Furthermore, $255 million of the $2.6 billion allocated under the Accelerating Coal Transition (ACT) programme — a new initiative that helps countries heavily reliant on coal shift towards cleaner energy sources –— is earmarked for community development and energy efficiency projects in the province. Mpumalanga is home to 12 out of 14 coal-fired power stations in South Africa.

Revenue management

While the main issue is how these municipalities will receive the funds, the treasury explained that efforts are being made to support municipalities in Mpumalanga through revenue management initiatives. “These include setting appropriate tariffs, reconciling the general valuation roll with the billing system, and developing best practices for credit control and debt management,” said the treasury, adding that these measures are intended to stabilise municipal finances and enable more active participation in JET projects.

The treasury said it has incorporated the JET process into the local government fiscal framework. “Treasury has expanded the scope of the Integrated National Electrification Programme conditional grants to support alternative energy solutions, including solar, micro-grids, wind, biomass, and energy storage systems.”

This is a significant development aimed at enabling municipalities, particularly in Mpumalanga, to tailor their energy strategies to local resources while addressing financial constraints, the treasury said.

In November 2023, Oxpeckers reported that financing for the JET is being undermined by indebted municipalities in Mpumalanga that are not bankable and are not in a position to attract financial investments to support their transition to renewable energy. (See Are municipalities good for JET money?)

The treasury said this week that it has updated the Municipal Borrowing Policy Framework to clarify financing mechanisms and encourage private-sector investment. The framework includes instruments such as green bonds, public-private partnerships and project financing. But the treasury acknowledged that challenges remain in creating bankable projects, with efforts under way to build the capacity of municipalities to access these funds.

The treasury is negotiating additional funding with international partners, including the African Development Bank and the Climate Investment Funds — Accelerating Coal Transition programme.

“These negotiations aim to secure funding for electricity distribution, water, and sanitation projects in Mpumalanga, as well as community-based projects to mitigate the socio-economic impacts of Eskom coal plant decommissioning,” the entity told Oxpeckers.

Balancing sheets

Neil Cole, financing manager for the Presidency’s JET Implementation Plan project management unit (PMU), said the first challenge of financing municipalities with weak balancing sheets is that there is no mechanism for the treasury to borrow and then on-lend to municipalities.

“The treasury also does not provide sovereign guarantees to municipalities,” he said.

However, Cole said there is a review process under way to explore how municipalities that cannot borrow on their own balance sheets can receive this financing.

“We are considering what kind of credit guarantee vehicles can be put in place to support these local governments and weaker municipalities so that they can mobilise the financing they require. Additionally, we are examining how the conditional grant mechanism can be used in an innovative way to de-risk and leverage financing from the private sector.”

Although it is not clear how much Mpumalanga alone will need to facilitate the transition, Cole acknowledged the complexity of determining the exact financing needs for the province.

“It is not easy to say at this point how much Mpumalanga needs to facilitate the transition. The investment plan for Mpumalanga is roughly R65 billion. The transition involves a complex financing need that extends beyond the next five years, encompassing more than just electricity and gas components.

“When we did the costing of the South Africa transition investment plan, the total cost was $98 billion, or R1.5 trillion. We will allocate a significant portion of the $11.6 billion to Mpumalanga, but we will need to mobilise additional resources as well,” Cole added.

Workstream setup

Joanne Yawitch, commissioner at the Presidential Climate Commission (PCC), noted that although money has flowed into the treasury, municipalities are heavily indebted, which impedes their ability to secure funds for the transition.

Speaking to Oxpeckers during the inaugural JET Municipal Conference, hosted by the PMU in partnership with the South African Local Government Association (Salga) in late August, Yawitch said the PCC is setting up a finance workstream that will address these issues and find solutions.

“Municipalities have balance sheets that limit their borrowing capacity, and mechanisms will need to be established to address this,” she said. “Additionally, many municipalities lack plans, which complicates the situation further. Having a plan is crucial because it provides a foundation for problem-solving.

“Our work will involve a lot of solution-finding to tackle these complex problems,” she said.

Yawitch explained the strategy is to start with the 20 municipalities responsible for 80% of distribution, which includes all major metros and several secondary cities. “By focusing on slightly larger municipalities, we can learn valuable lessons that might be applicable more broadly,” she said.

“However, significant work is required in capacity building, particularly in improving financial management, billing systems and debt collection. Our finance workstream will address how to access necessary funds, overcome existing problems and develop the plans municipalities need. This will involve collaboration with a capability workstream focused on enhancing municipal capacity and solving related issues.”

Yawitch expressed hope for progress by the end of the year, stating: “We aim to define the lead institution, establish workstreams and set terms of reference and action plans by the end of this year. We hope to hit the ground running in early 2025. Effective and efficient use of funds is crucial to support the energy transition.”

Local consultation

At a recent business conference in Middelburg, Moeketsi Mpotu, chief executive of the Middelburg Chamber of Commerce and Industry, told Oxpeckers that local businesses are ready to play a meaningful role in the JET. However, he stressed the need for proper consultation and transparency.

“There are opportunities that local businesses can seize to support the multinationals that come here,” he said. “Our main issue is the lack of proper consultation and transparency about where the JET money is spent.”

Mpotu suggested that the JET office be located in Mpumalanga, or that the chamber have some oversight, particularly for Mpumalanga-related projects. “This would ensure transparency and allow us to track where the money is going,” he explained.

Salga’s role

Oxpeckers also spoke to Nhlanhla Ngidi, head of energy and electricity distribution at Salga, about the organisation’s role in the new PCC just energy transition workstream. “We are advocating on behalf of municipalities, and we are also protecting their interests,” he said.

“The transition is not going to happen up in the air; it’s going to happen in local government, so we have to protect the interests of municipalities. As a result, our key role is that we sit in the PCC as Salga.”

Ngidi also stated his concerns regarding the balance sheets of municipalities. “Most municipalities’ balance sheets are not in good condition to secure funding from financial markets or institutions. Therefore, with the energy transition and available funding, we must approach this differently from traditional financing requirements.

“The government itself needs to stand behind municipalities and provide guarantees to secure funding. This could involve a combination of loans, grants and government support. Since COP26 we’ve seen various pledges, but to implement projects and start receiving funds, we must ensure everything is above board. We must avoid the maladministration of these funds.”

Ngidi said municipalities are working on preparatory manuals that package all necessary projects. “Municipalities will be able to request funds based on these plans and the projects they’ve identified for the JET,” he said.

“It is crucial for municipalities to package their projects and conduct feasibility studies to determine project needs and budget requirements. Without knowing the number and value of projects, providing funds would be ineffective.”

“Once preparation is complete, we will enter the practical implementation phase, which will involve extensive public participation and consultation. Each municipality must have community representatives on project steering committees to ensure local businesses and citizens are informed and involved. Everything must be communicated comprehensively to ensure no one is left behind,” Ngidi said.

Thabo Molelekwa is an associate journalist at Oxpeckers Investigative Environmental Journalism, and a graduate of our #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Hub.

Track the development of energy projects across Mpumalanga province on the Oxpeckers #PowerTracker tool

The province is grid-rich due to historical investments in coal plants, making it a good location for these new energy projects, said Jesse Burton, a researcher in the Energy Systems Research Group at the University of Cape Town.

“There’s a lot of grid capacity available and they’re close to high-demand energy load centres,” she said.

According to Burton, starting renewable energy projects in the province that is responsible for more than 80% of South Africa’s coal production and is home to 12 of the country’s coal power plants shows communities that there’s an energy future beyond coal. “Mpumalanga is very suitable for all sorts of renewables, including wind and solar,” she said.

Hendrina wind farm

Two wind farm projects are emerging in Mpumalanga. One is in Hendrina, in the Steve Tshwete Municipality, where a 210 megawatt wind farm is being developed about 20km from the Hendrina coal power station.

Scheduled to begin construction in December 2024 and to reach full operational capacity by November 2026, the project is a partnership between electricity trader Apollo Africa, which is owned by JSE-listed Reunert, and Enertrag South Africa, a subsidiary of the German-based renewable energy company Enertrag AG.

This project, according to the #PowerTracker tool, is in the final stages of securing a crucial grid-connection budget quote from Eskom, making it one of the few private wind projects to have achieved that milestone to date.

Enertrag was contacted to get more details regarding the commercialisation milestones; project specifications; economic and environmental impacts; its partnership with Apollo Africa; investment and funding; community involvement and technical aspects of the wind farm development in Hendrina. 

However, the company declined to respond, stating: “We consider the level of detail you seek to be commercially sensitive, particularly as we are currently progressing towards commercialising this project.”

