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President unpacks details of R131bn green energy deal

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President Cyril Ramaphosa.
President Cyril Ramaphosa.

President Cyril Ramaphosa says the R131 billion offer by the US, UK, Germany and European Union (EU), made to help South Africa transition from coal to clean energy, does not mean the country must accept any unfavourable terms.

The president was responding to oral questions in Parliament yesterday.

The multibillion-rand deal, clinched earlier this month at the COP26 UN Climate Summit in Glasgow, aims to accelerate the country’s transition to renewable energy and away from coal.

The funds would go to support coal workers and dependent communities, and include provision for Eskom to repurpose its aging coal power plants.

SA also aims to invest in the development of new sectors, such as electric vehicles and green hydrogen, while providing for the economic inclusion of historically-marginalised communities and sectors of society.

The country currently generates the vast majority of its electricity from coal, with the beleaguered state-owned Eskom’s facilities breaking down on a regular basis. The power utility has had to resort to repeated bouts of load-shedding, negatively impacting the economy.

Eskom alone produces over 40% of all greenhouse gas emissions in SA.

Not a done deal

Speaking in Parliament yesterday, the president said: “In terms of the political declaration, the US, UK, Germany, France and the EU have offered and I wish to underline, that this initial amount of $8.5 billion – which is equivalent to around R131 billion – has been offered to support South Africa’s just transition efforts.

“This support will take the form of various financial instruments, ranging from grants to concessional loans at a lower interest rate.

“This funding will be mobilised over the next three to five years, with a view to longer-term engagement,” he said.

Economic Freedom Fighters leader Julius Malema had asked the president to provide details of the terms and conditions of the R131 billion loan.

The president said the offer by developed countries was an initial commitment, which may increase as discussions progress and further funds are identified.

“This commitment from international partners does not mean we need to accept the offer as such, nor do we need to accept any unfavourable terms, especially if the financing arrangements could impact negatively on the public fiscus.”

Ramaphosa said the political declaration is in line with the obligation on the part of developed economies – as historical beneficiaries of high carbon emissions – to provide support to developing economies to transition to a lower-carbon future.

He also said a significant proportion of funding is expected to be used for Eskom’s just transition plans, which include decommissioning, repowering and repurposing of old coal-fired power stations in line with the Integrated Resource Plan 2019.

Funding will also be allocated towards the development of new sectors, such as electric vehicles and the implementation of the Green Hydrogen Sector Master Plan, the president said.

“Funding offered through the political declaration [announced at COP26] will be used for targeted programmes of reskilling and upskilling, creating employment and providing other forms of support to ensure workers, women and youth are the major beneficiaries of our shift to a greener future.

“A negotiations team will be established between South Africa and the partner group of countries and we will have our own top-class finance people drawn from the public and private sectors as well as trade unions to discuss these matters, if it even gets there.

“This process is expected to be finalised over the following months,” said Ramaphosa.

Powering municipalities

Meanwhile, Ramaphosa also said yesterday as part of measures to improve electricity generation to deal with load-shedding, municipalities will soon be allowed to generate and buy electricity from independent power producers to unburden the grid.

Cities like Cape Town and Johannesburg have long been calling on government to allow them to purchase their own electricity from renewable energy independent power producers in a bid to do away with the troubled Eskom.

“A number of the measures that we have taken and put in place include that there should be [an] independent generation of electricity, including by our local government entities.

“Local government entities play a critical role in the electricity system. Many of them distribute and they on-sell to residents, and whilst it took quite a long time to finally get to this decision that municipalities should be allowed to generate as well as to buy from independent power producers, that’s exactly where we are now,” he said.

Opposition leader John Steenhuisen asked if municipalities would be allowed to generate their own energy and to also buy from independent power producers. He asked the president to provide further emergency measures that government will undertake to augment the country’s electricity supply.

“We have given a clear direction and permission for local government to generate electricity…I’d like to see [municipalities] immediately move on to generate electricity so that we can de-risk this risk that we have of having one entity alone generating the electricity for the entire country,” the president said.

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