South Africa’s Energy Ministry Preparing for the End of Coal

(Bloomberg) -- South Africa’s energy department has said it will start preparing for the end of coal-for-power use in the country but cautioned that a retreat from the dirtiest fossil fuel must take account of the impact on the economy and the people who depend on it for a living.

In a presentation to a small group of business, government and research representatives on Nov. 15, the department said it plans to set up a Just Energy Transition unit to help deliver an outcome “which delivers social justice,” according to a copy of it seen by Bloomberg. While the department declined to immediately comment on the presentation, four people with knowledge of it confirmed its veracity. 

The presentation may mark a shift from the rhetoric of Gwede Mantashe, South Africa’s energy minister, who has repeatedly said the country should continue to exploit its coal resources and not be dictated to by developed countries who are urging it to reduce climate warming emissions. Mantashe’s comments have been at odds with those of Environment Minister Barbara Creecy and President Cyril Ramaphosa.

The presentation also comes after it was announced this month at the COP26 climate negotiations in Glasgow that the U.S., U.K., Germany, France and the European Union had offered South Africa $8.5 billion in concessional loans and grants to transition from coal. South Africa relies on the fuel for about 80% of its power and is the world’s 12th biggest source of greenhouse gases.

‘Stranded Assets’ 

“The global phase out of coal has started and will happen at different scale and pace,” the department said in the presentation. “The transition will be disruptive – needs to be carefully managed and coordinated.”

The department acknowledged that financial institutions have become reluctant to finance coal projects and acknowledged “the real possibility of stranded fossil fuel assets and ghost towns.”

It spoke of the need to protect energy security and provide measures such as training so as not to exacerbate poverty and unemployment in coal-dependent areas. 

Still, the department said the country’s existing energy policy, which includes 1,500 megawatts of new coal-generation capacity, should be implemented.

It also suggested that the viability of retrofitting coal-fired plants run by state utility Eskom Holdings SOC Ltd. with nuclear reactors be assessed. Eskom has proposed using the site of the plants to generate power from gas or renewable sources such as solar.

Many of Eskom’s plants are nearing their scheduled decommissioning dates and the country will be in need of additonal power generation capacity.

(Adds impending coal closures in last paragraph)

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