Ummbila Emoyeni project

Between Bethal and Morgenzon, Seriti Green has begun construction on a 900MW wind farm. The company has signed a power purchase agreement with its parent company, Seriti Resources, to supply 155MW of wind power generation for its coal-mining operations and will sell the remaining 745MW to Eskom.

Named Ummbila Emoyeni, this development marks a major milestone in Seriti Green’s broader renewable energy goals, which aim to develop 3 000MW of wind and solar energy capacity within the next decade.

According to Seriti, the Ummbila Emoyeni project is not only a substantial investment in renewable energy but also a significant stride in their commitment to sustainability. Seriti aims to reduce its carbon dioxide emissions by up to 350,000 tonnes annually, effectively halving its current emissions footprint.

Businessman Peter Venn, who is the chief executive of Seriti Green, emphasised the importance of integrating renewables and coal: “The critical thing for us is not renewables or coal but renewables and coal.  

“We’ve got this trilemma of energy security, cost of energy and just transition and one needs to work through all of them; we are not climate denialists, but realistically, coal is going to be around for some time.”

Early-stage construction on Ummbila Emoyeni began in December 2023, with full-blown construction starting in April this year, he said. Full generation is expected by the end of 2026. 

“The project is being built in 155MW phases, each costing about R5 billion. By the end of this year, we will start with 310MW, followed by another 310MW in 2025.”

According to Venn, this 900MW project is projected to cost R25 billion. Seriti Resources holds a 55% stake in the project, while Standard Bank, RMB and Venn’s family holding company, Venn Energy, each own 15%. RMB and Standard Bank have provided substantial debt funding of about R4 billion, contributing significantly to the project’s financing.

Venn emphasised the importance of long-term debt facilities for renewable energy in keeping tariffs low. He noted that South Africa’s commercial banking sector has actively provided 15- to 17-year debt for such projects. 

“So, once the project starts operating, it’s going to take us 15 to 17 years to pay off the debt,” he said.

Pushbacks

While the history of these kinds of projects has been marked by pushbacks in provinces such as the Northern Cape and Western Cape between landowners and companies failing to meet the expectations of nearby communities regarding job creation and other related benefits, Seriti promises that Ummbila Emoyeni will result in significant investment in Mpumalanga, along with the creation of jobs, procurement opportunities and social investment expenditures.

Venn highlighted that this project is the first of its kind in Mpumalanga and significant investments will be made to benefit local communities, including road infrastructure and employing local contractors.

He noted that there were no major challenges in developing the project, just minor delays from the municipality. 

“Wind farms are very different developments, so we had to do a lot of education with the municipality. And we’ve conducted community engagements for two years,” he said.

Regarding uncertainties about job losses in the coal sector, Venn said “an operating wind farm is never going to be able to absorb an entire coal mine or a coal power station. So it’s imperative that we grow the greater economy of Mpumalanga.”

Wind resources

Addressing concerns about wind availability in Mpumalanga, Venn said: “The wind is slightly higher in the region. Instead of 900m tall towers, we are building 150m towers because the wind is very strong.”

Thabo Hlalele, Energy Research Centre manager at the Council for Scientific and Industrial Research, emphasised the importance of considering the environment, wind resources and grid infrastructure when deciding to start a wind farm in areas such as Mpumalanga. 

“A flat area at a higher elevation can offer better wind conditions and proximity to the grid is crucial for transmitting power,” he said.

“The topography of the area plays a significant role. A flat area at a higher elevation can offer better wind conditions than lower areas, which is often overlooked in the planning stages,” he explained.

Hlalele also emphasised the importance of wind resources.

“If the wind resource has an average speed that is conducive for that area, it would definitely be a plus. The economics of a project hinge on this, as achieving an attractive cost of energy is essential for the project’s viability.”

Operational wind farms

Morongoa Ramaboa, chief communications officer of the South African Wind Energy Association, noted that South Africa has an installed capacity of 3,442MW from 34 operational wind farms — most of them in the Cape provinces. More than 31GW is expected from potential projects in various stages of development, as indicated by the 2023 South African Renewable Energy Grid Survey.

Ramaboa said Mpumalanga’s existing infrastructure from coal plants provides a significant advantage in terms of readiness for wind energy projects. 

“Though the wind resources in Mpumalanga are lower than the Cape region, they are still high from an international perspective and are well suited for the development of wind facilities.

“While other provinces like the Eastern Cape and Western Cape have been leading in wind energy capacity, Mpumalanga’s potential is now being recognised,” she said.

The association views the Seriti Green Ummbila Emoyeni project as vital for achieving national renewable energy goals: “It demonstrates the private sector’s interest in decarbonising energy supply chains, potentially boosting investment and policy support,” Ramaboa said.

Thabo Molelekwa is an associate journalist at Oxpeckers Investigative Environmental Journalism and a graduate of our #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Hub

• You can track the development of energy projects across Mpumalanga province on the Oxpeckers #PowerTracker tool.

Hydrogène De France’s ambitious plans include installing 1 500 megawatts (MW) of solar PV combined with 3 500 megawatt-hours (MWh) of hydrogen storage. The projects will inject 1.9 terrawatt hours of stable electricity into the grid 24/7 and will peak at about 500MW, says Nicolas Lecomte, company director for Southern and East Africa.

“Hydrogène De France [HDF] envisions that this 500MW of green energy can mitigate up to half of the [Eskom] load-shedding stages, marking a pivotal transition toward cleaner and more reliable electricity for South Africa. This project will provide electricity to an equivalent of 1.4 million inhabitants all day and all night, all year round,” Lecomte said.

“When it comes to hydrogen power plants, the HDF Renewstable Mpumalanga project is the largest. The word ‘power’ is essential. Hydrogen infrastructure projects can be of a very different nature, for different applications,” he said.

World Bank experts say South Africa has 20 projects linked to green hydrogen across the country. Most of these projects are in the Western and Eastern Cape, with three being developed in Mpumalanga: the Sasol Hyshift project in Secunda, the Camden Green Hydrogen and Ammonia facility in Ermel, and the HDF Renewstable Mpumalanga development in Standerton — the first HDF project in South Africa.

Renewstable Mpumalanga is not one of the nine priority projects registered in the Government Gazette and identified as strategic infrastructure priority projects for the government in partnership with business and other sectors. Lecomte said HDF aims to conclude the registration and permitting processes for the first Renewstable units in the first quarter of 2025.

Land lease

The project is an outcome of Eskom’s land lease agreements with independent power producers for the commercial use of land parcels near two of its coal-fired power stations in the province, Tutuka and Majuba.

In April 2022, Eskom initiated a request for proposals, launching a selection process to lease 6,184 hectares of land for 25 to 30 years. HDF Energy secured 1 782ha to develop green baseload power plants.

HDF is a French independent power producer specialising in hydrogen power. It has expanded its operations into the Southern African market and is developing several green hydrogen (GH2) projects in various other parts of the world and Africa, including Namibia, Zimbabwe and Kenya.

Lecomte said HDF’s expansion into the Southern African market with the launch of its Renewstable Mpumalanga project was motivated by several factors, including the abundant natural resources that make the region conducive to renewable energy production, in a national and regional context of power-generation deficit.

“Another factor is that the regulatory environment in South Africa and neighbouring countries is conducive to renewable energy investments. Mpumalanga, being the focal point of the Just Energy Transition, is also a renewable energy resource-abundant province,” he said.

The Renewstable Mpumalanga project will play a role in the energy transition by supplying two major nodes of the electricity grid close to the two local coal-fired power stations, said Lecomte. It will also sell the power to its own customers, which could include commercial and industrial clients.

“What sets Renewstable apart from other renewables, such as wind and solar, is its ability to provide round-the-clock, adjustable, grid-stabilising power. From a technology perspective, the introduction of this new type of power plant is a revolution. It addresses a key challenge associated with renewable energy sources — their intermittency,” he said.

Eskom relationship

Speaking about Eskom’s relationship with the developer, the utility’s media desk said, “This is a specific programme where Eskom will lease land over a long period to renewable developers for the establishment of renewable generation. The developer is responsible for all development, approval, construction, etc.”

Eskom anticipates capacity from the Renewstable Mpumalanga project to come online from the end of 2026. “The developer will sell the energy to their own customers, with Eskom managing the wheeling of the energy to their customers or own offtake points.”

The utility explained that the intention of its relationship with independent power producers is to unlock opportunities for the private sector to expedite new-generation capacity in managing the constrained electricity system. 

“Eskom supports the implementation of cost-effective, proven commercial technologies and is also researching green hydrogen with the possibility of a small demonstration plant,” the media desk said.

