A lot has happened since I wrote my last post. If you don’t recall, I wrote a post detailing how South Africa’s renewable energy future is likely to fail, owing to government capacity issues and the nature of the necessary renewable products. Since then, two key events have passed which have the potential to significantly alter South Africa’s renewable energy transition. The first event was the various pledges and steps taken at COP26 in Glasgow, and the second was a milestone in the South African renewable energy market.
Firstly, there were numerous outcomes of COP26, or the United Nations Climate Change Conference, but the most important had to do with funding. South Africa was gifted $8 billion for the phasing out of coal for electricity generation by some richer nations. That’s roughly R130 billion. Of course, the first thought that springs to mind is whether that money will actually make it to its intended recipients. But the more important question is, is it even enough?
Not even close.
Remember, it took around R200 billion to build our current renewable energy infrastructure, which is 1/16th of our electricity needs. So, this donation, while welcome, is not nearly enough to get us to phase out coal. However, one fact may influence this conclusion. Wind and solar are now officially cheaper than coal in South Africa! This is a tremendous milestone, one worth celebrating, and a real step towards an economically sustainable future. In the most recent REIPPP (Renewable Independent Power Producer Procurement) programme bid, which will add 2500MW to the grid, the cost of electricity supply for wind and solar was 34.4c and 37.5c per kilowatt-hour, respectively. In comparison, coal costs about R3.12 per kilowatt-hour. That price difference is just phenomenal! This is especially great for cash-strapped South Africa in desperate need of electricity capacity since renewable energy is now not only environmentally needed, but also logistically and financially attractive. But will this cheaper cost mean $8 billion will be enough? I don’t think so.
While it has progressed significantly, 94% of the electricity grid infrastructure will not be cheaper than the first 6%. So, this means we are still not on track for net-zero emissions by 2030, and even 2050 may still be out of reach.
In a recent article, The Economist claimed that this donation was a promising sign and could make South Africa a renewable role model for other nations. I suspect they will be largely disappointed.
There is one other fact I think is worth mentioning here. Even though COP26 achieved many admirable goals, one event caused it to be considered a failure by many critics.
At the end of the conference, right before the agreement was signed, some wording was changed. Some significant wording. The agreement changed from “phasing out of coal”, to “phasing down on coal”. This slight change brought tears to the eyes of the president of COP26, Alok Sharma, as it changes the agreement from a binding, trackable goal, to vague, immeasurable tokenism. While everyone knew the main culprits were India and China, South Africa was quietly pushing for this alteration. I was disgusted when I found this out. New Institutional Economics talks about how nations cannot progress when informal institutions clash with formal institutions, or basically that rules do not work when the people behind them or for whom they are intended, do not believe in or support them. There needs to be political will to achieve a goal and clearly. If there is any political will here, it is a willingness to prevent a renewable future.
If South Africa is to prove me wrong and phase coal out of electricity before it’s too late, our elected officials need to first show that this is a goal they believe in and are willing to take real, sometimes painful steps to achieve. If this isn’t the case, all the donated money in the world will struggle to change our nation.
If you're interested
A brilliant book that expounds on the thinking of New Institutional Economics is Why Nations Fail by Daron Acemoglu and James Robinson
For a quick review of COP26, a suggest taking a look at Bloomberg Green’s scorecards, which can be found on Instagram or here
__________________________________________________________________________________
References
https://www.economist.com/international/2021/11/20/the-glasgow-summit-left-a-huge-hole-in-the-worlds-plans-to-curb-climate-change
https://mg.co.za/environment/2021-11-18-south-africa-supported-last-minute-change-to-cop26-deal/
https://www.theguardian.com/commentisfree/2021/nov/14/cop26-last-hope-survival-climate-civil-disobedience?utm_term=61929213b0f4b5ce428f496c19b8f5b5&utm_campaign=BestOfGuardianOpinionUK&utm_source=esp&utm_medium=Email&CMP=opinionuk_email
https://www.dailymaverick.co.za/article/2021-11-04-best-plan-to-keep-the-lights-on-solar-and-wind-power-officially-cheaper-than-coal/?utm_medium=email&utm_campaign=Business%20Maverick%20Friday%2005%20November%20StraussCo&utm_content=Business%20Maverick%20Friday%2005%20November%20StraussCo+CID_58c0e3e236cd68b0d780a50ad8201383&utm_source=TouchBasePro&utm_term=Best%20plan%20to%20keep%20the%20lights%20on%20Solar%20and%20wind%20power%20officially%20cheaper%20than%20coal