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In 2021, the Just Energy Transition Partnership was formed between South Africa, the UK, EU, France, Germany and the US at COP26, which saw member nations pledge contributions of US$8.5bn to be deployed over the next three to five years for the transition from fossil-based energy to renewable energy and help South Africa in its decarbonisation efforts
The South African Government has since established the Just Energy Office with the objective of providing energy security and mobilising funds into renewable energy projects while helping workers and communities that historically relied on coal industries for their livelihoods with the transition.
The commitments under the COP26 partnership came after the ministry raised the licensing threshold for new generation capacity from 1MW to 100MW for private investment in the Commercial and Industrial (C&I) segment of the industry. This move creates a more enabling environment for private investment in RSA for small and large-scale developers especially mining companies who are expected to spend about US$3.8bn on renewable energy projects, with plans for a combined capacity of 585MW in solar energy alone. This, coupled with the increased carbon tax rate and energy constraints, will encourage mine owners to move towards cleaner energy sources sooner rather than later.
The department estimates that there are approximately 4.5GW of renewable energy projects in the pipeline with an additional 2.6GW that DMRE will procure through the newly launched REIPPPP bid window 6.
The newly established Hydrogen Economy roadmap also creates a new investment avenue for the development of green hydrogen. The Industrial Development Corporation, working with KfW, is identifying early-stage project potential in the Northern Cape to develop a port at Boegoebaai for the export market for green hydrogen.
On the financing side, AfDB has committed its resources to support African countries on their just energy transition ambitions by providing policy advice, technical assistance, and financing for these projects. Norfund and CDC Group also announced an investment of R600mn (approx. US$36mn) to fund a pipeline of more than 2.4GW of new wind and solar projects.
Progress made by the South African Government and its continued commitment to the Just Energy Transition vision is heartening and bodes well for local and foreign direct investment in renewable energy solutions in RSA.
Discussions between the partners are still underway and the Investment Plan is being finalised with close monitoring of key milestones ahead of the eagerly anticipated COP27.
This article is authored by Synergy Consulting IFA.