President Cyril Ramaphosa delivering the keynote address during the opening ceremony of the Just Energy Transition Municipal Conference held at Gallagher Convention Centre in Midrand, Gauteng. (@PresidencyZA/X)
The national effort against climate change must not come at a higher cost for electricity users, President Cyril Ramaphosa said on Monday.
“South African households, like many around the world, are battling and reeling from the rising cost of living, including the costs of energy,” Ramaphosa said in a keynote address to open the inaugural municipal just energy transition conference in Midrand.
“You just need to open overseas newspapers and you will find that people are raising issues about the costs of energy in many countries. We must therefore ensure that the energy transition does not contribute to energy poverty,” he said, adding that it must not deepen the inequality that is “so rife and so much a part of the life of our people”.
These comments are on the back of an alleged proposal by power utility Eskom to hike tariffs by about 40% for the next year.
Ramaphosa noted that, while the free basic electricity subsidy for indigent households is one of the most important policies the government has implemented to tackle poverty, it is “not being used to good effect” in a number of municipalities.
“It will be important to sustain and expand this support during the just energy transition and ensure that many poor households benefit from the subsidy,” he said.
Low-carbon, climate-resilient development
Rapid, sustainable and inclusive economic growth is the priority of the government of national unity and low-carbon, climate-resilient development is central to achieving this inclusive growth.
This presents the country “with a challenge but a great opportunity”, the president said.
“Electricity generated from fossil fuels accounts for most of our country’s carbon emissions because industry is still mainly reliant on power that is produced by Eskom’s coal-fired power stations; our entire economy is therefore carbon-intensive.
“As the world changes, and it is changing, our reliance on fossil fuels to industrialise poses a significant risk for our country. It poses threats to our economy, our society and our environment if we do not drive the energy transition in ways that are appropriate to our national and local circumstances,” Ramaphosa added.
This has implications for local goods and products entering these markets because for as long as the country produces its goods using fossil-intensive energy, when they reach their destination or markets, “they will impose tariffs on us, therefore making our goods uncompetitive.
“Just as we continue to oppose unilateral and coercive carbon adjustment measures by developed economies, we realise the need to reduce our reliance on carbon-intensive energy production. We see the need to diversify our energy sources to grow our economy.”
There are great prospects ahead if the country takes advantage of the global energy transition to support economic growth, development and employment creation.
As a signatory to the Paris Agreement, South Africa is committed to contributing its fair share to the global change effort, he said.
“We must pursue it in a way that contributes to inclusive economic growth, to energy security and, ultimately, to ensure that, as we transition, our people are not left behind and that we create employment. We must do so at a pace, scale and cost that is consistent with the country’s social and economic development path. But what is certain is that we’ve got to embark on this journey.”
Decarbonisation objectives
The Integrated Resource Plan sets out a viable energy mix over the medium and long term to achieve the country’s decarbonisation objectives. The renewable energy independent power producer procurement programme has attracted more than R200 billion in investment and has added much-needed capacity to the electricity grid, Ramaphosa said.
“At a time when Eskom was facing, and continues to face, enormous challenges, the regulatory changes we introduced in 2021 to increase the licensing threshold for generation projects has resulted in a pipeline of over 130 confirmed projects,” he said.
This amounts to 22 500 megawatts of capacity with an estimated investment value of R390 billion.
“This is an enormous amount of money, which we don’t pick up in the streets at any given time, and that’s why it’s wonderful to have financiers and investors at this conference. It’s for this reason that I said I could smell money as I walked in because this speaks to the amount of money that is going to be needed for this project to go ahead.”
Municipalities are central to efforts to decarbonise the energy sector. They own and operate about half of the country’s electricity distribution grid and facilitate universal access to electricity. About 165 municipalities are electricity service providers.
Through the integrated national electrification programme grant, municipalities are responsible, too, for addressing the electrification backlog. Municipalities need to be in the “driving seat” to provide clean, affordable energy to the communities, businesses and industries that operate in their localities.
Affordable clean electricity
The just energy transition implementation plan, which the cabinet approved last year, includes a dedicated municipal portfolio roadmap. There are three areas of focus, Ramaphosa said.
The first is providing access to affordable, clean electricity. Municipalities are now able to purchase power directly from independent producers and establish their own power-producing entities.
Ramaphosa has signed the Electricity Regulation Amendment Act into law, paving the way for a new and competitive electricity market. The reforms contained in the law must help speed up the decarbonisation process.
“But more than that, they must result in a better deal for households and for businesses. We will need to deal with challenging issues like electricity pricing structures and the staggering levels of municipal debt owed to Eskom.”
Sustainable financing
The second area of focus is the issue of sustainable financing for electricity infrastructure, the president said. The municipal grid system needs to be upgraded, modernised and extended and the energy generation of the future requires systems that are fundamentally different in terms of design, capability and operation.
Smart metering will have to accommodate the increased penetration of renewable energy at different scales.
“It will need to facilitate wheeling and feed-in by small-scale embedded generation. Massive investment is needed to ensure optimal grid control, safety and energy storage. This investment will need to draw on both public and private sources of capital.”
Wheeling refers to sending energy from a generator to an end-user in another area through existing distribution or transmission networks.
The government is working on financing solutions, including concessional loans, for the National Transmission Company of South Africa to expand the grid and is expediting funding for investment-ready projects in all areas of the just energy transition, he said.
National government, Ramaphosa added, is rallying its teams to work with the South African Local Government Association and mayors to align on the just energy transition programme of action for local government.
Managing the transition
The third area of focus is to strengthen the capacity of municipalities to manage the transition, which requires extensive training and upskilling.
“We should never be afraid, as local government, to learn what other local government entities in our country are doing better,” he said, adding that new systems will be required to identify human resource, technical capacity and other needs within municipalities and plan and budget accordingly.
Municipalities will need to adopt best practice when it comes to the design and implementation of programmes and projects.
“We must do the best of the best. The days of mediocrity and the days of doing things just because we have to do them, and end up with sub-optimum results, are over …
“I’ve appointed streetwise ministers in all these areas; their eyes are wide open and you listen to these guys and these girls talking — they know what they’re talking about,” he said.
Parachute development
The government, the president said, wants to move away from “parachuted” development initiatives, where projects are conceptualised at national government level and don’t take into account the realities on the ground.
“We need to be particularly aware of this when it comes to the just energy transition. What may work in one locality may not be feasible in another.
“Besides upgrading and expanding grid infrastructure, what other realities will need to be taken into account? How will this new infrastructure be protected from criminality?”
Ramaphosa noted the challenges presented by “so-called” business forums and mafias in the construction and the coal sectors.
“How are we going to ensure that the rollout of new energy sources at municipal level supports localisation and local businesses? How do we inform communities through public campaigns in accessible and appropriate languages?” These are all issues that municipalities will have to consider and address, he said.
The transition to a low-carbon, climate-resilient economy and society must take the needs and interests of affected people into account, he added. “This isn’t simply an issue of installing panels or meters. We must reaffirm a just transition that incorporates distributive, restorative and procedural justice.”