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An orderly transition, or a disorderly retreat?

South Africa will shift to a green economy one way or another …

For South Africa to meet its commitments under the Paris Agreement, it needs to phase out the use of coal in its power and liquid fuel sectors by 2040. That’s a little over 20 years in which the country needs to manage a major transition. At the moment, however, there is not much of a plan for how this will happen.

Consider that Eskom and Sasol are both major contributors to the local economy in various ways. Their operations cannot simply be shut down without material social and economic consequences.

“If you think about what’s at risk – Sasol is the single biggest taxpayer in SA, and employs tens of thousands of people,” says Jon Duncan, head of responsible investment at the Old Mutual Investment Group. “Eskom also employs many thousands of people. There are also all of those people employed in ancillary jobs around the coal supply chain, such as those working at the Richards Bay coal terminal. Then you put a multiplier on that in terms of the households being supported by those jobs. We really have to be thinking quite carefully about what’s at risk.”

Read: Sasol special report part 2: How do you solve a problem like Secunda?

Managing the country’s economy away from these operations in a measured way that does not prejudice growth, the tax base and the livelihoods of those they employ is therefore imperative. It needs to be carefully planned and executed.

The right approach

“It is a transition – it is not a complete stopping of all coal tomorrow morning,” says Tracey Davies, executive director of Just Share. “And quite frankly the transition is going to happen no matter what any of us do, because just the economics of renewable energy already make that clear.”

As discussions at the Old Mutual Investment Group’s ‘Tomorrow’ event made clear this week, this transition has to be ‘just’. It must take into account that moving away from fossil fuel industries will inevitably impact on many people.

“Whether or not this transition will be just, or will leave the already poor and vulnerable in our society still poor and vulnerable and even more unable to deal with the impacts of climate change, is up to policy makers,” Davies says.

It therefore cannot be left to unfold in an unguided, unplanned way.

“Let’s not forget that the primary issues in this country are social in nature – poverty, unemployment and inequality,” Duncan says. “These are the things we must solve for collectively. Climate change is a massive multiplier of those risks.

“This is also something occurring globally, and South Africa as an economy is massively at risk if we don’t start to plan for an ordered transition,” he adds. “There is nothing worse than a disordered retreat.”

Solving for Eskom

It is also not as simple as assuming that everybody who now works in the fossil fuels industry will get a job at a solar energy plant or wind farm.

“I think it’s unfair to say that if we are going to transition from coal to renewable energy, renewable energy must employ everyone in the coal sector,” says Davies.

“That’s not realistic. Even if the numbers matched, which they don’t, it’s a completely different skill set.”

South Africa therefore needs to find innovative ways to move the economy along this path that takes businesses, the workforce and society along with it. That means seeing this as an opportunity as much as a challenge, particularly in the case of Eskom.

Duncan sees the current discussions around the potential establishment of a green energy fund backed by development finance institutions that will lend money to Eskom on condition that it accelerates the closure of coal-fired plants and the uptake of renewable energy as an encouraging step.

“It presents an opportunity for South Africa to not only address the financial risk that Eskom poses to the country, but also potentially to solve for some of the requirements to transition Eskom to something that is compatible with a two-degree outcome,” he says.

Read: R161bn green-energy initiative takes shape

This however needs to be shaped by input from all those who will affected.

Collaboration

“It is going to require participation from all stakeholders in the broader energy system,” Duncan argues. “It is going to be uncomfortable for those in the renewable energy sector and for those facing the reality of job losses, but it is one of those things that unless stakeholders start talking to each other, we are going to miss the boat.”

In those discussions, one of the most important points will be how the country ensures that closing Eskom power stations doesn’t wreck local economies.

South Africa will have to explore the question of whether those who lose jobs will be compensated in some way, and how other opportunities will be afforded to them.

“There is talk about setting up renewable energy infrastructure in the existing coal mining areas to leverage the existing transition infrastructure, or creating renewable energy manufacturing industries in those areas,” says Davies. “The opportunities for job creation in the rehabilitation of the Mpumalanga coal fields also has huge potential.”

For this to be successful, however, there must be a collective appreciation of what needs to be done, and how it will be managed.

“What it takes is collaboration,” says Davies. “You are not going to retrain people, create entire new industries and new economic development zones, and transition to a completely different economy that treats everyone fairly if government, business, unions and civil society are all speaking in different languages and at cross-purposes.”

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It is not going to happen. There is simply not enough money to do it. Even if we accept that renewables are cheaper than coal most of the older power stations are paid for, to replace them Eskom would need far more than 450 billion to do it. Where is that money coming from? Can you imagine the ANC telling miners and power station workers that you have no job from tomorrow because we installed imported wind and solar power systems? Please do not even think manufacturing those locally, there is simply not enough financial, scientific and human capacity.

