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R161bn green-energy initiative takes shape

The new entity will lend money to Eskom.

A plan to establish the world’s largest green-energy financing initiative is being threshed out in South Africa, which needs to reduce its environmental footprint and find innovative ways to fund debt-stricken state power utility Eskom.

The plan being formulated by Meridian Economics, a Cape Town-based think tank, is under consideration by the government. It envisions the establishment of an $11 billion (R161.1 billion) facility backed by development finance institutions and private funders.

The new entity would lend money to Eskom at slightly below commercial rates on condition it accelerates the closure of polluting coal plants to make way for renewable energy.

South Africa is the world’s 14th-largest producer of greenhouse gases and the government is under pressure to deliver on a commitment it made in 2009 to reduce emissions by 42% by 2025. Under the new plan, the country would add an additional 10 gigawatts of renewable energy production capacity over a decade, thereby reducing its potential carbon dioxide emissions by 715 million metric tons by 2050.

“This would be the largest and most significant global climate finance transaction to date,” Emily Tyler, a climate economist at Meridian, said in an interview. “It would propel South Africa to a cleaner and more resilient energy future.”

Eskom supplies about 95% of South Africa’s power and has turned to the government for aid to remain solvent after amassing R450 billion of debt. Under the plan, it would secure loans in tranches from the new facility over five years and have to repay them over 20 years. The money would be used to wean Eskom off bailouts and cover its future financing needs, rather than fund new and already self-sustaining green energy projects.

Implementation of the plan would be contingent on the government following through on a commitment to break up Eskom into generation, transmission and distribution units under a state holding company and reorganising its debt to place it on a more sustainable footing.

The new entity would utilise most of the difference between the cost of the concessional funding it secures and the price it charges Eskom to finance a so-called transition fund. It would focus on creating jobs and promoting development mainly in the eastern Mpumalanga province, where most of Eskom’s plants are located. It would also contribute to state coffers in the form of a carbon payment.

The establishment of the transition fund could help win backing for the plan from labor unions, which oppose coal-plant closures and Eskom’s breakup on the grounds there will be job losses. The unions played a key role in helping President Cyril Ramaphosa win control of South Africa’s ruling party in late 2017.

Several large development finance institutions, climate funds and philanthropic organisations have expressed initial interest in participating in the initiative, Tyler said, without identifying them.

Discussions on the green funding proposals are at an early stage and it would be premature to comment on them at this stage, said Ismail Momoniat, a deputy director-general at the Treasury, which is assessing the plan.

Meridian is headed by Grove Steyn, a member of a government task team set up to advise on a resource plan for Eskom. The green energy initiative was included in the team’s report submitted earlier this year, but the details have since been refined.

US$1= R14.6452 
© 2019 Bloomberg L.P.

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I have always interpreted the thick tank idea as a bunch of people sitting in a watertight tank with their hands in their hands and not having the foggiest idea of what they are doing there.

Surely you mean ‘think-tank’and ‘hands on their heads’..?

maybe boots is a candidate

Good luck with trying to do anything rational with the government.

Sounds like a series of bribes and taxes to get them to do the right thing.

Pathetic, really.

Any notion that the funding will make its way into the pockets of those affected workers….well, how naive can you be.

Saibotkram1988 I actually meant heads in their hands (sorry for the typos)
and grahamcr, when hell freezes over (which is very unlikely according to the global warming concept).

When the world was on the Gold Standard and the British Empire ruled the world, they could not allow a group of farmers in the Transvaal to own the largest deposit of gold in the world. They made a plan to solve that problem. They sent their military to take away the Boers’ competitive advantage.

Now that the world is on the petrodollar standard, where energy took the place of gold, and South Africa has an abundance of cheap(shallow)coal, again they made a plan to take away our competitive advantage.

We used to say that “he who owns the gold, rules the world”. Now we say “he who owns the source of energy rules the world”. Maybe this push towards green energy will drive true freedom and democracy. Nobody will ever own the sun and the wind, so there will never be an incentive to wage a war to get control over it.

So true.
Cheap renewable energy will provide people with freedom they last had in the 1800’s

You generate and use your own power, that same power is used to propel your car, heat or cool your house or even charge your lawn mower.

You are no longer a hostage to OPEC or the whims of a foreign country that supplies you with oil or natural gas.

I tend to agree with much that our Ninja master says. PJJ .. well not so much, but that’s okay. I would say that it is not who owns the energy but rather the debt. Owns as opposed to owes. The debt is irredeemable. It can never be paid. it is a form of modern slavery, except the slaves move in and out of servitude. Not all can exit this state. Certainly I agree that the plan is to take away the cheap competitive advantage.

There is no way on earth that renewables (excl. hydro) can supply the right amount of power at the right time at the right price. This has never been done. Countries like Germany, Denmark and South Australia have tried and failed. All that has happened is the capital requirements has doubled. One for the baseload and one for the renewable. The net result is skyrocketing energy prices.

South Australia is a great case in point. The wind ‘farms’ generate enough energy for the entire state but at the wrong time. One cannot store this. When the wind farms are useless, South Australasia has to import power. South Australia has an unstable grid and the most expensive electricity in the world.

I am another case in point. I have a 6.6 kW solar system (in the panel sense) on my roof. The house is about 260m2 single storey and there is not much space left. The roof space is fully utilised. This produces about 28kWh on average. The cost was about R120000 (AUD12000). The house uses about 18kWh per day. The reaminder is not enough to run two cars. Cooking and hot water is on gas.

There is a movement in Australia for IPPs that they must guarantee the power they supply. If they cannot, then they have to purchase it on the open market. Suddenly wind and solar are not so cheap.

The current international monetary system that is based on debt, is like a community that became dependent on heroin. Everybody knows that heir habit is unsustainable and damaging, but nobody wants to end it. People may well ask why we have to end this “goldilocks” system when it works so well? Everybody gets to have their pie and eat it. The owners of capital become wealthy, politicians are happy, socialists can be philanthropic with other people’s money, and the poor receive grants. What is there not to like?

The only problem is that the debasement of the currency also debases social cohesion. In short, this is how the Weimar Inflation led directly to the NAZI phenomenon. The escalating incidents of rioting and xenophobia across the globe are the results of the Great Financial Crisis and the debasement of money.

The problem is, the process of debasement cannot be reversed, it has to continue until it ends in the implosion of the currency system. International currencies are not at the stage of immediate implosion yet. So, we can expect “inequality” to increase and social unrest and the acts of “service delivery protests” to escalate.

The debasement of the currency, the fiat currency system and the accompanying socialist policies, cause, and drive, social unrest and it will end in war, as always.

“This would be the largest and most significant global climate finance transaction to date,” Emily Tyler, a climate economist at Meridian, said in an interview. “It would propel South Africa to a cleaner and more resilient energy future.” Do we really need this?

Screw the environment-we have more significant problems to solve.

Solar panels are all very well in the day-time but what happens at night?

Have fun picking up the dead birds and bats under the blades.

Well said. I think the real cradle to grave environmental cost (and of “renewable energy” is largely ignored in the rush for pc.

“….backed by development finance institutions and private funders.”

This is a first-step to privatising Eskom. In all honesty, which private funders would want to lend money to Eskom and, satisfy themselves of Eskom being able to repay the sum? I would be surprised if someday Meridian Economics and the pool of funders lobby for the utility’s privatisation.

Let me warm my popcorn for this drama series.

I suggest anyone who believes privatizing ESKOM will cure our electric woe’s should do a little research on privatized utilities overseas. Start with PG&E in California. The original ESKOM model was proved to work, a utility beholden to shareholders will make decisions based on whats best for shareholder returns.

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