The latest developments in Just Energy Transition

During the World Leaders’ Summit at COP 27 in November 2022, South African President Cyril Ramaphosa presented the new Just Energy Transition Investment Plan (JET IP) for South Africa. It was announced for the first time at COP 26 in November 2021 that the governments of France, Germany, the United Kingdom, the United States and the European Union had committed an $8.5 billion first round of funding to help South Africa on energy transition projects to be supported within the framework of the Just Energy Transition Partnership (JETP) between the countries. In October 2022, the South African cabinet approved a five-year investment plan for the $8.5 billion package.

The Investment Plan for a Just Energy Transition (JET IP)

The JET IP is aligned with the Cabinet-approved National Just Transition Framework. The South African government said the plan outlines the investments needed to meet the country’s decarbonization commitments while promoting sustainable development and ensuring a just transition for affected workers and communities – in other words, a whole-of-society approach.

The JET IP covers electricity, New Energy Vehicles (NEVs) and green hydrogen and identifies a funding need of USD 98 billion over the next five years, expected to come from both the public and private sectors. The JET IP aims to decarbonise the South African economy in an equitable manner within the NDC target range of 350-420 MtCO2 by 2030. The JET IP focuses on decarbonisation, social equity, economic growth and inclusivity and governance. Investment criteria for the plan include projects that deliver greenhouse gas emissions reductions, just transition outcomes, and are catalytic in nature and ready for implementation.

Key investments under the JET-IP include:

  • Electricity – decommissioning (repowering and conversion with clean technologies), reinforcement and expansion of the transmission grid and renewable energy.
  • New Energy Vehicles – Decarbonizing the automotive sector and supporting the supply chain shift towards green, sustainable manufacturing.
  • Gaseous Hydrogen (GH2) – Basic planning and feasibility, including port investments, to boost exports and boost employment and GDP.
  • Cross-cutting – investing in skills development and communities.
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Also at COP 27, Masopha Moshoeshoe, a green economy expert at the Presidency’s Office of Investment and Infrastructure, said the country aims to attract $250 billion worth of investments by 2050 to develop its green hydrogen economy, or around $1.4 million jobs and $30 billion in annual revenue by 2050, but that renewable power generation capacity of between 140,000 MW and 300,000 MW would be needed to power the green hydrogen sector. The country currently has around 40,000 MW of renewable energy capacity.

Just switch

There is a need in South Africa to build economic and social resilience to meet the NDC targets, manage transition risks and ensure social preparedness as the country diversifies its energy mix and builds new industries. A just transition addresses the need to balance carbon emission reductions with the employment impact of this transition and the need to create long-term green energy jobs, particularly in relation to impacted communities currently heavily reliant on fossil fuels fuels are dependent. Location- and sector-specific vulnerabilities (e.g. care, preparation, social infrastructure) and cross-generational effects must also be recognized.

Coal remains the main source of energy for the country, but for South Africa to meet its targets to reduce carbon emissions this needs to change. The retraining of the existing workforce and the training of the future workforce is also essential. South Africa updated its NDC under the Paris Agreement in 2021 and now has a proposed revised target range of 398-510 MtCO2eq for 2025 and 398-440 MtCO2eq for 2030.

Political Developments

There have been a number of policy developments to support South Africa in its energy transition. The National Development Plan (NDP), Draft Integrated Energy Plan (IEP), Renewable Energy White Paper, National Determined Contribution (NDC), Just Transition Framework and supporting policies under development and implementation outline the policy basis for Energy transition in South Africa and the move away from carbon-fired energy. The Integrated Resource Plan (IRP) 2019 covers the government’s energy plans through 2030, outlining reduced reliance on coal-fired energy and an increased focus on a diversified energy mix that includes renewable energy, distributed generation and battery storage.

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The Renewable Energy Independent Power Producer Procurement Program (REIPPPP), launched in 2011, outlined renewable energy procurement in the country. The sixth round of REIPPP started in 2022 and aims to procure 2.6 GW of solar and wind power. Also, to incentivize self-generation of renewable energy, the South African government has indicated that it intends to remove the 100MW threshold for distributed power generation, meaning large power plants of more than 100MW could be built without a permit to meet their own needs and sell them to the grid. Other developments include the South African Automotive Master Plan, the Climate Change Bill, the South Africa Green Taxonomy and CO2 tax increases. Other policy measures such as the National Energy Efficiency Strategy and the Green Transport Strategy also play a role in ensuring that the country meets its climate protection goals and reduces its CO2 emissions.

Trading carbon offsets in the carbon market, where companies can pay other companies to offset their emissions for them, is also becoming increasingly popular in emerging markets. In August 2022, the Johannesburg Stock Exchange announced that it was exploring the possibility of introducing a carbon trading market in South Africa.

In February 2022, the South African Hydrogen Society Roadmap (HSRM) was published by the South African government. The roadmap is considered an important signpost on the way to implementing hydrogen development, which is to be at the heart of South Africa’s strategy for economic growth and climate protection.

As part of a diversified energy mix strategy, Eskom recently identified eighteen bids from independent power producers in an auction for the use of vacant land in Mpumalanga, located near its coal-fired power plants with direct access to the national transmission grid, that will enable Wheeling becomes. The projects will add approximately 1,800 MW of renewable energy to the South African power grid.

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In addition, recent amendments to the Electricity Regulation Act proposed by the Ministry of Natural Resources and Energy address, among other things, the electricity supply deficit, the vertical structure of the market and the lack of competition, the introduction of a multi-market including independent power producers (IPPs) and the formation of a centralized procurement office. The changes also concern the introduction of a day-ahead market to account for hourly supply and demand, direct electricity procurement by municipalities, raising the threshold for self-generation, the need to account for low-carbon generation technologies, the timing of license applications, changes in transmission grid operations , including electricity trading, and the creation of additional regulatory capacities. The strategy aims to accelerate affordable, decentralized and multi-owned renewable energy systems.

The lack of access to affordable and secure electricity has for some time had a significant impact on the private sector in South Africa and the country’s energy policy developments aligned with the global energy transition towards a clean and decentralized energy system welcomed as a means of improving access to decarbonised, affordable renewable energy that takes into account the country’s commitments to reduce carbon emissions and the demands of economic growth based on a just transition.

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