Cross-border energy deals ignore climate-change goals

NOT much has been said about the ministerial determination printed in the Government Gazette on April 20 2016 that 3,750MW of coal-fired electricity supply capacity will be through crossborder power procurement. It requires that this capacity be secured from independent power producers (IPPs), and the procurer will be the Department of Energy.

This is the latest determination in terms of the long outdated Integrated Resource Plan — IRP 2010 — for electricity supply. This is clearly being retained as the official plan until various desired procurements are so advanced as to be unaffected by a new plan. The department committed to a twoyear planning cycle, but has produced nothing since a draft IRP Update Report was tabled in 2013 and later withdrawn.

The notice explains that the 3,750MW “represents the capacity allocated to ‘Coal Pulverised Fuel (PF), Fluidised Bed Combustion (FBC), Imports … for the years 2025 to 2030…” in the IRP 2010.

Thus the capacity allocated to various kinds of coal-fired generation over the last five years of the planning period has now been allocated to imports. The determination stipulates that timing “may differ from the timetable set out in Table 3 of the IRP”, and that “the procurement programmes shall target connection to the Grid for the new generation capacity as soon as reasonably possible …”.

This means procurement is already in the works for the entire allocation to coalfired power under IRP 2010-30 (a total capacity of 6,250MW, in addition to Medupi and Kusile at about 4,800MW each), backed by ministerial determinations requiring Eskom to purchase the output.

A recent department presentation to Parliament noted that a “request for information” regarding coal-fired power projects in June 2014 drew interest “shown by 80 IPPs including projects in Botswana, Zimbabwe, Swaziland and Mozambique”.

This cross-border procurement could be worth about R32bn per annum, assuming a price of R1.20 per kWh, which is widely considered a credible benchmark for new coal-fired electricity supply. This assumes pollution-control equipment as required in SA, including flue-gas desulphurisation (FGD). It also assumes the power purchase agreements cover 80% availability of the total capacity. Perhaps IPPs across the border will offer something cheaper (about R26bn per annum at R1/kWh), as water may not be available for FGD.

One facet of such a power supply initiative is the prospect of Treasury underwriting Eskom power purchase agreements that seek to secure infrastructure investments in regional rather than domestic projects. While regional co-operation on electricity supply is an established policy and planning objective, it is not usually associated with agreements that will further entrench our heavy dependence on coal.

Eskom CEO Brian Molefe has recently shown disdain for government commitments to power purchase agreements with renewable energy IPPs, prompting the government to protest that it is not for Eskom to make policy. Eskom must be aware of the obligations to cross-border coal-fired power procurement contained in the ministerial determination. Will the CEO’s arguments against procurement of renewable energy be applied to coal-fired IPP agreements?

Another facet of the decision is an externalisation of the national carbon footprint of electricity supply, as the emissions will also be cross-border. Using the assumptions above, emissions from such generation will be in the region of 20Mt per annum, about 3.6% of SA’s total emissions.

Our National Development Plan explicitly recognises that shifting emissions over the border is not a legitimate climate change mitigation strategy. In 2035, 20Mt would be at least 15% of what our total annual emissions need to come down to, to have at least half a chance of achieving the global mitigation goal.

It remains to be seen whether the longawaited Integrated Energy Plan might adopt, or will at least investigate, an emissions reduction objective consistent with the global goal. This question, tabled when the consultative process was launched in May 2012, continues to be ignored.

The decision to import coal-fired power puts into perspective the complaint to the public protector lodged by the Alternative Information and Development Centre (AIDC), joined by a dozen other organisations. The complaint quotes the requirement of the National Climate Change Response White Paper, adopted in 2011, to set medium- and long-term Desired Emissions Reduction Outcomes (DEROs) — to 2030 and 2050 respectively.

Their complaint targets the interministerial committee on climate change, chaired by Environmental Affairs Minister Edna Molewa. In May, the AIDC published an open letter to the committee motivating urgent, multi-stakeholder deliberation of national climate change mitigation objectives and, most particularly, sectoral emissions reduction outcomes for 2030.

It also urged the identification of a national greenhouse gas emissions pathway to 2050 that is consistent with the “well below two degrees” objective of the Paris Agreement, signed by Molewa in April. The minister did not respond to the letter.

The public protector complaint alleges maladministration for allowing the elaboration of mitigation policy to be unduly delayed, to the detriment of responsible public investment planning.

It also charges maladministration for allowing the process on DEROs to be held hostage to the department’s avoidance of timely energy planning, and for effectively allowing the department to constrain future options for climate change response.

It further argues that the committee should not be allowing massive energy infrastructure commitments to be made in the absence of clear emissions objectives and a low-carbon energy strategy.

The significance of Energy Minister Tina Joemat-Pettersson’s determinations for electricity supply cannot be meaningfully assessed against the very broad national emissions range described in the 2011 policy. That allows for annual emissions anywhere between 398Mt and 614Mt up to 2035, and an equally wide range for decline thereafter. This apparently doesn’t bother the department, but what of other sectors and activities for which emissions reduction is more challenging or costly than the opportunities readily available in electricity supply?

Other stakeholders and government entities, such as the Public Investment Corporation, should be demanding clarification of climate change policy without waiting for the public protector to investigate. The coal lobby is trying to secure as much business as it can before people get to grips with what the global goal really means. Avoiding the issue will only make it worse.

This cross-border procurement could be worth about R32bn per annum, assuming a price of R1.20 per kWh

Worthington is a Democracy Works Foundation associate, freelance researcher and activist who has worked on energy and climate change issues in the South African NGO sector since 1995.

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