When asked to elaborate on specific requirements or conditions outlined in the land lease agreement regarding the use of the land for renewable energy development and associated infrastructure, the desk responded: “Specific contractual matters are confidential."

“However, the intent from Eskom is to allow as much freedom as possible to the developer to generate new capacity. Eskom does not procure the energy and the developer is free to produce products that they require or can sell commercially. The source of generation must be renewable in nature and all legislation needs to be adhered to,” Eskom said.

While these kinds of agreements might come with financial implications, Eskom would only say that there would be implications associated with the land lease agreement. However, the media desk would not elaborate further, saying this was confidential contractual information.

Civil society concerns

In South Africa, an accelerated push for GH2 facilities has been facilitated through the Green Hydrogen Commercialisation Strategy, given the green light by the cabinet in October 2023. Natural Justice and other civil society organisations have recorded the effect of GH2 projects on two sites: Boegoebaai in the Northern Cape and Ermelo in Mpumalanga.

According to a recent Natural Justice report, communities in Boegoebaai and Ermelo said they had not been provided with information on what GH2 is, how it works, who it will benefit and how it will impact local communities. When there has been public consultation, the communities said, it had been insufficient. Natural Justice believes this violates the Constitution’s guarantees of administrative justice and public access to information.

Avena Jacklin, operations director of environmental justice organisation GroundWork, told said: “While GH2 agreements are a response to pressures for change, they are largely dependent on local natural resources (mainly land and water) and foreign technical human capital, for the benefit of the north — rather than based on an endogenous transition. Justice and open and participatory democracy are compromised in this way.”

According to Jacklin, mega projects promise more than can be delivered and tend to over-extend their allocated budget and time. They inevitably result in soil and water pollution, affecting both surface and groundwater and the loss of agricultural land, as well as the displacement and relocation of communities and loss of ecosystem services, she said.

“Land users comprising mainly the informal economy are not consulted or included in the inception phase or decision-making processes,” she said.

Jacklin maintained that even though GH2 projects may address the need to decarbonise heavy industrial manufacturing and chemical processes, “the capitalistic approach of mega projects has intensified the commodification of our natural environment with agreements that bind us further into the mineral-energy complex model that our current crisis of inequality and poverty has arisen from”.

“Green hydrogen in this format presents a technology change that is largely untested and driven by market share, rather than meeting local needs, and has already proven to be exclusionary and polluting. With volatile markets and oversupply over the next decade or two, it may be headed for a market bust, leaving a largely changed landscape and deepening our poverty crisis,” she added.

Land use rights

Lubabalo Majenge is the head of communications at Lekwa municipality, where the Renewstable Mpumalanga project is being developed. He explained the role of the municipality when these projects are taking place in their area: “It is mainly to process the land use rights application submitted to the municipality in line with the requirements of the Spatial Planning and Land Use Act, read together with the Spatial Planning and Land Use Management by-law of Lekwa Local Municipality.”

According to the HDF proposal submitted to the municipality, jobs will be created during construction and post-construction, he said.

Majenge emphasised the importance of community involvement in the project and shared what he believes will work: “We insist on the establishment of a project steering committee that consists of representatives from various stakeholders to ensure that the local community is well represented and informed about the project.”

Some challenges might arise during its development, such as untraceable land claimants on some of the farm portions, unreasonable or unrealistic expectations of timelines, undue pressure on municipal officials and the fear that the introduction of renewable energy will lead to the closure of the Tutuka power station, resulting in job losses, Majenge said. 

“However, the municipality is already addressing these challenges through engagements with Eskom.”

Blessing Manale, head of communication at the Presidential Climate Commission, said it was still too early to predict the future of GH2 in South Africa.

“As we decarbonise, certain challenges can only be effectively addressed using green hydrogen (hydrogen produced using renewable energy). However, it is too early to say what will happen with hydrogen. It is an important technology but its affordability and implementation timing will depend on international research efforts and local policy decisions,” he said.

According to Manale, while GH2 is an expensive, but promising, opportunity, with most technological barriers overcome, its use in power plants is unlikely in the near future. 

“We will probably not use green hydrogen in power plants until later in our journey to net-zero” when the amount of harmful greenhouse gas emissions being produced balances with the amount being removed from the atmosphere, he said.

“Burning hydrogen in power plants would be more expensive than other options and would require significant additional renewable energy to produce the green hydrogen.”

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism and a graduate of its #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Hub.
You can track the development of energy projects across Mpumalanga on the Oxpeckers #PowerTracker tool.

The $23 million pilot was developed by the Council for Geoscience at a site in Leandra because it is close to the emission sources from Sasol and several coal-fired plants, said Taufeeq Dhansay, manager of the minerals and energy integrated geoscience mapping programme at the council.

He said the principle behind the process, known as carbon capture and storage, is to take resources out of the ground and put them back in the same area. “In its simplest form, all you’re doing is preventing CO2 [carbon dioxide] from going into the atmosphere. For it to work, you generally want to be close to where the CO2 is being emitted, and you want to be able to store it in the same location where it was originally coming from.”

Air pollution in areas surrounding the coal power stations of Mpumalanga is ranked as some of the worst in the world, and is estimated to cause more than 2,200 deaths annually. Sasol is listed as one of 57 big companies that produced 80% of the world’s carbon dioxide emissions from 2016 to 2022, and its synthetic fuel plant is based in Secunda, about 30 minutes’ drive from Leandra.

Co-financing

The carbon capture pilot was co-financed by the government and the World Bank. It ended in February, and several reports on the geology and engineering design requirements are being compiled before the project proceeds to the next phase.

A $23-million grant was provided from the World Bank Carbon Capture and Storage Trust Fund. “Of this amount, the government has provided financing equivalent to $15 million to complement the grant financing provided by the trust fund,” said the World Bank South African country office.

Asked what factors influenced the decision to invest in this initiative, the World Bank said: “Given the dependency of South Africa on coal, including for electricity generation, and the need for decarbonisation, there were several factors that influenced the decision to explore the feasibility of this engagement, including South Africa’s carbon emission profile, the potential for carbon dioxide storage and capture, and the availability of grant financing.

“The project’s objective was to assess the feasibility of and build expert capacity for CO2 storage in South Africa.”

The key areas of the project that the World Bank’s investment supported were the completion of site investigations, geological characterisation, and schematic and engineering design for CO2 storage in Leandra, located in the Govan Mbeki municipality.

Dhansay explained geological characterisation as the process of understanding rock. “The idea is to store CO2 in the rocks. We need to characterise the rocks as much as possible to know if they can indeed absorb the CO2,” he said.

The next phase of the project will be construction, Dhansay said: “This phase means you drill a hole into the ground and into the geological formations of interest where you want to pump the CO2. Then, you develop surface infrastructure where you will slowly pump CO2 into the ground and monitor it with various machines and equipment to see how the rocks absorb it.”

Northern KwaZulu-Natal

A site in the Umkhanyakude district in northern KwaZulu-Natal was the first choice for the pilot project. “That site was selected because of the type of carbon storage that was going to be investigated. Subsequently, we realised that it was too far removed from the major emission sources,” said Dhansay.

German development agency GIZ estimates South Africa has a theoretical geological storage capacity of 150 gigatonnes (50 billion tonnes) of CO2. “The country emits about 500 million tonnes a year, so the 50 billion tonnes of storage potential would be more than enough,” said Dhansay.

He said transitioning away from coal in the short term presents a complex challenge because of the time and infrastructure required to establish alternative energy sources such as solar, wind or nuclear power. Although decisions outlined in the Integrated Resource Plan, the government roadmap for meeting electricity demand, indicate a gradual shift to renewable energy, “the reality is that coal will continue to play a role in energy production for the next decade or two”.

“Within the next 10 years we are still going to be producing energy from coal, and while we are producing energy from coal, you have to mitigate the CO2 that will be coming from that energy. Given this timeframe, it’s imperative to address the associated CO2 emissions,” Dhansay said.

“Carbon capture, utilisation and storage technology offers a solution by capturing CO2 emissions from coal combustion and either storing them underground or repurposing them for commercial applications such as fertiliser production or fire extinguishers,” he said.

Long-term benefits

The World Bank said the potential long-term benefits for South Africa, both in terms of environmental sustainability and economic development, could include “removal of CO2 from the environment and decarbonised economic growth in general”.

“Realising these benefits is subject to the successful achievement of the remaining stages of CO2 storage development that the World Bank is currently not involved in, including detailed engineering design, procurement, construction of the CO2 storage facility, and operation of the facility,” said the country office.

