”

The electricity “IRP2019” was the culmination of a protracted process that started with a draft IRP2013 – the promised updating, or next iteration, of the “IRP2010” that was adopted in 2011, roughly consistent with the promised bi-annual cycle. This 2013 draft did not provide for nuclear power and did not find favour, though it did reach Parliament before it sank. A 2016 version, being developed in parallel with an Integrated Energy Plan (IEP) for the energy system as a whole, was held in abeyance as the draft IEP2016 was gazetted, but that also sank.

The “IRP2019” was subject to public consultation – based on a 2018 draft – before morphing into the “policy-adjusted plan” that was finally released a year ago.

The input assumptions (technology and fuel costs, availability of the existing generation fleet, etc) used for IRP2019 were already outdated by the time it was approved and there were assurances that IRP would be an ongoing and iterative process, but no work is being done on updating even the electricity modelling system, never mind the integration of all energy planning. 

Mantashe is nevertheless insisting that the country is bound by the IRP2019 until further notice, regardless of market realities and future consequences.

There may be hope to be found in the department of trade, industry and competition (DTIC) embracing the SA RE masterplan (SAREM), now one of 14 industry-specific master plans to drive re-industrialisation, manufacturing and job creation.

However, no sooner had SAREM gained official standing, following many years of effort, than Mantashe moved to impose the same constraints on this initiative, regardless of the consequences for investment prospects, that were set in IRP2019.

When the minister initiated formation of a “Ministerial RE Stakeholders Forum” in August, he was adamant that opportunities to be explored must be within the parameters of IRP2019. This will not be conducive to the potential noted in the president’s 24 August letter that “the hydrogen economy, when linked to renewable energy, can also position South Africa as a global player in the many applications of green hydrogen”.

It would seem the SA Wind Energy Association has resigned itself to such dynamics, having gone from complaining about the random constraint placed on wind power development in IRP2019, which limits deployment to 1,600MW per annum from 2022 (and far less in preceding years), to now calling this allocation a “sweet spot”, in the words of SAWEA CEO Ntombifuthi Ntuli, as quoted in Engineering News.

While many South Africans support aspirations for a developmental state with a “command and control” government approach to drive the realisation of human rights, what we have is the continuation of a short-sighted, control-for-leverage approach that has facilitated financialisation, disregard for net socioeconomic impact and growing inequality. This dynamic is not only conducive to, but further exacerbated by patronage and corruption, which has expanded a constituency that won’t let go of the energy status quo.

On 24 August the president wrote: “Unless we act swiftly to significantly reduce carbon emissions and adapt to the effects of climate change, we will be facing one state of disaster after another for many years to come.” This is nothing more than an acceptance of science, but it cannot be reconciled with Ramaphosa’s endorsement one month later for (inter alia) building more coal fired power plants, in deference to Mantashe’s IRP.

As so succinctly noted in these pages by Gaylor Montmasson-Clair (senior economist at Trade and Industrial Policy Strategies), “whether South Africa reaps the benefits of the global transition to a low-carbon economy or suffers its consequences is the choice at hand”.

Our existing policies and international commitments clearly mandate the former, but absent an effectually democratic Parliament, giving effect to this choice requires our president to decisively confront intransigence – as in the Chambers English Dictionary: “Intransigent (adj.) refusing to come to any understanding, irreconcilable: obstinate.” DM