The International Energy Agency’s (IEA) latest World Energy Outlook for 2020 states that solar power is now the “cheapest electricity in history”. It’s something you either believe will make a difference to market developments or you don’t.
Before we unpack this, let’s take a brief history tour. You’ll see why in a moment.
Originally published in the ESI Africa weekly newsletter on 18/11/2020
Founded in 1974, at the height of fossil fuels powering industrialised nations, the IEA’s initial objective was to respond to threats to the supply of oil. Raising its relevance on the energy stage, the organisation also positioned itself as an information platform with the first World Energy Outlook published in 1977.
In its 2014 edition, the IEA warned that $48 trillion in investment and credible long term policy planning would be required between 2014 and 2035 to secure sufficient energy supplies for that period.
Five years later, a November 2019 Reuters article reported that the IEA had been criticised for failing to create a 1.5°C scenario and place it centrally in its annual World Energy Outlook report.
The critics – comprising 65 signatories of a joint letter issued to the head of the IEA, Fatih Birol – argue that the report should revise its approach so as to unlock faster investment in renewables.
The argument continues that such a revision will better identify possible risks to the value of oil, gas and coal companies posed by the prospect of rapid action to cut greenhouse gas emissions.
It’s a challenge that is very prominent in South Africa where the path to a just energy transition will see its over 90% reliance on coal-fired power changing employment prospects across the board.
Since the energy sector is closely linked with economic stability and growth, the country’s minister for mineral resources and energy, Gwede Mantashe, during an investment forum on 17 November, stated that he wanted the sector to grow and contribute more to South Africa’s GDP than the 8% it does at present.
Acknowledging that there are obstacles to achieving this growth, Mantashe invited investors to “come and tell us where there are obstacles”. He also said that “we have identified exploration as the lifeblood of the industry”.
However, the constraint of unreliable power supplies must be addressed. The minister acknowledged that “self-generation” for the mining industry was crucial, yet companies from all sectors are struggling to get permission to start solar projects.
This stumbling block threatens any endeavours for a just energy transition or any transition to speak of. Even as solar power has come out tops with the “cheapest electricity in history” it does not matter as the obstacles to investment, which are already known, have not been removed.
Clearly, the IEA’s 2014 warning that investment is the key ingredient to secure energy supplies has for too long been ignored. Let’s trust that taking steps now will have a positive impact on the mining and solar power markets.
Until next week.