And as always … COMPLETE AVOIDANCE of ANY reference to (let alone discussion) of the elephant in the room exabercating this problem – the out-of-control population explosion amongst the poor.

Imagine where we would be sitting now if we had effectively addressed this problem head-on 25 years ago!

Instead, we refuse to admit there is even a problem in this regard.

Denialism always works out well in the end, huh?

One snag seems to be how “green” is “green” with tales of solar panel manufacture having a greater carbon footprint than they save and wind turbine blades having to be landfilled. Even hydro has a cost to the environment. Full cycle costing is something many are very shy about.

Reality should be that lowest full cycle costing with the aim of minimum environmental impact through to rehabilitation rules; even if it is coal in the short to medium term.

SA has bigger problems – Eskom moneypit.

…..ANC promised to commit to this anal idea?

Commitments not exactly the ANC strength

Patrick, this is an excellent article. But the noxious cloud of dripping negativity (especially in the financial sector) that tries to pull down every reasonable idea is the real elephant in the room here. Change is going to come, no matter what the doom and gloom enthusiasts say. I believe that with some bright people negotiating the change that HAS to happen, it will work.

“Change is going to come, no matter what the doom and gloom enthusiasts say”

Exactly, one of my favorite all time qoutes :
“If you dislike change, you’re going to dislike irrelevance even more.” – Eric Shinseki

“And quite frankly the transition is going to happen no matter what any of us do, because just the economics of renewable energy already make that clear.”

So says Tracey. So it must be true.

The fact is it will only be possible when renewables can deliver the right amount of power at the right time at the right price.

Currently they cannot.

Currently one requires a backup (double capex) for when they cannot deliver. Many jurisdictions are now considering insisting that not only do ISP suppliers guarantee their price, they guarantee the availability of the power. If they cannot make it they have to buy it on the open market.

Solar and wind may be cheap but they are fickle. Currently there are about 60GW worth of nuclear power under construction. For CSP this must be about 1 or 2 GW at most. If CSP was so good and so cheap why is it not taking over? (bait)

That’s why it’s called a transition, it’s not happening overnight but heading that way. The tech has moved very quickly over the past 5 years.

Nuclear has to evolve to remain part of the future plan, something it hasn’t really done over the past couple of decades.

Coal will likely be squeezed out first, estimates I have seen is that 2/3rds of human carbon emissions comes from transport and energy generation.

Distributed energy, hydro, other renewables, storage, gas and nuclear likely to be where we are headed but who knows. We are talking decades not days here.

Water usage is the next item to consider. Nuclear uses roughly 1.5kl per MWh, solar uses 0.0075 per MWh. Not sure how much storage uses or wind or gas but I suspect coal/nuclear are way ahead of the rest in that department.

Well you know me, ill happily take the bait.
Just this time no exaggerating or cherry picking please 😛

“The fact is it will only be possible when renewables can deliver the right amount of power at the right time at the right price.

Currently they cannot.

Currently one requires a backup (double capex) for when they cannot deliver”
So just because you say that must mean its true?
So what you are describing is boils down to capacity factor, for those that don’t know, capacity factor is the amount of time that a generation asset operates at nameplate capacity, typically coal plants are around 85% (Eskom’s coal fleet is closer to 75% due to bad maintenance) and for nuclear its around 90%
And Richard is correct, due to the inherent nature of renewables they don’t have great capacity factors.
PV is around 20%
Wind has traditionally been around 20-40%
However this is changing (for wind at least, PV needs storage if it wants to achieve a higher capacity factor).
Ever newer and larger turbines have constantly been pushing up the capacity factor associated with wind, the new GE Haliade-X 12 MW turbine for example has a capacity factor of 63%!

And of course then there is that other little metric that the anti renewable community always seems to ignore, availability factor.

So for what percentage of the time will a generation asset be in a state that it can produce energy, the undisputed winner here is PV.
PV has a availability factor of 99% which makes sense, since the only maintenance needed is cleaning the panels, and you don’t need to shut down the entire plant to do it.
Wind clocks in at 95-96%
Coal plants have a availability factor somewhere in the 80%’s depending on plant age, nuclear is around 90%

And this might sound trivial at first but let me put that in perspective.
of the 365 days in a year, a coal plant will only be available to generate anything (at lets say a 85% availability factor which is generous given Eskom’s current fleet) 310 days of the year!
The other 55 days, it completely offline, not generating less, generating nothing, that is why even with coal, you need to spend extra capex to have reserve capacity so this is not a new problem introduced with renewables, it’s just a different looking one, capacity is now lost intermittently instead of months on end.

