Climate Change

20 Jul 2020

Nine Ways to Decarbonize the South African Energy Sector

20 Jul 2020  by CNBC   

The energy sector currently accounts for two-thirds of global carbon emissions and expedited progress on energy efficiency and low-carbon sources in the energy mix is required to achieve deep decarbonization.

1. We need an energy transition.

Business as usual will use up the Paris Agreement carbon budget within 20-30 years and bring us towards a hothouse earth. We need a transition from energy that emits greenhouse gases to renewable energy to avoid this fate.

2. We know what we need to do.

The broad shape of the energy transition is to reduce demand where possible through energy efficiency and behavioural change, decarbonize electricity, electrify everything you can and use some variety of renewable-based hydrogen for the rest. To transition at the necessary pace may also require the use of biomass and emissions removal technologies.

3. The energy transition will be difficult.

Fossil fuels provide around 80% of global energy supply and are the foundation of modern society. Many countries and companies are dependent on the wealth generated by fossil fuels and the Bank of England has noted that up to $20 trillion of assets are at risk from the energy transition. South African Banks must work with public sector, for mitigation and policy mindfulness to allow the economy to be ready with measures and targets set.

4. The forces of transition are likely to prevail.

Those who would benefit from a transition vastly outnumber those who benefit from continuity; 80% of people live in countries that import fossil fuels. Just 1% of the global workforce works in the fossil fuel industry and a large share of the rents from fossil fuels flow into the hands of a small number of fossil fuel exporters.

We are living in a fast changing world and South Africa needs to have foresight on what will replace coal exporting , we can use it locally while catching up to make our production cost effective.

5. The energy transition is just.

The global view is, Fossil fuels are used mainly by the rich and the few, while their costs are shouldered mainly by the poor and the many. In contrast, renewables are everywhere, can be deployed at any scale and are being used to solve last-mile problems and provide electricity to the 1 billion people who lack it. Domestically, we are one of the leading exporter of coal, which require reflectiveness and mindfulness leadership on policy transitions. The International Renewable Energy Agency (IRENA) predicts an energy transition that will create more new energy jobs than fossil fuel jobs, while South Africa can lose jobs when the transition is not planned well.

6. We have technology solutions.

There are rising numbers of technology solutions available to start the transition in a cost-effective manner. Efficiency gains have already curbed energy demand growth from 3% to around 1% on average and could drive growth still lower. Reflecting on the manufacturing technologies we can take advantage to match the global manufacturing industry standards and have smart factories and smart industries with innovation factor driven tier systems.

7. Incumbents are at risk.

Peaking demand and technological competition put incumbent players in the energy system at considerable risk of lower prices and stranded assets if they fail to react in time. Coal became too expensive to the South African economy, making electricity prices more expensive to businesses and households, which suggest adaptation to renewables and transition to cost effective electricity. That’s the only way South African manufacturing industry can peak and be competitive. Coal is too expensive to the South African economy, we must manage production to serve the required just transition phase and decarbonize the future economy.

8. We need more policy action to reach Paris goals.

Policy-makers need to take much more assertive action if they wish to drive the transition fast enough to meet the aspirations of the Paris Agreement. There is tremendous scope for major policy action.

9. Policy-makers need to plan for change.

Policy-makers need to retool fossil fuel dependent states and systems, to retrain workers in order to ensure that the transition is just, to plan for new sources of tax revenue and to hold back from investing capital in assets which are likely to be stranded by the transition. Eskom and coal companies must start training a pool of their staff for the just transition or renewable energy materials and management of systems. Transformation must be communicated to all staff in time and have a decade or two decade plan that will make ease to tailored programmes to shape human capital to the decarbonized future economy.

It remains uncertain on how the political economy will play out in South Africa. Every country is different and there is no single solution. Some countries’ fossil fuel interests have been able to seize the reins of government to try to hold back an energy transition, while the energy transition will also create new constituencies that benefit from investment and growth as well as jobs in the wider economy. The sustainability and Impact Investment criteria forces unlisted investments and banks adapt to the just transition.

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