Makhosonke Buthelezi, spokesperson of the department of mineral resources and energy, said more than 80% of power generation in South Africa comes from coal, mostly found in Mpumalanga, which makes it the economic backbone of the province.

“Transitioning to cleaner technology should take place with strong consideration of the socio-economic impact on the province. Carbon capture will enable newer and cleaner coal technologies while the Just Energy Transition is underway,” he said. “We pursue this project because it is a proven technology to mitigate carbon emissions in high-carbon intensity economies.”

According to Buthelezi, the knowledge gained through this project will enable South Africa to assist other countries in Africa to mitigate carbon emissions. “We collaborate with large carbon emitters and petrochemical industries, and we believe these collaborations will lead to the success of the project,” he added.

‘Dirty lie’

For critics such as climate justice activist Alex Lenferna, “clean coal is a dirty lie. While carbon capture addresses carbon emissions, it may exacerbate other environmental concerns related to coal combustion.

“I think the carbon capture technologies are one way they [the government] want to keep us stuck on coal use as a way of avoiding the energy transition, even if they know, in their hearts, that the technology is not really feasible; this is a big worry.”

Lenferna said there are some technologies that can slightly remove some of the air pollutants, but many of those make coal much more expensive because they cost so much to install.

“When we’re at a point where solar and wind are already cheaper than coal without those technologies, adding them just doesn’t make economic sense,” Lenferna said. “The problem with these carbon capture technologies is they’re far too expensive.”

He said carbon capture projects in other parts of the world had proved unsuccessful, referring in particular to the “Kemper project” in the United States. Intended to host the first commercial-scale carbon capture project on a large coal plant in Mississippi, its construction stopped after delays and increased costs prompted regulators to decide in 2017 that the facility could run on natural gas only.

Lenferna said another challenge associated with carbon capture technology is its energy-intensive nature. Achieving economic viability requires a significant amount of energy input, which could translate to higher coal consumption and water usage. Other pollutants such as sulphur dioxide and nitrous oxide are not captured by carbon capture systems, he added.

“The money that’s spent on carbon capture could be better spent on other technologies that better deliver on decarbonising and are also cheaper,” he said. “Our money is better invested in solar and wind than it is in these incredibly expensive technologies which remove only one pollutant from coal but don’t reduce a lot of the other pollutants.”

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism, and a graduate of our #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Hub.

Track the development of energy projects across Mpumalanga province on the Oxpeckers #PowerTracker tool

However, environmental organisations question whether gas is a green energy source and whether it will contribute to South Africa’s undertakings in the global fight against climate change.

In 2023, Kinetiko Energy, an Australian gas exploration company, and the Industrial Corporation of South Africa (IDC) jointly signed a liquefied natural gas (LNG) development project for Amersfoort. The town is near Volksrust in the Mpumalanga-KwaZulu-Natal provincial border area, the heart of the country’s energy centre.

Kinetiko describes the project, codenamed Korhaan after an endemic bird species, as South Africa’s largest onshore LNG project and aims to produce 50 megawatts of equivalent energy initially, with plans to expand to 500MW through the abstraction of more than two trillion cubic feet in gas reserves. LNG is natural gas that has been cooled to liquid form for ease and safety of non-pressurised storage and transport.

IDC funding

Tshepo Ramodibe, head of IDC corporate affairs, said the discovery of the Amersfoort gas reserves followed more than two decades of extensive exploration and drilling by various entities. 

The Korhaan project is still in the development phase, he said, with confirmatory drilling work and the completion of the application for production rights under way.

“IDC will provide development funding for the project to complete a pilot phase that should confirm the availability of the gas reserves,” explained Ramodibe. 

The budget for the pilot phase is R155 million, with IDC committing up to R70 million for this phase, while the balance is provided by Afro Energy, a subsidiary of Kinetiko Energy.

Asked what factors make Mpumalanga an attractive location for onshore LNG investment, Ramodibe identified the project’s proximity to local markets, especially Sasol, and the potential for power stations in the province to be converted to gas.

South Africa’s other onshore LNG project, the Renergen project, comprises exploration and production rights of 187 000 hectares of gas fields near Welkom, Virginia and Theunissen in the Free State. Full production is expected by 2027.

Transition fuel

Acknowledging that gas is not a renewable resource, Ramodibe said: “It is a resource that has the potential to alleviate the energy shortage in South Africa while the country transitions to renewable energy.”

Makhosonke Buthelezi, spokesperson for the department of mineral resources and energy, affirmed that natural gas forms part of South Africa’s energy mix, as outlined in the Integrated Resource Plan (IRP 2019). He said gas is a global transition fuel, providing the flexibility necessary for cost-effective electricity generation.

“In this regard, the department of mineral resources and energy promotes exploration and production of gas and supports the development of gas infrastructure to augment the country’s electricity generation capacity,” Buthelezi said, highlighting gas as a crucial resource for baseload energy, strengthening South Africa’s energy security and supporting sustainable industrialisation.

However, lawyers at the Centre for Environmental Rights cautioned against the development of large-scale gas-to-power infrastructure in South Africa, citing potential negative effects on decarbonisation efforts and climate risks.

“Every country’s profile in this regard will be different, depending on their resources and existing infrastructure. Every country, however, needs to move as quickly as possible towards clean, low-carbon energy provision and electricity generation,” the centre’s lawyers said in an interview.

“In South Africa, we need to move away from coal as quickly as possible as we build renewable energy capacity. Of course, this cannot be done immediately, and the existing functioning coal fleet should be retrofitted with pollution abatement as one mitigation measure. This existing fleet will provide the generation needed to supplement the renewables as they get built and come online,” they said.

According to the centre, as renewable energy can be intermittent — for example, when solar or wind resources are limited — there is sometimes a need for any shortfall to be made up by “peaking” generation sources, such as is currently provided by diesel turbines. The organisation said some models suggest that, from a technological point of view, this peaking could be gas-fired.

Renewables challenges

Nick de Blocq, chief executive of Kinetiko Energy, expressed doubt about whether renewables could replace coal in South Africa. He emphasised the need for the urgent pursuit of nuclear and gas power at scale and pointed to Europe’s challenges in transitioning directly to renewables.

“The cleanest energy solutions we have available today globally include geothermal, hydro, nuclear and gas. In South Africa, at scale, that means nuclear and gas should be pursued with urgency. We cannot pin our hopes for regional-level power on things we cannot have,” De Blocq said.

According to him, the global average output from weather-related energy sources is in the region of 25% of installed capacity, often dropping into single figures.

“The outcome in Europe from an attempt to transition directly to renewables has resulted in the least available and most expensive electrical power bills in the history of the continent,” he added. “They are reverting to coal and diesel to fill the gap so glaringly left by ‘renewables’, which are by no means clean and green energy.”

De Blocq acknowledged that gas is not renewable but agreed with the recent European Union classification of gas as “green”. Though not cheaper than coal, gas is substantially cleaner, greener and offers a more efficient burn, he said.

He highlighted Mpumalanga’s strategic location for gas and South Africa’s need to import gas because of  limited LNG production in the country. 

“South Africa needs to evolve from being a 100% gas importer to accommodate domestic supply from both offshore and onshore,” he said.

Affected communities

Asked whether people affected by the project had been consulted, De Blocq said: “We are obligated to communicate with stakeholders and landowners to share our plans with them at the various stages of applications for exploration rights and production rights. 

“We went through that process some time ago … and we will meet once again with them as we evolve into producers in the future. Landowners and farmers need to understand clearly that we represent a net benefit to them.”

Unlike solar farms, which take inordinate land space as they provide intermittent power, he said, gas production would be from small boreholes in the ground every 400m or so, “and therefore of negligible disturbance to agriculture”.

“And although landowners are not the owners of the gas under their feet — it is owned 100% by the state — as the rights holder we believe that the landowner should benefit from what we do in the form of a cash consideration for our access, as well as in the provision of paid-for services like accommodation, plant hire, road-building and more,” De Blocq added.

Promising step

Njock Ayuk Eyong, chief executive of the African Energy Chamber, praised the Amersfoort project as “a promising step on the long road to Africa’s just energy transition” in a recent opinion editorial.

He emphasised the significance of gas as the way forward for African states and asked where the money would come from for building wind and solar farm infrastructure if the continent was unable to profit from its own natural resources, “natural gas being the most vital among them”.

“We are told to play this game of catch-up with our hands tied — to leave our natural resources in the ground while the developed nations of the world continue to exploit their natural non-renewable wealth. 

“We are expected to jump straight to building wind farms, solar farms and hydroelectric dams while hundreds of millions of Africans are still living without access to electricity,” he wrote.

