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Emerging power

Coal, solar or nuclear power?

by Melanie Müller, Anna Cavazzini
Coal-fired power plant in Kwazulu-Natal, South Africa

Coal-fired power plant in Kwazulu-Natal, South Africa

South Africa’s energy needs are steadily growing, and the country has been facing supply shortages in recent years. Like many developing and emerging nations, it must decide between expensive investments in renewable energy and using easily available fossil fuels. The government considers the current international debate on the Green Economy an opportunity to mobilise foreign funding for renewables. By Anna Cavazzini and Melanie Müller

South Africa emits about 10 tons of CO2 per capita and year. That is about the level countries like Germany and Britain have. However, the ANC government has not been able to provide all citizens with adequate energy supply since the end of apartheid. Despite a large-scale electrification programme that started in 2008, there are still regions where people lack access to the power grid. By 2029, the government of President Jacob Zuma plans investments worth about € 63 billion in this sector.

The country’s energy needs are set to increase. The government wants to reduce the high unemployment rate of currently 24 %, according to official information. South Africa’s economy is growing by about three percent annually, but according to the World Bank, a rate of seven percent is needed to meaningfully reduce rampant inequality. The government wants to achieve faster growth and needs to improve energy supply in order to do so.

Some 90 % of country’s electric power is based on coal. About 17 million tons of coal will go up in smoke this year, and the amount is rising. The government recently brought two dormant coal-fired plants back on line in an attempt to guarantee power supply in coming years, and it also has begun to explore new coalfields. Power utility Escom, moreover, is building two huge new coal-fired power stations. With a total capacity of 4,800 megawatts, they will be among the world’s biggest power plants when they become operational in 2017.

According to Escom, the costs will amount to € 20 billion. Ebrahim Patel, the minister of economic development, says low power costs justify these plans. He also says that a share of the profits from the coal-fired plants will be used to subsidise renewable energy technology.

Apart from relying on coal, however, the government wants to boost power generation from nuclear reactors. Currently, two nuclear power stations near Cape Town supply about five percent of the nation’s electricity. The weekly paper Mail and Guardian recently published expert estimates according to which the costs for building six more nuclear power stations would amount to a sum between € 30 billion and € 130 billion. There immediately was a public uproar, because nuclear power was always advertised as being low-cost. Environmental groups want all money to be invested in renewable energy.

Renewable opportunities

Renewable energy has great potential in South Africa. The country normally has 300 days of sunshine a year. According to the Energy Research Centre at the University of Cape Town, solar power could be introduced on a large scale. Biomass and wind energy are also seen as promising. In 2010, however, an estimated two percent of power generation was based on renewables. South Africa will have to make massive changes in the coming years if the government is to reach its declared goal of covering 42 % of the nation’s energy needs from renewables by 2042.

As a start, the government initiated the South African Renewables Initiative (SARi), with the goals of speeding up the deployment of renewable energy, encouraging industrial development and squaring economic growth and energy security with climate protection. Phase one of the programme, from 2012 to 2015, is coordinated by a secretariat which is organ­ising regular meetings with representatives from government agencies, financial institutions and local partners. By 2030, the programme will need around € 11 billion to expand renewable energy; foreign donors are supposed to contribute about a third of that amount.

At the same time, the government is promoting the ideal of the Green Economy, an issue discussed at the Rio+20 conference, among other things. The idea is to make the economy business friendly, socially inclusive and environmentally sustainable. In the eyes of the government, this discourse should help to attract funds for renewable solutions to South Africa.

There can be no doubt that South Africa’s government, on its own, will not be in a position to finance the necessarily massive investments. Accordingly, it emphasises that it will need international support to make its transformative plans come true.

The role of the EU

In this context, the European Union matters very much. Renewable energy solutions are high on its international-development agenda. Andris Piebalgs, the EU’s commissioner for international development, has made this issue a priority, and only recently the Africa-EU Renewable Energy Cooperation Programme was set up. Renewables promotion is a core topic in the EU’s international-development strategy paper “Agenda for change”. Piebalgs says the EU will neither support fossil nor nuclear technologies, but focus exclusively on renewables instead.

At the same time, the EU is South Africa’s biggest donor of official development assistance (ODA). The European Commission provides 25 % of ODA to the country, its member states account for another 25 % and its European Investment Bank (EIB) contributes yet another 20 %. Accordingly, 70 % of the ODA South Africa receives is from Europe.

It is hard to assess how much climate money is included in such funding to date. While there is a general consensus that climate funding is supposed to be granted on top of ODA, there is no binding definition of such “additionality” (see box on next page). Neither the EU nor multilateral bodies have clear rules on this matter.

Energy, however, is obviously central to Euro­pean–South African cooperation. The EIB, for instance, helped to launch the SARi with an initial investment of € 40 million.

Donor policies remain controversial, however. The EU’s dilemma is evident in its cooperation with South Africa. Carbon Capture and Storage (CCS) is a matter of hot debate in Europe since the effectiveness of such approaches is still unproven. Nonetheless, European institutions are backing CCS in South Africa in the context of financial support for new coal-fired power plants. Germany’s IPEX Bank, which belongs to KfW Entwicklungsbank, is involved in financing these plants, and German private-sector companies will contribute to constructing them.

For the EU, moreover, South Africa is an important partner as an exporter of coal. The EU buys more than half the coal it needs for power plants overseas, and South Africa provides nearly 16 %. Where exactly coal is produced and burned has no bearing on the climate however.

Sustainable energy policy means more than just investing in renewable technologies. The efficient use of resources matters too. No matter how power is generated, investments in infrastructure are necessary. On behalf of their government, South African experts have spelled out that these challenges imply that the country must use resources sparingly and rely on low-carbon technologies and strategies to create jobs. In order to rise to urgent challenges, South Africa needs change in the energy sector. There is an opportunity for leapfrogging, moving on to state-of-the-art energy technology without copying every step industrialised countries took. South Africa should grasp this opportunity and henceforth pursue a sustainable development path.

International development agencies can contribute to making this happen. The EU is playing a pioneering role in promoting green solutions in the energy sector. However, its own energy interests – and that of European businesses – tend to clash with the lofty expectations the EU has for developing countries and emerging markets like South Africa. European policymakers need more coherent approaches if they want to achieve the kind of sustainable development discussed in Rio in 1992 as well as 2012.