President Cyril Ramaphosa emphasized on Monday that efforts to combat climate change should not lead to increased electricity costs for consumers.
During his keynote speech at the first municipal just energy transition conference in Midrand, Ramaphosa highlighted that South African families, like many globally, are grappling with rising living and energy costs. He pointed out that these issues are being discussed worldwide and stressed that the transition to cleaner energy should not worsen energy poverty or deepen existing inequalities.
These comments come amid reports of a proposed 40% increase in electricity tariffs by Eskom for the coming year. Ramaphosa also underscored the importance of the free basic electricity subsidy for impoverished households, which, although vital in fighting poverty, is not being effectively utilized in some municipalities. He called for the continuation and expansion of this support to ensure it reaches many low-income households during the energy transition.
Pursuing Low-Carbon and Climate-Resilient Growth
The government of national unity aims for swift, sustainable, and inclusive economic development, with low-carbon, climate-resilient growth at its core.
The president highlighted this as both a challenge and a significant opportunity for the nation.
He explained that South Africa’s carbon emissions largely stem from fossil fuel-based electricity, as industries rely heavily on Eskom’s coal-fired power, making the economy carbon-intensive.
As global trends evolve, the nation’s dependence on fossil fuels for industrialization poses risks to the economy, society, and environment unless the energy transition is tailored to local and national contexts. This reliance impacts the competitiveness of South African goods in global markets, potentially leading to higher tariffs.
While resisting unilateral carbon adjustment measures from developed countries, South Africa recognizes the need to reduce carbon-intensive energy use and diversify its energy sources to foster economic growth. Seizing the global energy transition presents opportunities for economic expansion, development, and job creation.
As a participant in the Paris Agreement, South Africa is dedicated to contributing to global climate efforts, focusing on a transition that supports inclusive growth, energy security, and employment, while aligning with the country’s development goals.
Decarbonization Goals
The Integrated Resource Plan outlines a strategic energy mix for the medium and long term to achieve the country’s decarbonization targets. The renewable energy independent power producer procurement program has secured over R200 billion in investments, significantly enhancing the electricity grid, according to Ramaphosa.
He highlighted that, despite ongoing challenges at Eskom, the regulatory adjustments made in 2021 to raise the threshold for generation project licenses have led to a pipeline of more than 130 confirmed projects. This represents a total capacity of 22,500 megawatts with an estimated investment of R390 billion.
“This is a substantial amount of investment, which we don’t encounter daily, so having financiers and investors present at this conference is crucial. The large sums required for these projects highlight the importance of financial backing,” Ramaphosa remarked.
Municipalities are pivotal in the energy sector’s decarbonization efforts, as they manage around half of the country’s electricity distribution grid and ensure widespread electricity access. With about 165 municipalities providing electricity, they are also responsible for tackling the electrification backlog through the national electrification program grant. Municipalities need to take a leading role in providing clean, affordable energy to their communities, businesses, and industries.
Ensuring Affordable Clean Electricity
The just energy transition plan, approved by the cabinet last year, includes a specific roadmap for municipal involvement, with three main priorities, according to Ramaphosa.
The first priority is ensuring access to affordable clean electricity. Municipalities are now permitted to buy power directly from independent producers and set up their own generation facilities.
Ramaphosa has enacted the Electricity Regulation Amendment Act, which is designed to foster a competitive electricity market and expedite the decarbonization process. These reforms aim to improve conditions for households and businesses by addressing issues such as electricity pricing and substantial municipal debt owed to Eskom.
Securing Sustainable Financing
The second priority is obtaining sustainable financing for electricity infrastructure. The municipal grid system needs to be upgraded and expanded to meet future energy requirements, which will necessitate new designs and operational capabilities.
Smart metering systems will need to support the integration of renewable energy sources and manage energy wheeling and feed-in by small-scale generators. Significant investment is required for effective grid management, safety, and energy storage, drawing on both public and private funding sources.
The government is working on financing strategies, including concessional loans, to support the National Transmission Company of South Africa in expanding the grid and accelerating investment in transition projects. Coordination with the South African Local Government Association and local officials is also underway to ensure alignment with the just energy transition goals.
Managing the Transition
The third priority is to enhance municipalities’ ability to manage the transition, which will require substantial training and skill development.
Ramaphosa stressed the importance of learning from other local governments that have excelled in various areas. He noted that new systems will be necessary to evaluate and address the human resource and technical needs of municipalities, ensuring effective planning and budgeting.
Municipalities are encouraged to implement best practices in program and project design. “We need to aim for excellence and move beyond mediocre approaches that result in suboptimal outcomes,” he said.
He also highlighted the appointment of experienced ministers who are well-informed and capable in their fields.
Avoiding “Parachute” Development
The president emphasized the need to avoid “parachute” development initiatives, where projects are designed at the national level without considering local contexts.
It is crucial to adapt solutions to local conditions, as what works in one area may not be practical in another. Key issues include protecting new infrastructure from criminal activities and ensuring local businesses benefit from new energy projects.
Ramaphosa pointed out the challenges posed by organized crime and problematic business practices in sectors like construction and coal. He highlighted the need to support local businesses and communicate effectively with communities in accessible languages.
The transition to a low-carbon, climate-resilient economy must address the needs of the affected populations, incorporating principles of fairness, restoration, and procedural justice.