This originally appeared as an op-ed by Business Day on December 9, 2021, and is reprinted below with permission.

On the margins of the 2021 UN Climate Change Conference (COP 26) in Glasgow, a group of developed countries, including France, Germany, the UK, and the US, pledged to mobilise $8.5bn (R131bn) over the next few years to help South Africa move away from coal and speed up its transition to a low-carbon economy.

The partnership is potentially excellent news. If successful, it will serve as a model for climate progress, ensuring that the costs of the energy transition and climate change are split in a more equitable way between developing countries facing high bills, and developed countries bearing the responsibility for most carbon emissions in the atmosphere.

Reactions to the announcement have ranged from cautious optimism that international climate finance may finally deliver transformational funding to strident opposition to foreign governments interfering in South Africa's domestic energy policy. Still, the majority agree the deal lacked detail and clarity on what exactly it would deliver.

No matter what it says, though, one thing should be clear: these funds cannot be used to support gas projects and unwittingly kick-start a whole new fossil fuel industry in South Africa. But as it stands, this dangerous outcome remains a possibility.

The deal stated that the money would help accelerate the development of renewable energy, electric vehicles, and hydrogen, and would support coal workers facing job losses due to plant closures. However, it also noted that state-owned power utility Eskom would have access to financing to decommission — or repurpose — part of its fossil fuel-based electricity fleet. And Eskom — whose total generation fleet of 46GW includes 39GW of coal-fired capacity — has not explicitly ruled out a conversion of existing coal plants to gas-fired units. 

Advocates of gas might argue this is a good idea as gas plants are generally thought to emit less carbon than coal, and repurposing coal plants might be quicker than developing new gas-fired plants. Yet, the long-term effects of investing in gas would be detrimental.

While carbon emissions from gas-fired plants are indeed considered to be lower than coal, emerging evidence on emissions due to methane leakage across the gas supply chain — from production and transport to final burning — shows that coal-to-gas switching cuts the emissions 0% to 30% at best, making the technology dirtier than previously believed, and perhaps no better than coal at all.

In addition, developing gas infrastructure would put the next generation of gas workers and their communities in the same challenging position that coal workers are experiencing today. Gas assets are likely to become stranded and unable to operate due to worsening economics and tightening emissions standards long before the end of their technical lifespan. The new climate finance for South Africa is meant to deal with precisely these kinds of issues, by accelerating, not hindering, a just transition. Imagine the irony if, instead, it was used to create the same problem for the next generation of workers.

Finally, as more than 20 countries recently pledged to end fossil fuel finance abroad, support for gas projects is becoming harder to find, which is weighing heavily on the economic viability of the gas sector — from exploration and production, to pipelines and power stations.

This is not to say that no gas investment should be allowed to take place in the country at all, but simply that there is no reasonable justification for including gas-fired generation among the projects funded by climate finance. Truly low-carbon technologies, such as renewable electricity generators, green hydrogen, and storage technologies, are available and should be at the centre of any serious climate-financed investment package.

So let there be no mistake. Substantial volumes of gas-powered generators that have not been fitted with carbon capture and storage technology to stop the emissions from entering the atmosphere are not compatible with net-zero emissions pathways. Gas can no longer be seen as a “bridge fuel'” between coal and renewable technologies as the latter are now cost-competitive with thermal plants. To qualify for climate finance, projects should generate close to zero carbon emissions, rather than represent a self-claimed improvement on coal, which, for gas plants, is likely to be marginal, or even negative, depending on gas-related methane emissions. 

The next step for the climate finance partnership is to establish a task force and determine an unambiguous action plan. It is vitally important that these climate funds are not the catalyst for the development of a fossil gas industry in South Africa. The task force should explicitly rule out substantial investments in fossil fuel-based projects to ensure that these funds support workers and communities while building a climate-safe future for all South Africans.

The City of Cape Town’s drive to procure or generate their own electricity is one of the first steps in solving South Africa’s energy crisis, according to a new study by the International Institute for Sustainable Development (IISD). 

In Power by All: Alternatives to a privately owned future for renewable energy in South Africa, researchers look at how different business models might increase the share of renewable energy in South Africa’s electricity sector. The report analyses four successful international case studies, identifying potential opportunities and challenges in applying these models in South Africa.

