President Cyril Ramaphosa delivers the keynote address at the opening ceremony of the Just Energy Transition Municipalities Conference at the Gallagher Convention Centre in Midrand, Gauteng. (@PresidencyZA/X)
TPresident Cyril Ramaphosa said on Monday that the national effort to tackle climate change must not come at the expense of increased burdens on electricity customers.
“South African households, like many around the world, are struggling and reeling from the rising cost of living, including energy costs,” President Ramaphosa said in his opening keynote address at the first Just Energy Transition Conference for Municipalities in Midrand.
“If you open a newspaper abroad, you will see that in many countries people are raising issues about energy costs. We must therefore ensure that the energy transition does not exacerbate energy poverty,” he said, adding that it must not deepen inequalities that are “widespread and a major part of people's lives”.
The comments come following reports that power utility Eskom is proposing to increase tariffs by around 40% next year.
President Ramaphosa said the free basic electricity subsidy for poor households was one of the government's most important anti-poverty policies but that it was “not being used effectively” in many municipalities.
“It is important that this support is continued and expanded during the just energy transition, to ensure that many poor households can benefit from subsidies,” he said.
Low-carbon and climate-resilient development
Rapid, sustainable and inclusive economic growth is the unity government's top priority, and low-carbon and climate-resilient development is central to achieving this inclusive growth.
The president said this was a “challenge but also a great opportunity” for the country.
“Electricity generated from fossil fuels accounts for most of our country's carbon emissions because industry still relies mainly on electricity produced by Eskom's coal-fired power stations. So our entire economy is carbon intensive.”
“The world has changed and is changing, but our reliance on fossil fuels for industrialisation poses great risks for our country. If we do not advance the energy transition in a way that is appropriate to our national and local circumstances, it will pose a threat to our economy, society and environment,” President Ramaphosa added.
This will affect local goods and products that flow into these markets because as long as the country is using fossil fuel intensive energy to produce the goods, once the goods reach their destination or market, “tariffs will be imposed, resulting in our goods becoming less competitive.”
“Just as we continue to oppose unilateral and coercive carbon adjustment measures by developed countries, we recognize the need to reduce our reliance on carbon-intensive energy production. We believe that to grow our economy, we need to diversify our energy sources.”
The future looks bright as the country harnesses the global energy transition to support economic growth, development and job creation.
As a signatory to the Paris Agreement, South Africa was committed to making its fair contribution to global change efforts, he said.
“We must do this in a way that contributes to inclusive economic growth, energy security and ultimately creates jobs to ensure that our people are not left behind during the transition. We must do so at a pace, scale and cost that is consistent with the country's social and economic development trajectory. But one thing is certain: we must embark on this journey.”
Decarbonization goals
The Integrated Resource Plan sets out a viable energy mix over the medium and long term to achieve the country's decarbonisation targets, and the Renewable Energy Independent Power Producer Procurement Programme has attracted more than R200 billion in investment, adding much-needed capacity to the electricity grid, President Ramaphosa said.
“At a time when Eskom has faced, and continues to face, significant challenges, the regulatory changes we introduced in 2021 to increase the licensing standards for power generation projects have resulted in a pipeline of more than 130 confirmed projects,” he said.
This equates to a capacity of 22,500 megawatts, with investment estimated at R390 billion.
“This is a huge amount of money and it's not something you can just pick up on the street any time. That's why it's great to have financiers and investors at this conference. This is why I said I could smell money the minute I walked in, because that speaks to the amount of money that's needed to get this project going.”
Municipalities are at the heart of efforts to decarbonize the energy sector. They own and operate about half of the country's electricity grid, facilitating universal access to electricity. Around 165 municipalities are providers of electricity services.
Through the Integrated National Electrification Programme grants, municipalities will also be held responsible for addressing the electrification gap. They will be required to “take the lead” in providing clean, affordable energy to the communities, businesses and industries operating in their areas.
Affordable Clean Power
The Just Energy Transition Implementation Plan approved by Cabinet last year includes a dedicated municipal portfolio roadmap, and President Ramaphosa said there were three focus areas:
The first is to provide access to affordable and clean electricity. Municipalities can now buy electricity directly from independent producers and set up their own generating entities.
President Ramaphosa has signed the Electricity Regulatory Amendment Act, paving the way for a new competitive electricity market. The reforms contained in the act should help accelerate the decarbonisation process.
“But beyond that, a better deal must be delivered for households and businesses. Difficult issues such as electricity tariff structures and municipalities' huge debts to Eskom need to be addressed.”
Sustainable Financing
The second focus, the president said, is the issue of sustainable financing of electricity infrastructure: the municipal grid system needs to be upgraded, modernized and expanded, and future energy generation requires a fundamentally different system in design, capacity and operation.
Smart meters need to accommodate the increasing penetration of renewable energy at various scales.
“We need to encourage wheeling and feed-in tariffs for small-scale embedded generation. Large-scale investments are needed to ensure optimal grid control, security and energy storage. This investment needs to leverage both public and private funds.”
Wheeling refers to sending energy from a generator to end users in another area through an existing distribution or transmission grid.
He said the government was working on financing solutions, including preferential loans for South African National Transmission Company to expand the grid, and to fast-track funding for investment-ready projects in all areas of the just energy transition.
President Ramaphosa added that the national government was working with the South African Local Government Association and mayors to bring together teams to work on the municipal Just Energy Transition Action Plan.
Managing the migration
The third focus area is strengthening municipal capacities to manage the transition, which requires extensive training and upskilling.
“As a local government, we should never be afraid to learn what other local governments in the country are doing,” he said, adding that a new system would be needed to identify human resources, technical capacity and other needs within the city and then plan and budget accordingly.
Local governments should adopt best practices when it comes to designing and implementing programs and projects.
“We must do our best. The days of mediocrity, of doing things just because they have to be done, with suboptimal results, are over…
“I've appointed naive pastors to all these areas, and their eyes are open, and when you listen to what they're saying, they know what they're talking about,” he said.
Development of the parachute
The President said his government wanted to move away from “parachute” development plans in which projects are conceived at the national government level and do not take into account realities on the ground.
“We need to be particularly mindful of this when it comes to a just energy transition. What works in one region may not be feasible in another.”
“Besides upgrading and expanding grid infrastructure, what other realities do we need to consider? How will this new infrastructure be protected from crime?”
President Ramaphosa pointed to challenges posed by “so-called” business forums and mafias in the construction and coal sectors.
“How do we ensure that the introduction of new energy sources at a municipal level supports localisation and local businesses? How do we inform local communities through public campaigns in easy-to-understand and appropriate language?” 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 into account the needs and interests of affected people, he added. “This is not just a matter of putting up panels and meters. We need to reaffirm a just transition that incorporates distributive, restorative and procedural justice.”