As we reach the median stage of South Africa’s Just Energy Transition Investment Plan (2023 – 2027). AfricanLaw takes a closer look at the pros and cons of the South African Energy Transition Deal based on general knowledge and opinions shared across the African continent.
If you are not familiar with the jurisdiction, what you need to know is that South Africa’s energy sector is undergoing a transformative shift with a Just Energy Transition Partnership (JETP), an initiative between the South African government and the International Partners Group (IPG). The IPG consists of primarily Western nations including France, Germany, the Netherlands, the Unites States of America and the United Kingdom. This partnership has gained global attention for its ambition to transition South Africa from coal dependency to a greener, more sustainable energy future.
However, while this deal appears to hold immense promise, particularly for investors interested in venturing in renewable energy in South Africa, it also raises several concerns regarding feasibility, equity, and long-term impact on the community that are worth considering with a more critical eye.
Below, we explore the key advantages and challenges of this highly anticipated energy transition.
The Promising Prospects of JETP
- Financial Injection for Renewable Energy Development
One of the most significant aspects of the JETP is perhaps the $9.3 billion pledged by the IPG to support South Africa’s transition. This funding aims to catalyse renewable energy projects, develop infrastructure, and reduce carbon emissions. Such financial backing appears quite promising for overcoming historical underinvestment in sustainable energy and systemic limitations in South Africa.
- Policy Reforms to Encourage Competition
The Electricity Regulation Amendment Act, signed in August 2024, is another landmark development in this journey. By liberalising South Africa’s energy market, the 2024 Act encourages private sector participation in green projects, which could lead to greater innovation, efficiency, and faster renewable energy adoption within the African continent.
- Strengthened Institutional Frameworks
The recent unbundling of Eskom, South Africa’s state-owned electricity utility, has led to the creation of the National Transmission Company of South Africa (NTCSA). This move is also expected to enhance transparency and operational efficiency in the management of energy infrastructure in South Africa.
- Expansion of Renewable Energy Pipeline
South Africa’s renewable energy pipeline is robust, with over 133 GW of projects in development, but stands to grow even more so with the IPG investment. Among these projects, 66 GW are already in advanced planning stages, showcasing a promising trajectory toward a greener future for South Africa.
Challenges on the Path to Transition
- Grid Infrastructure Limitations
While, as we’ve seen above, renewable energy projects are on the rise, integrating them into South Africa’s national grid remains a noteworthy challenge. The ongoing outdated infrastructure and limited capacity could delay the full realisation of these projects.
- Extended Coal Operations
In a controversial move, we have also seen a shift towards decommissioning timelines for coal-fired power plants have been extended. This decision raises concerns regarding South Africa’s ability to meet the ambitious emissions reduction targets agreed upon and its commitment to a low-carbon future.
- Funding Disbursement Delays
Thirdly, although the pledged $9.3 billion is substantial, it seems as though only a fraction of it has been spent to date. Delays in fund utilisation could thus hinder the progress of critical energy projects.
- Probable Fragmentation of the African Voice in Climate Negotiations
Another key concern is that bilateral energy transition deals, such as the JETP with South Africa, may weaken the collective bargaining power of African nations in global climate negotiations. Historically, Africa has negotiated as a unified bloc, known as “the Africa Group”, in various forums to present a stronger, cohesive stance. In the event that this collective voice is fragmented by individual agreements that differ substantially from each other, the continent’s leverage becomes at risk of being diluted. This approach could leave smaller or less powerful nations in a weaker position when negotiating with the Global North, ultimately undermining Africa’s ability to secure favourable terms for its collective energy transition needs.
Striking a Balance
The JETP represents a bold step forward in South Africa’s fight against climate change. However, its success depends largely on addressing the key challenges mentioned above. For policymakers, legal practitioners, and energy stakeholders, the JETP may provide valuable lessons on balancing environmental objectives with economic realities. Moreover, this transition has significant implications for the legal framework in South Africa, particularly in terms of regulatory reforms and compliance requirements that impact the ease of doing business. For potential investors, primarily in South Africa and the broader African continent, the evolving energy landscape offers as many opportunities as it presents challenges. Progressively streamlined policies and enhanced grid capacity could attract foreign investment, however, navigating complex local regulations and ensuring alignment with global climate goals will require strategic foresight.