“Who will build the foundational infrastructure needed to support it? Developed nations are quick to promise, ‘We will,’ but are reticent to follow through on their promises. What’s more, their foreign ‘aid’ has frequently focused more on alleviating the symptoms of Africa’s economic and energy poverty rather than resolving the source.”

The African Energy Chamber was contacted for further comment on the LNG project in Amersfoort but it had not responded by the time of publishing.

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism and a graduate of its #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Hub.
• You can track the development of energy projects across Mpumalanga province on the Oxpeckers #PowerTracker tool.

Three of Mpumalanga’s 17 local municipalities — eMalahleni, Msukaligwa and Steve Tshwete — are most affected by the just energy transition (JET) because they house coal mines and Eskom coal-fired power stations. The state of their finances will take centre stage in shaping the path of the transition.

Although additional funds for South Africa’s energy transition are expected to be raised at the global COP28 climate change conference, taking place from November 30 to December 12 in Dubai, there are obstacles to the funding reaching municipalities in Mpumalanga.

A recent report by financial services consultants Krutham, titled JET Issues In Public Finance — which focuses on mobilising JET funding for Mpumalanga — suggests these municipalities may have difficulty attracting investments for the transition.

The Krutham research highlights that the challenge for municipalities is not to try to replace coal plant jobs with renewable energy jobs but to attract investment for land identified for future economic zone development, and to take advantage of the skilled or semi-skilled labour force that will become available.

Speaking to Oxpeckers, Jana van Deventer, the lead author of the Krutham report, explained that it focuses specifically on energy transition issues in public finance, and has a strong focus on not just national government but also on provincial and municipal governments.

According to Van Deventer, any funding for the energy transition that is earmarked at national level and put aside by the treasury would have to flow through provincial and municipal governments.

Earlier this month, the government confirmed the approval of the JET implementation plan by the cabinet and the signing of three new concessional loan agreements — worth more than $1.8 billion — in support of the JET investment plan. The new loans have been provided directly to the treasury for general budget expenditure purposes by the World Bank, Germany’s Kreditanstalt für Wiederaufbau (KfW), and the African Development Bank (AfDB).

“What the research found is that many of the municipalities based in the areas that will be most affected by the transition are in a dire financial situation,” said Van Deventer. “They have not been receiving clean audits from the auditor general.

“Because of the poor financial position of these municipalities, it will be very difficult for them to fulfil the role of channelling funding that is intended for the just transition, not only from a transitioning perspective but also in terms of how new industries and community development can be done.

“So these local municipalities are basically just not bankable, which means they are not feasible for any funding from different sources of financing,” Van Deventer said.

Municipal debts

The auditor general’s report shows that in the 2020-21 financial year Steve Tshwete local municipality had unauthorised spending of R107-million and just under R500 000 in irregular spending. eMalahleni had R444 million of unauthorised spending and R618 million of irregular spending.

When asked about these irregularities and whether they will affect the municipality in terms of the JET, Leah Mabuza, the executive mayor of eMalahleni, said cash flows are a determining factor for future service delivery plans.

“In the case of eMalahleni local municipality, we are working hard to ensure that we have adequate cash reserves to meet future service delivery plans. On a regular basis, the municipality saves money through reduced spending and saving cash from collections.”

According to Mabuza, the municipality has a plan to ensure measures are put in place towards a credible budget that is fully funded, does not have budget overruns, and also ensures that revenue due to the municipality is collected. But all of this depends on the ratepayers honouring their monthly accounts, she said.

This is why, she said, under the slogan “Pay your municipal account and demand quality, prompt services”, the municipality urges eMalahleni residents to pay their utility bills and other fees imposed by the municipality in order to receive timely, high-quality services.

She said the municipality has positioned itself to achieve clean administration through financial prudence, and carefully managing the available funds effectively and efficiently.

“We have the institutional arrangements and control mechanisms to improve the way we do business with efficiency and accountability in the expenditure of municipal funds. [But] there are challenges we face as an institution, such as the rising Eskom debts,” she added.

Mabuza said the municipality has taken advantage of provincial and national government support through various programmes, such as the Financial Recovery Plan, the Municipal Audit Support Plan and a municipal debt relief plan offered by the treasury. “We are confident that our state of finances is gradually improving, and thus our bankability,” she said.

Steve Tshwete

George Mapheto, finance officer at the Steve Tshwete local municipality, told Oxpeckers that according to its current municipal balance sheet, the municipality is doing well and it is able to service its debt when comparing current assets against current liabilities.

“The only challenge is that, at the moment, we’ve got long-term liabilities. In short, I can say we are almost over-indebted. There are some loans that we need to fix,” said Mapheto, estimating that these loans are about R800 million or R900 million.

But Mapheto insisted that it would not be fair to say the municipality is not ready or will not be able to attract investments judging from its current financial state because “the transition is something that might happen in 10 years’ time and by then, you would find that the liabilities would have been paid.

“Attracting investments for the transition will also depend on how we are going to be able to now make sure we improve our financial position in terms of current assets, like the collection of outstanding debts, and also other revenue sources,” he said.

Msukaligwa

Msukaligwa local municipality will also be heavily affected by the JET and was also found not to be in a position to attract investment by the Krutham report.

The municipality acknowledged that it does have financial issues that will affect the JET pathway; but it is contemplating a limited number of investment opportunities.

“Our municipality is currently not doing well or as expected in terms of revenue generation and has been classified as one of the municipalities in the province that is financially stressed and that may negatively impact our participation in the just energy transition,” said Mandla Zwane, the spokesperson of Msukaligwa local municipality.

He told Oxpeckers the municipality is planning to approach development funders such as the Development Bank of Southern Africa, the Industrial Development Corporation, the Government Employees Pension Fund / Public Investment Corporation, and multilateral institutions such as the United Nations, European Union, German development agency GIZ, World Bank, European Investment Bank and USAID for grants or loans to facilitate the transition in the municipality.

Funders

The International Partners Group (IPG), a group of international funders supporting the JET to the tune of $9.3 billion, recognises the importance of working with municipalities and communities to deliver projects on the ground in a timely manner, according to a recent statement by the European Union.

The IPG is “undertaking extensive work to improve municipal capacity to invest in and plan for renewable energy power projects and increase electricity access, in particular for the most vulnerable, while also working on demand side management initiatives, and considering options for social ownership models”, the statement said.

Tracy Ledger, of the Public Affairs Research Institute, said the entire local government’s fiscal framework is unsustainable because municipalities are required to raise 90% of their revenue from rates and taxes, and water and electricity sales to residents.

Ledger said securing a successful energy transition in South Africa is going to require a lot of investment in infrastructure funding. “There’s a lot of investment that needs to go into municipalities to catch up on the maintenance backlog,” she said.

“There are 165 municipalities across the country that are doing electricity distribution. In almost all those municipalities, what has happened is that over the past 25 years there has been a big increase in demand for electricity. There has been an expansion of the electricity network. But we haven’t seen municipalities’ ability to keep up with the maintenance of the infrastructure. So a lot of that infrastructure has fallen into disrepair,” she said.

“It doesn’t help if we have all this renewable energy that comes on to the grid, but because the distribution grid is collapsed, it can’t actually get to people’s homes or people’s businesses.”

Third sphere

Thalente Ndebele, Mpumalanga provincial coordinator of the ANC Youth League, told Oxpeckers it is unfortunate that the municipalities, which form the third sphere of government and are closest to the people on the ground, “are failing to deliver the mandate of serving their people”.

“I have already started engaging with the municipal officials. One of the members of the mayoral committee has mentioned that they’ve developed an action plan to address all the issues they’re facing,” Ndebele said

He said that they are pushing to make changes in the financial situation of eMalahleni, but the process is complex because it requires a combination of short-term and long-term interventions.

“A municipality such as eMalahleni needs to demonstrate open and accountable financial management in order to attract investments for the energy transition and make investors trust that the municipality has the ability to handle finances,” Ndebele said.

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism, and a graduate of our #PowerTracker professional support and training programme.

This investigation was supported by the African Climate Foundation’s New Economy Campaigns Hub

A leading GH2 enterprise is taking shape in Mpumalanga, where the HySHiFT renewable hydrogen project is developing sustainable aviation fuel, or e-kerosene. The aviation industry is responsible for about 12% of global transport emissions and HySHiFT aims to find ways to reduce its carbon footprint, according to the project partners.

In 2022, a consortium comprising Sasol, Enertrag, Linde and HydRegen announced they would use energy sources such as wind and solar to power 450 megawatts of renewable electricity and a 200MW electrolyser needed to split water into oxygen and hydrogen. This green hydrogen would be used in Sasol’s existing facilities to produce enough e-kerosene to fuel two flights between Germany and South Africa a day, they said.