“The study clearly shows that allowing municipalities to procure or generate their own electricity will reduce pressure on the strained South African electricity system, diversify the country’s energy mix, and lessen fiscal pressure. It is a step in the right direction and needs to be given the opportunity to succeed,” says Richard Bridle, a lead author of the study.

Locally, the City of Cape Town has been trying to obtain the right to procure their own renewable energy through years of court cases. In October 2020, Minister of Mineral Resources and Energy Gwede Mantashe amended the electricity regulations to allow municipalities to develop or procure their own power. This is a pivotal stride toward increasing renewable energy in the country while also retaining public ownership of the energy sector.

One of the case studies looks at the successes of German municipalities since evolving into providers of a range of public goods such as electricity, water, gas, basic infrastructure, and services.

“Looking at Germany, we see that municipal ownership of renewable energy can allow public entities at the subnational level to tap into existing customer, legislative, and infrastructural networks to create regional webs of renewable energy projects,” says Bridle.

This model is not without its flaws and South African municipalities are obviously different from those in Germany. However, researchers say the pursuit of municipal ownership is still a critical step toward a just transition. 

In Germany, the electricity sector was liberalized in 1998, creating a favourable environment for municipalities to take control of their electricity supply and for consumers to freely choose their electricity supplier. Municipal investments in renewables proliferated and installed renewable electricity increased 143% in five years.

The IISD study shows that municipalities, given a supportive and enabling context, have the potential to play a key role in the electricity system by delivering a distributed model of publicly owned electricity generation. It also shows that South Africa does not face a binary choice between public ownership through Eskom and private ownership through Independent Power Producers—instead, the country will need an all hands on deck approach to transform its electricity system.

A new study by the International Institute for Sustainable Development (IISD) suggests that Eskom holds the key to fundamentally transforming the country’s electricity sector. At present, Eskom’s heavy reliance on aging and unreliable coal-fired power stations has led to ongoing rolling blackouts across South Africa that have cost the country more than R120 billion over the past two years—yet the rollout of new generation capacity has been slow.

“At the moment Eskom is seen as a barrier to renewable energy deployment, but it doesn’t have to be,” says Chido Muzondo, a lead author of the study. “What this research shows is that with the right business model—and sufficient political support—it is entirely possible for a state-owned utility to pivot out of fossil fuels and into more cost-effective and reliable renewable energy.”

In Power by All: Alternatives to a privately owned future for renewable energy in South Africa, researchers analysed four international cases of publicly and community-owned renewables. One of these case studies looks at Ørsted, a state-owned energy utility in Denmark which was successfully transformed from a fossil fuel dependent utility into a global leader in renewable energy. This example could provide valuable insights into Eskom’s future, given Eskom’s intention to reach net-zero emissions by 2050.

In 2008, Ørsted, then known as DONG, was an energy utility similar to Eskom, generating around 85% of its power and heat from fossil fuels and only 15% from renewable energy sources. By 2019, Ørsted became the world’s largest offshore wind power generator, with renewables accounting for 86% of its total generation capacity.  

Ørsted’s first step to becoming a renewable power utility was establishing a wind power business unit. In 2006, only two percent of its 4,500 employees worked in the wind energy department. By 2018, half of the 6,000 employees were employed within business units focusing on wind and in 2019, it became the world’s largest offshore wind generator.

“In the Ørsted case study, the development of a small but capable business unit that developed a functional business model allowed the leadership to take the decision to transition the entire utility. This did not happen overnight and the context in South Africa is  obviously different—but this could be the first step towards a transition to clean energy in South Africa,” Muzondo says.

The company initially faced some opposition from the Danish government and parliament due to the fear of job losses from transitioning to renewable energy—fears that have been echoed in South Africa too. Ultimately, the utility addressed these concerns through wide-ranging consultation and clear communication.

In a move similar to Ørsted's, Eskom created a Just Energy Transition (JET) office in 2020. Muzondo says that efforts to create new sustainable business units, like Eskom’s JET office, should be supported as they may one day enable a transition of the entire utility.

“The Ørsted case shows that with support from the government and committed leadership, state-owned enterprise transition has the potential to transform the energy sector of a country and transition jobs from the fossil fuel industry to renewables,” she says.