South Africa Could Be a Coal Transition Model, Climate Fund Says

(Bloomberg) --

South Africa’s aging coal plants, the political priority given to exiting the dirtiest fossil fuel and its power-supply crisis mean it could be a model for other nations transitioning to cleaner energy, according to the head of an $8.5-billion group of climate funds.

“I absolutely think that South Africa can serve as a demonstration for many other countries globally on how to do this,” said Climate Investment Funds Chief Executive Officer Mafalda Duarte in an interview from the COP26 climate summit. “There’s a clear momentum and a recognition now from many parties that there’s a need for an energy transition.”

South Africa, the world’s 12th-biggest emitter of greenhouse gases, is currently dependent on coal for more than 80% of its power. President Cyril Ramaphosa has set up a commission to advise on how to mitigate climate change, and the cabinet recently adopted a more ambitious emissions-reduction target. 

That’s helped the nation win funding to build renewable energy capacity and help ease the impact of the switch on coal-dependent communities. The CIF, which works with organizations including the World Bank on climate issues, said South Africa can apply for as much as $500 million to support the initiative. 

The CIF has already provided $462 million in funding for South Africa’s energy transition, supporting the development of three solar power plants as well as a wind facility owned by Eskom Holdings SOC Ltd. The group is also allowing the state-run utility to re-purpose $273 million of cash to develop a battery storage project. That has “unlocked an additional $2 billion” from the World Bank, International Finance Corporation and the African Development Bank, Duarte said.

Ramaphosa said on Tuesday the U.S., U.K., Germany, France and the European Union have agreed to mobilize $8.5 billion in concessional finance and grants over the next three to five years to assist with the country’s energy transition. Still, Eskom Chief Executive Officer Andre de Ruyter said transitioning the company away from coal could cost as much as $30 billion.

Record Blackouts

South Africa has been plagued by intermittent power outages since 2005 as its aging coal-fired plants struggle to keep up with demand. This year is set to be a record for blackouts.

Experts that advised the CIF on selecting which countries to fund transitions for “put South Africa on top,” Duarte said. “South Africa is more advanced on the discussions and the understanding of the need for a just transition. When we are in crisis we are in a great moment for reform.”

The country will need to draw up a transition plan that focuses not only on renewable energy capacity but also on power distribution and mitigating the socio-economic impacts of coal-station closures, she said. That’s especially true for regions which are heavily dependent on coal, such as the eastern province of Mpumalanga. 

“We can’t get to the Paris Agreement goals if we just focus on renewable energy capacity,” Duarte said. “What we are telling them is you have to come back with a comprehensive investment plan that focuses on the people and communities.”

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