The German government has pledged a grant of €15 million (about R300 million) to the project, which is being developed at Sasol’s Secunda operations.

Hard-to-abate sectors

“We are confident that green hydrogen is key to decarbonising various hard-to-abate sectors, as well as the transport sector,” Sasol president and CEO Fleetwood Grobler said.

“At our Sasolburg operations, we have successfully commissioned a 3MW solar farm that powers existing electrolysers. We have already achieved daily production of approximately 150kg of green hydrogen during the plant’s commissioning phase,” Grobler said.

In the near term, this will be bolstered by a further 69MW wheeled from the Msenge Emoyeni wind farm in the Eastern Cape, he added.

“We expect this to come online in 2024 and it will enable our Sasolburg electrolysers to produce up to 5 500kg of green hydrogen a day.

“Having reached this historic milestone, much more work is to be done, which includes developing the regulatory environment in which green hydrogen mobility can thrive.”

On October 19, the cabinet approved implementation of the Green Hydrogen Commercialisation Strategy, which aims to position South Africa as a major producer and exporter of GH2. The government has estimated that the hydrogen economy has the potential to add 3.6% to gross domestic product by 2050 and create 370 000 jobs.

Decarbonisation goals

According to Charlotte Mokoena, executive vice president at Sasol, GH2 is expected to play a critical role in South Africa’s decarbonisation goals beyond 2030.

“As we implement our decarbonisation progammes and transition to sustainable energy sources, this will have a direct impact on our workforce, communities and value chain,” she said. “It is imperative that we build the resilience of our communities and employees to ensure we sustain livelihoods and thrive as the transition unfolds.”

Mokoena said the just energy transition is a complex undertaking which necessitates a collaborative approach. 

“The availability of funding, skills and capacity to deal with this massive challenge resides across our ecosystem and beyond that it must be tackled together. We need to leverage partnerships to realise impact beyond the scale, and Sasol, together with our partners, is taking a lead in shaping the development of South Africa’s green hydrogen ecosystem.”

Mokoena said Sasol is accelerating developments in the emerging GH2 economy, ranging from renewables procurement to pre-feasibility studies with the government on both greenfields and brownfields projects. 

“This includes a large-scale export-orientated GH2 project in the Northern Cape, production of sustainable fuels from GH2 in our Secunda and Sasolburg facilities, hydrogen mobility and the supply of GH2 for steel production.”

Heavy industry

Speaking during the South Africa Green Hydrogen Summit from 16 to 17 October, Joanne Bate, the chief operations officer of the Industrial Development Corporation (IDC), the state-owned development finance institution and implementing agency of industrial policy, explained the importance of GH2 in the energy transition.

“We’re looking at hydrogen for decarbonisation of industry, including the petrochemical industry, and for new export products, specifically sustainable aviation fuel. The key role of IDC has been driving the commercialisation strategy and providing project development funding to some of the early-stage projects in the GH2 value chain,” Bate said.

“A lot of heavy industrial processes like steel manufacturing require very high levels of heat in the manufacturing process and what makes hydrogen very efficient in that process is that hydrogen has a very high heat point.”

She said the industrialised triangle of Secunda in Mpumalanga, Sasolburg in the Free State and Vanderbijlpark in Gauteng “is where the hydrogen for decarbonisation of existing industry becomes very important. Sasol has the top technology used to proceed to produce synthetic fuels, so that’s currently the priority project.”

The reason GH2 is a priority, she added, is that “we will lose our manufacturing or heavy manufacturing industrial base if we don’t decarbonise it by between 2028 and 2030. The only reasonable means of decarbonising is through GH2 because they’re very high heat-intensive processes and green hydrogen is the most effective way of decarbonising this.”

She pointed out that in Japan, which is heavily dependent on coal-fired power stations like South Africa is, “they’re importing a significant amount of coal but they are also looking at using ammonia, which is the derivative of GH2, in order to feed their coal-fired power stations”.

There’s potential for hydrogen to be used in different applications, including keeping power stations open “because you’re using the ammonia instead of coal”.

Bate emphasised that the big shift in the energy conversation is that it’s no longer just about coal and electricity. “It has to be about the chemical industry, which will allow the Mpumalanga province to create new jobs,” she said.

Early-stage projects

In 2022 the IDC signed a memorandum of understanding with German state-owned investment and development bank KfW to assist early-stage projects with grant funding to help accelerate the development of GH2. Part of this was an agreement that will enable the IDC to manage €23 million in grant funds from the German government.

“IDC is looking at a number of GH2 projects. We are one of the few development banks internationally that offers project development funding,” Bate said.

However, she added that South Africa does expect significant foreign direct investment into the projects. 

“We really do want to ensure that there is foreign direct investment, whether it comes in the form of equity. We’re not really concerned about what that equity looks like.”

Mahandra Rooplall, IDC’s industry development planner who is working on the national hydrogen commercialisation strategy for South Africa, said there is a global race to establish developing countries as GH2 hubs to supply export markets.

“If we come too late to the party, those markets will be tightened up and we will have lost the opportunity for the country. So, it is about ensuring that we reach commercial scale quickly enough to ensure that we decarbonise and protect our industry, and also take a meaningful role in the hydrogen economy,” he said.

SA-H2 Fund

In June this year, the SA-H2 Fund was launched, an innovative blended finance fund that aims to secure $1 billion to accelerate the development of the GH2 sector in South Africa. The fund is supported by Climate Fund Managers and Invest International BV (II) of the Netherlands, Sanlam in South Africa, the Development Bank of Southern Africa (DBSA) and the IDC, in collaboration with other strategic partners.

In a statement released by the DBSA on the day of the launch, Andrew Johnstone, CEO of Climate Fund Managers, said: “To achieve net zero by 2050, urgent and unprecedented action is needed. We believe that GH2 is both the pathway and the solution to the global energy transition.

“South Africa combines deep technical and capital markets with world-class conditions for generating renewable electricity through solar and wind power, key drivers in the production of green hydrogen. Fitting within the framework of the just energy transition, SA-H2 will help empower South Africa to claim its rightful place as a world leader in this exciting and necessary sector.”

The SA-H2 Fund would join the SDG Namibia One fund, which aims to secure $1 billion in funding for the country’s GH2 development, as “the second-of-its-kind, regional blended finance fund to develop and fund GH2 projects”, Johnstone said.

“Succeeding in a just transition to cleaner energy rests on our ability to create a viable marketplace that attracts and mobilises public and private capital,” said Catherine Koffman, group executive: project preparation at the DBSA.

“We will create and use innovative blended finance architecture and structuring to build a substantial pipeline of GH2 projects in South Africa. This will give private-sector developers access to risk capital from an early stage of development, throughout construction and into operations.”

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism and a graduate of our #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Campaigns Hub.

This article was first published by Oxpeckers.

Since the initial $8.5 billion pledged at the United Nations Climate Change Conference in Glasgow in November 2021, referred to as COP26, there have been further pledges by the Netherlands and Denmark. Spain has also committed additional funding towards the transition.

The treasury told Oxpeckers that, so far, it has received €600 million (about $640 million) of the pledges. These are loans of €300-million each from Germany and France that were concluded through the Just Energy Transition Investment Plan (JET-IP) in 2022 and early 2023, to support policy and institutional reforms related to climate change.

“We now have pledges of $11.9 billion, but it’s still a long way from the just under $90 billion [about R1.5 trillion] that will be required over the next five years,” said Neil Cole, financing manager of the JET-IP project management unit.

Concessional loans

Cole said concessional loans make up the highest proportion of the total pledges, at $5.3 billion. A concessional loan, or “soft loan”, is made on more favourable terms than the borrower could obtain in the marketplace. Private investments make up a similar amount.

Just over R530 million of the pledges comprise grants, he said.

Cole said the project management unit (PMU) believes that multilateral development banks, such as the World Bank and the African Development Bank, will also significantly invest in the Just Energy Transition, through grants and concessional loans.

“Included in that group of multilateral development banks is the New Development Bank, otherwise known as the Brics bank, that we have approached as part of our mobilisation of funds,” he said.

The PMU has not set a target figure for the amount of grants to be mobilised, head of the unit Joanne Yawitch told Oxpeckers, but “in principle, the greater the grant amount, the better. Similarly, increased allocation of concessional finance is important to take the JET forward.”

At the recent Africa Climate Summit in Kenya, Environment Minister Barbara Creecy stressed the importance of African countries developing a new financing model that will not increase debt and worsen Africa’s fiscal positions.

