HomeIndustry SectorsFinance and PolicyDe Ruyter shares implications of $8.5 billion climate agreement

De Ruyter shares implications of $8.5 billion climate agreement

Last week, Eskom GCE Andre de Ruyter spoke with Ryk van Niekerk, the editor of Moneyweb, about the R131 billion agreement that was reached between various international partners and Eskom. Herewith is a synopsis of the interview.

The partnership will mobilise an initial commitment of $8.5 billion that can be made available over the next 3-5 years to support South Africa to achieve the most ambitious target within South Africa’s upgraded and ambitious Nationally Determined Contribution.

Speaking from Glasgow, de Ruyter shared that: “We need to spend a great deal of money over the next 10 to 15 years to replace our coal-fired power stations, which are rapidly reaching the end of their lives, with new, cleaner and greener power-generating capacity.

“This not only includes power generation, it also includes some 8,000 to 10,000 kilometres of new transmission lines, as well as a total renewal of our distribution network to accommodate renewable energy.

“In total, we expect this to cost in the order of R400 billion to R500 billion.”

De Ruyter said the agreement was the first step in ensuring the transition to cleaner energy would be “a just transition,” specifically that Eskom won’t “leave behind ghost towns when we cease producing electricity from coal”.

You should read:
Just energy transition partnership with South Africa announced at COP26

De Ruyter said that this agreement would allow Eskom to accelerate its plan to remove CO2 from the atmosphere. “The plan we currently have on the table is to remove 22GW – roughly half our installed capacity – of coal-generation capacity from the system by 2035, and to replace it with greener energy.”

This represents about 8GW of power of the 50GW required.

De Ruyter explained: “For the remainder, we want to enter into partnerships with the private sector; we, therefore, think there is an excellent opportunity for the private sector to play a prominent role in this new-generation capacity.

“By 2035 the current plan includes turning off about nine of the power stations, and we plan to then keep only six of our current coal-powered stations until they reach their end of life, which would more or less be by 2040/2045 – excluding of course Medupi and Kusile, which will continue producing until around 2069.”

There is an entire pipeline of projects already tabled by Eskom for green energy projects, supported by battery manufacture and storage and the provision of micro power generation in rural areas. He continued that there are also wind and solar projects which are now possible to put into action.

Asked about the South African transition away from coal despite countries such as India, China and the US not ratifying such commitments, de Ruyter said: “The first thing one needs to keep in mind is the age of our coal-fired power stations and the fact that they are not reliable. … If one looks at the cost of available new technology per kWh, solar power costs one-tenth that of new coal capacity.

Must watch:
Our interview with Andre de Ruyter

“I think the second component that is important is the competitiveness of our exports. Compared to the countries you [van Niekerk] mentioned, South Africa is much more coal-intensive than our international competitors. The European Union has already announced that from 2023 a coal or a CO2 import tax will be levied.

“Because 87% of our electricity is derived from coal, our manufacturers and our mines are very concerned that they will be hit by these CO2 imports, and to remain internationally competitive we, therefore, have to lower our CO2 intensity.”

De Ruyter discussed the focus of the transition, support for the impacted communities and raised the possibility that the support provided by the international community may also mean fewer tariff increases for South African consumers, saying: “So, should one be able to speed up this transition, taking into account the need to also invest in storage capacity, batteries and pump stations, we think that renewable energy would indeed slow the rate at which electricity tariffs increase. That would of course be good news for the economy.”

You can read the full transcript of the interview between de Ruyter and MoneyWeb here.