A real world example of this, lets take the Duvha power station again at 3600W nameplate capacity, according to Eskom in a 3 year period it averaged 22 798GWh
Now lets match Duvha in terms of nameplate capacity with those new GE Haliade-X 12MW turbines.
that would be 3600MW / 12MW = 300 Turbines.
And these turbines are projected to generate around 67GWh annually each.
So that is 67GWh x 300 turbines = 20 100 GWh
And looky there, even though I have a much worse capacity factor at 63% the availability factor closes the cap significantly.

“Solar and wind may be cheap but they are fickle. Currently there are about 60GW worth of nuclear power under construction. For CSP this must be about 1 or 2 GW at most. If CSP was so good and so cheap why is it not taking over? (bait)”

Yeah, and for how long has that nuclear been under construction for?
I will eWallet you R50 if you can list me one nuclear plant in the western world completed on time and within budget in the last 10 years.
Even Hinkley Point in the UK built by no other than EDF is overbudget and late.
Don’t get me wrong I want nuclear to succeed, clean firm baseload generation would be great, but I don’t think fission is going to get us there, since nuclear fusion is the holy grail of energy generation I would hope for that, but as the saying goes that’s 30 years away!

CSP is not taking over for the same reason bikini’s won’t outsell jackets Scandinavia.
The amount of surface area on the planet with high enough DNI to get to the lower than coal prices are relatively small, but SA,Chile and Australia just happen to have a lot of those 2500+ DNI surface area, so if you have it, use it!
It would be like asking, well if hydro is doing so well in Norway, why doesn’t everyone have hydro, simply because everyone doesn’t have the hydro potential.

A really great and useful explanation that knock backs a LOT of the confusing assumptions so readily bandied about.

Proof once again that there is often as much real educational value in the “comments” as there is in the original article. No disrespect to you here, Patrick. Your articles are always insightful and thought-provoking. And for me anyway, first-rate, must-read quality.

Thanks, PJJ.

If Moneyweb wanted to, I would happily chip in for 1 green/renewable energy article every 1-2 weeks.

Green is only cheaper when you apply green economics. Based on facts its currently a no contest. Its also time more people took the trouble to examine the real science which mainstream press refuses to publish. Even without checking the selected, compromised and adjusted data used to support the scam, logic tells you mans 0.0016% CO2 contribution to the atmosphere cannot possibly cause earthquakes, tsunamis, volcanic eruptions or extreme weather. However, the sun, clouds
& massive ocean currents have a lot to say.

So the explosive human population growth in the last 2-3 centuries on this planet has got absolutely no outcomes or consequences on their surroundings, and NOTHING to do with the MASSIVE ecological destruction that is EVERYWHERE apparent???

I’d rather take a risk adjusted approach and assume that the plumes of smoke that cause countless illnesses whilst polluting land and water are probably also affecting the atmospher. Hence I support limiting pollution where possible vs unlimited pollution with irreversible consequences.

I also don’t see what the climate science community have to gain from pulling this elaborate hoax.

Of course we do get people like you, where you would prefer to pollute as you please whilst declaring all climate change supporting data biased whilst all climate change denying data the actual hidden truth. You can understand why it does not seem very credible.

You don;t see how the climate science community could gain? There isn’t a scientist on earth with access to funds that has not been put in place by some big corporation to gain profit. Profit is always the motive.
I’m very on the fence about this issue. It does seem we are experiencing dramatic changes in climate world wide but on the other hand I hear the phrase ‘carbon tax’ and suddenly I;m thinking this is another ploy to get more money out of the citizens of earth.

@Saibotkram1988

I know exactly why you might feel that way, but let me just put it in perspective for you, because you are onto something, and that is financial incentive.

So what is the financial incentive for climate scientists? Well its hard to determine globally, but in the US that would be the entire Carbon Monitoring System (CMS) budget, this is 10M USD annually.

a Hefty figure at first glace, but, lets say, whatever data comes out of the CMS would cut US oil consumption by only 1% annually.
This would represent a economic value of :
19.96M barrels per day x 0.01 = 199 600 barrels per day
199 600 x 365 days a year = 72.8M barrels P.A
72.8M barrels at say 53USD per barrel = 3858M or 3.8B USD worth of reasons to be suspicious.

Now sure this is not profit, but lets say they have a operating profit margin of 10%?

The oil industry stands to lose 385M USD worth of profit, with JUST a 1% drop in oil consumption.
Now, you tell me, where do you think the financial incentive lies?

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