“African countries need a new suite of financing instruments, with a set of favourable terms and conditions that are not merely debt generators, or our efforts and actions of mobilising the trillions of dollars required for significantly scaled-up climate action will be actions in futility,” she was reported as saying in an article published by the Mail & Guardian.

According to Cole, the PMU certainly wants to increase the amount of grants that it is going to be mobilising because grants have all kinds of benefits. “It’s a call to the international community, and that call is at different levels. It’s a call at multilateral forums such as COPs and various climate summits that take place,” he said.

Small and medium enterprises

Economic diversification and participation of small and medium enterprises in the renewable energy value chain need to be financed, Cole said, and the sources of that financing will come from both grants and concessional loans, as well as investments that are going to be made by the private sector.

He said the government is participating in multilateral forums, as well as bilaterally with individual countries. “We recently had the Brics summit that took place in South Africa with very strong commitments from the Chinese government to support the transition and investments in renewable energy,” he said.

The Chinese government pledged a grant of about R500 million for the energy sector during a state visit in Tshwane in August, where President Cyril Ramaphosa hosted his Chinese counterpart, President Xi Jinping.

“South Africa deeply appreciates China’s support in addressing our current energy challenges. This includes the donation of emergency power equipment worth R167 million and availing a grant of approximately R500 million as development assistance,” Ramophosa was quoted in BusinessTech.

Details of this grant are not available, but a memorandum of cooperation between South Africa and several Chinese entities was shared by the ministry of electricity with Oxpeckers. It focuses on enhancing South Africa’s energy security through regulatory reform, infrastructure and technology development, human capital development, and research and development capacity.

It also aims to “promote sustainable energy solutions and diversify South Africa’s energy mix; strengthen bilateral cooperation … to support South Africa’s localisation and industrialisation programme objectives; facilitate knowledge and technology transfer; and encourage investment in the energy sector in South Africa”.

Participant companies from China are listed as “State Grid Corporation of China, China-Africa Development Fund, China Energy International Group, China General Nuclear Power Corporation, China National Electric Engineering Company Ltd, Huawei Technologies Co Ltd, TBEA Co Ltd and Global Energy Interconnection Development and Cooperation Organisation”.

Coal belt

In Mpumalanga, where the transition is being felt most by coal-affected communities, grants and concessional loans will play an important role in benefiting these communities, according to the PMU.

“There are two key sources of financing that we need to turn to mobilise in order to ensure that we mitigate the impact that the transition is going to have on workers in the coal belt and also the communities that were benefiting from having a coal power station or having a coal mine in the area,” Cole said.

“This is why we place so much emphasis on an increase in the contribution in the form of grants, mainly from development partners but also from multilateral development banks. Grants are going to enable us to address some of the ‘just’ components in the JET-IP,” Cole told Oxpeckers.

“We want to be supporting those workers who are transitioning out of the coal value chain and affected communities. And we also want to ensure the plan includes the investments that are required when those communities transition into the new value chain.”

He was unable to say how much of the €600 million received by the treasury so far had been allocated to this mission in Mpumalanga.

COP28 expectations

According to the treasury, the government will continue its efforts to access concessional financing from international financial institutions, including through climate finance. In 2023-24, the government plans to raise the equivalent of $2.6 billion.

Cole said at COP28, to be held in Dubai from November 30 to December 12, South Africa needs to point out two things, the first being what progress the country is making in the implementation of the JET-IP.

“How and where are we with the implementation? What kind of progress has been made? And also, of the pledges that the international community has made, what progress are we making in terms of how that money is going to be used because in 2024, we have to see the disbursement of those funds.”

The investment plan is a five-year plan that runs from 2023 to 2027, he added. “There’s a lot happening alongside the plan, and we need to consider that the transition is a transition to 2050. But what we’re dealing with now is a five-year plan so we remain focused on the next five years.”

The second issue “is where we join with other African countries and also countries in the Global South, in calling for developed countries to meet the commitments that they had made, both in the form of grants and of climate finance”, said Cole.

It is important that Western countries meet the commitments they made in the past, he said. “I’m sure by the time they get to COP28, they are going to be making new commitments. We certainly want to see them delivering on the previous commitments that they had made.”

Thabo Molelekwa is an associate journalist of Oxpeckers Investigative Environmental Journalism, and a graduate of our #PowerTracker professional support and training programme. This investigation was supported by the African Climate Foundation’s New Economy Campaigns Hub.

Wheeling of electricity generated by third parties has been approved by state utility Eskom since 2008. It addresses the geographical limitations of Mpumalanga, which a #PowerTracker data investigation in early 2023 showed, has missed out on renewable energy despite the planned decommissioning of coal power stations based in the province.

New research released in July by the South African Local Government Association (Salga) indicates that the wheeling market is still in early stages and only four municipalities have some sort of operational wheeling system in place. None is based in Mpumalanga.

“Mpumalanga has lots of grid capacity available to connect generators who can wheel their power to large energy users in other provinces of South Africa,” said Josh Dippenaar, project manager at Sustainable Energy Africa, one of Salga’s partners.

“Wheeling represents an opportunity to build power plants in areas where the local economic benefits of renewable energy are highest, and they can sell their electricity via the grid — that is, ‘wheel the power’ — to urban areas where the electricity can be consumed,” he said.

Wheeling process

Wheeling of renewable energy from a plant in a part of the country where there are grid constraints to an end-user located in another area takes place through an existing distribution or transmission network.

“This process usually involves electricity that is generated in more remote areas being transported to wherever the customer or offtaker is located,” said Wikus Kruger, director of the Power Futures Lab at the University of Cape Town’s Graduate School of Business. “It’s not like you have solar panels on the roof of the factory or even next to the factory. They will be quite far away.”

Wheeling is a way of getting private investment into the sector, he added. “Companies will pay a fixed fee to Eskom for wheeling the power; it’s a fee that’s supposed to cover the cost of running and maintaining the grid.” The actual cost of power being generated gets paid to the renewable energy plant by the offtaker company.

According to Eskom, wheeling is the delivery of energy over the grid. Customers enter into third-party bilateral transactions where they buy power from a private generator. This energy is delivered by Eskom over the grid.

“More and more customers are looking into entering into private power purchase agreements [PPAs] … for reasons such as [meeting] renewable energy targets and creating additional generation capacity to alleviate load-shedding,” said Eskom’s media desk in response to questions from Oxpeckers.

“Wheeling helps customers achieve renewable energy targets and facilitates private participation in the electricity supply industry to add additional generation capacity.”

Kruger said a problem with wheeling is that it’s only possible within the municipal space, and it’s challenging because the rules and regulations need to be set up by the municipalities themselves. He added that a potential solution being worked on is called virtual wheeling.

Virtual wheeling aims to reduce the barriers of the traditional wheeling method, which only allows for bilateral trade agreements between generators and buyers. Virtual wheeling allows one or more generators to transact with multiple offtakers, giving the customer the option of significantly reducing the term of a PPA as compared to traditional one-to-one wheeling arrangements, according to energy analysts Linsey Dyer and Chris Yelland.

On August 30, telecommunications giant Vodacom and Eskom announced an historic virtual wheeling agreement, enabling Vodacom to secure renewable energy from independent power producers on the same terms and conditions that underpin its agreement with Eskom.

Vodacom South Africa chief executive Sitho Mdlalose reportedly said the initial phase of the deal would move about 30% of Vodacom South Africa’s power demand onto renewable sources. “Think of it like purchasing renewable energy certificates,” he said. “Most importantly, it also has the added benefit of positively impacting the supply deficit currently being experienced and nurturing the growth of renewable energy production in South Africa.”

Examples down south

The Nelson Mandela Bay metro municipality in the Eastern Cape has been a frontrunner in the wheeling space, according to the July Salga report. With more than 10 years’ experience, roughly 2.5% of the energy flowing in the metro is wheeled energy.

In 2012, the council passed a resolution to source 10% of the total electricity consumption in the municipality from renewable energy sources, with an emphasis on local projects. According to the Municipal Wheeling Agreement for green power development, the municipality would wheel such power from private producers to willing buyers.

Once approval from the National Energy Regulator of South Africa (Nersa) was obtained, the first, non-exclusive 20-year wheeling agreement was signed between the municipality and Amatola Green Power. To date 5 000 megawatt hours are wheeled annually from private renewable energy developers such as the Electrawinds wind farm at Coega to willing buyers through the municipal network.

The City of Cape Town and George municipality are in the early stages of wheeling pilots, with the latter bringing in small wheeling volumes envisioned to grow as new generators connect to the wheel. The Cape Town wheeling service is expected to be fully operational by the end of 2023.

