South Africa’s Electricity Monopoly Seeks More Than $ 30 Billion To End Coal Dependence

The head of South Africa’s struggling electricity monopoly Eskom said he was seeking a deal at the UN’s COP26 climate summit to borrow more than $ 30 billion in concessional loans to help shutting down its aging coal plants and switching to renewable energy.

André de Ruyter, general manager of the utility which produces almost all of the electricity in Africa’s most industrialized economy, said the proposed loan facility would be “multi-year, multi-lender, multi-tranche on a “use or lose” base.

Although he did not specify who would provide the funding, European Commission President Ursula von der Leyen confirmed on Thursday that the commission, the UK, US, France and Germany will sign. a partnership for the “just energy transition” at COP26 to help South Africa to withdraw gradually. of coal.

The pact is the first of its kind where richer countries would provide financial and technical support to a polluter in the developing world to accelerate the switch to renewable energy. “This partnership could become a model on how to support just transition around the world with sponsor countries and countries that need to move faster in the just transition,” said von der Leyen.

As host of the UN meeting in Glasgow, the UK government pushed for plans to be unveiled at the summit that will wean major developing countries off coal in line with global commitments to end the use of coal. fossil fuels.

South Africa, the 12th largest carbon emitter in the world, already faces the prospect of shutting down much of Eskom’s coal fleet and investing in new renewable energy capacity faster than expected, as advanced age and recurring plant faults lead to frequent blackouts.

De Ruyter admitted that Eskom’s goal of $ 30-35 billion over 15 years to fund the dismantling of 22 gigawatts of coal-fired electricity and build alternative renewable sources and grids was “a very large sum of money. ‘silver “.

Eskom had “considerably strained” his finances to finance the green transition himself, he conceded. The utility has heavy debts of 400 billion rand ($ 26.6 billion) which has made it dependent on regular government bailouts after years of corruption and waste.

De Ruyter said he had the support of South African President Cyril Ramaphosa to pursue the loans offered, although senior officials in the ruling African National Congress, including Gwede Mantashe, the Minister of Energy, have expressed doubts. .

“There may be some trepidation and some questions about this exit from coal – that’s to be expected,” de Ruyter said. But Ramaphosa’s cabinet approved the plan, which the Eskom chief says could create thousands of jobs, including through manufacturing renewable energy.

Asked if global lenders might be reluctant to commit to a long-term lending facility upfront, he replied, “We understand that, but that’s why we think this partnership approach is. the best way to reduce carbon emissions ”, confidence could be strengthened through initial projects.

It was also much cheaper to finance developing countries such as South Africa to eliminate carbon emissions from their economies than in the developed world, where production of the easiest to stop fossil fuels had already ceased, a added from Ruyter.

“Our cost of carbon mitigation is a fraction of what it is in countries where cheap carbon has already been phased out,” he said. “You should be spending your money where you get the most bang for your buck. “

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