According to the Salga report, the City of Ekurhuleni metro in Gauteng has been receiving a growing number of requests to wheel and has responded by developing a wheeling policy that has been approved by the city’s council. Some KwaZulu-Natal municipalities — eThekwini, uMhlathuze and Msunduzi — and some Western Cape municipalities are in talks to make a start towards wheeling.

Grid availability

Gaylor Montmasson-Clair, a senior economist at Trade & Industrial Policy Strategies, said to date Mpumalanga has not been a major destination for renewables projects because other provinces such as the Northern, Eastern and Western Cape provinces have offered better returns.

But there are grid availability challenges in those provinces. “Most of the capacity seems to have been taken up in the grid in all three Cape provinces, which is also where a lot of the really good resources are,” said Montmasson-Clair.

“So now developers both for the public and private sectors are looking at other locations. The two provinces that have the most grid available are Mpumalanga and KwaZulu-Natal, each with roughly 6 000 megawatts of grid available.”

This means they are ripe for wheeling, but the process is complex legally and in terms of accounting and payments, said Peter Attard Montalto, managing director and global lead on the Just Energy Transition at financial services consultancy Krutham, formerly known as Intellidex.

“The problem in South Africa is that there is no standardised structure for how it works — this is what the National Energy Crisis Committee is working on quite successfully at the moment, though the answer will take some time yet to socialise and deploy.

“Currently, wheeling does happen, but it’s very ad hoc and you have to negotiate numerous contracts for every step of the path of the grid, which is unworkable at scale. This is what the committee work hopes to solve.” 

According to Montalto, wheeling will open Mpumalanga to a corporate market to buy, sell and trade power with offtakers all over the country, so it’s not reliant on the size of Mpumalanga’s economy.

The unbundling of Eskom to create a new National Transmission Company “is positive if done correctly because it promises to offer a higher credit quality that can borrow more to invest at scale in transmission and remove this and other blockages”, he said.

Fast-track wheeling

Dippenaar highlighted a lack of sufficient human resources as one of the causes of the delays in fast-tracking wheeling across South African municipalities. “Larger municipalities have bigger staff contingencies and more capacity to focus on new areas of work such as wheeling,” he said.

Kruger said another obstacle was the indebtedness of many municipalities to Eskom, or just poor municipal financial management. “It’s often difficult to get investments for these projects that are wheeling within municipalities because the financial instability in the municipality is posed as a risk to the project,” he said.

Many mines and commercial clients are already invested in wheeling, he added: “There are a lot of wheeling transactions being developed. It’s cost imperative, because the energy renewable plants generate is generally cheaper than what Eskom is providing and what Eskom is likely to be costing in the near future. So they’re doing this to save costs.”

These transactions should pave the way for development of the wheeling regulations and the kind of contracting that should take place for new projects, he said.

“We are seeing a lot of movement in areas where there are less grid constraints. Mpumalanga is one area, KwaZulu-Natal is another. There’s a whole kind of corridor of areas with great capacity available where wheeling projects are being developed,” Kruger said.

Andiswa Matikinca and Thabo Molelekwa are associate journalists of Oxpeckers Investigative Environmental Journalism. This investigation was supported by the African Climate Foundation’s New Economy Campaigns Hub

According to an Eskom spokesperson, four employees are starting a trainer’s course this week at the South African Renewable Energy Technology Centre in Cape Town. 

“They will be trained as trainers to come back to this facility and train other people,” said Vikesh Rajpaul, general manager of Eskom’s Just Energy Transition unit.

He added that a call would go out this week to invite locals to participate in soft skills training. “We want to start that by the end of this month, or at the absolute latest in early August,” he said.

An investigation by Oxpeckers Investigative Environmental Journalism and Climate Home News in April 2023 found a major skills gap in coal-reliant communities in Mpumalanga and a lack of clarity on how funds for reskilling would be used.

Training centres

In an interview with Oxpeckers on July 7, Rajpaul said Komati is being set up as a training facility with two training centres. The centres will focus on renewable energy skills, such as wind turbine maintenance, installing solar photovoltaic systems and agrivoltaics, which is the simultaneous use of areas of land for both solar panels and agriculture.

“We’re also looking at soft skills training for community members, such as project management, welding courses, negotiation skills, presentation skills, business report writing and skills needed for the establishment of SMMEs [small, medium and micro enterprises].”

Rajpaul added that Eskom intends using Komati as a training hub for the province. It would work with technical and vocational education and training (TVET) colleges in Mpumalanga to provide a consolidated programme of training, development and community upliftment, he said. Mpumalanga has three TVET colleges that fall under the department of higher education and training, and focus on “preparing students to become functional workers in a skilled trade”.

“We’re not doing this in isolation, and it’s not limited to Eskom employees only,” Rajpaul said, referring to fears expressed by many people interviewed by Oxpeckers that only Eskom workers would benefit from the renewables transition.

Repowering and repurposing

To make Komati’s transition possible, in November 2022 the World Bank approved a $497 million (about R9 billion) concessional loan facility to Eskom for the Komati repowering and repurposing project. Of this amount, $47.5 million came from the Canadian Clean Energy and Forest Climate Facility, and a $10 million grant from the Energy Sector Management Assistance Programme.

According to the World Bank, these funds will support Eskom in decommissioning the 56-year-old Komati coal-fired power plant, repurpose the project area with renewable energy and batteries, and create opportunities for workers and communities. If successful, the World Bank said, the project could provide a blueprint for the just energy transition in South Africa and beyond.

Rajpaul told Oxpeckers during a media tour of Komati organised by the Presidential Climate Commission that the R9 billion World Bank loan has three components Eskom has to fulfil: the decommissioning of the Komati plant ($33.5 million); repurposing the project area with hybrid renewables — solar, wind, batteries and a synchronous condenser ($416-million); and minimising the socio-economic effects of the plant closure and creating opportunities for workers and communities ($47.5 million).

“It is to fund the repurposing and the repowering as well as, where required, the site rehabilitation,” he said. “So it is only for Komati power station.”

According to Rajpaul, just under 10% of the total loan will be allocated to address community improvement initiatives. “This speaks to the agrivoltaics, the containerised microgrid manufacture, as well as the establishment of the training centres,” he said. 

The World Bank, together with the Global Energy Alliance for People and Planet, are funding the Komati training facility.

The megawatts

Repowering will see Komati produce about 340 megawatts (MW) of new generation capacity:  50MW solar photovoltaic, 70MW wind power and 150MW battery energy storage. Eskom is also looking at a synchronous condenser to be installed at the site, which will improve the plant’s power factor and reduce the reactive current required from the grid.

The station produced 1 000MW of coal-fired electricity when it was originally commissioned, and concerns have been expressed about the reduced megawatts from renewable energy.

“We acknowledge that a megawatt from renewables is not the same as a megawatt from coal,” Rajpaul said. “You cannot build all of the capacity, and it’s not our intention to replace all the capacity that the power station was generating, [but] it forms part of the bigger provincial initiative.”

The department of mineral resources and energy determines the new generation capacity, he added, so Eskom acknowledges that the station capacity that will come on board is not the same as the station capacity that was shut down. “But from a regional perspective and from a provincial perspective and from a country perspective, there’s a need for us to build a lot more generation capacity,” he said.

Speaking to the media, Public Enterprises Minister Pravin Gordhan addressed the concerns about the reduced megawatts, saying other power stations will compensate for what is lost at Komati “over a period of time”.

“What we want in South Africa sooner rather than later is energy security,” Gordhan said. “There must be enough megawatts for every household. There must be enough megawatts for our economy, and there must not be load shedding in the future.”

Pilot for transition

Being the oldest coal-fired power station in South Africa, Komati was the first to be decommissioned and is being used as a pilot for transition in South Africa.

“It had already been mothballed back in the 1990s, and then it was brought back to service for 10 years. By 2022 it was beyond its design life, so it was no longer economical for Eskom to run it,” Crispian Olver, executive director of the Presidential Climate Commission, told Oxpeckers.

According to Olver, even before the government started talking about energy transition and moving into renewables, Komati had reached the end of its life. “So it would be a mistake to look at Komati and say [it is shut down] because we are doing this transition to renewable energy; that’s actually not the reason,” Olver explained.

After it was decided to decommission Komati, Eskom built two new coal-fired power stations — Medupi and Kusile. “So we were building new stations at the same time as taking the old ones off,” he said. “The way that power stations are closed is important because as we shift out of coal and into renewables, it’s important that we get this [Komati] decommissioning process right.”

Thabo Molelekwa is a freelance health and environmental journalist, and an alumnus of the Oxpeckers #PowerTracker training programme.

This investigation was supported by the African Climate Foundation’s New Economy Campaigns Hub