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South Africa needs to spend $250 billion over 3 decades to transition from coal – Business Standard

South Africa, the world’s 13th emitter of greenhouse gases, will need to spend $250 billion over the next three decades to shut down coal-fired power plants and replace them with green energy, according to a study.

In addition to closing the country’s coal-fired plants and building wind and solar power plants, money will need to be spent to compensate coal-dependent communities whose livelihoods are threatened by change, the blended finance task force and the Center for Sustainability Transitions at Stellenbosch University said. According to the study, most of the money should come from the private sector.

The estimate comes as South Africa, which relies on coal for more than 80% of its electricity, is in the process of negotiating $8.5 billion in climate grants and soft loans with some of the world’s richest nations. The potential deal, announced at last year’s COP26 climate summit in Glasgow, envisages South Africa to withdraw some coal-fired power plants.

“The $8.5 billion pledge could be a catalyst to unlock $250 billion,” researchers said in the study released Thursday. “You must provide a global blueprint for transition financing.”

The deal, some details of which are expected to be presented before the COP27 climate summit in Egypt later this year, is being negotiated between South Africa and a group consisting of the United States, United Kingdom, France, Germany and the European Union.

With its aging coal-fired power infrastructure, many of which are nearing the end of their design life, and an economy that relies heavily on the dirtiest fossil fuels, South Africa is an ideal country from which to strike an energy transition deal that can be reflected in talks with other nations. Vietnam, Indonesia and India are seen as countries that could start talks similar to those of the African country.

Coal accounts for more than 5% of South Africa’s GDP and the coal industry employs 125,000 people, each with between three and 10 dependents.

According to the plan presented in the study, the country will need to install 5 gigawatts of renewable energy annually until 2050. This will create 5,000 jobs annually over the next decade in building, operating and maintaining the plants, the researchers said.

wind and solar energy

South Africa is “home to some of the world’s best solar and wind energy resources, and offers economic opportunities through a rapid energy transition,” the researchers said.

Researchers envision spending over 30 years as:

  • $125 billion for 150 gigawatts of solar and wind power plants

  • $18 billion for 33 gigawatts of storage batteries

  • $8 billion for 5 gigawatts of pumping to store hydro energy

  • $18 billion for 30 gigawatts of natural gas power generation

  • $50 billion to improve power transmission and distribution networks

  • $24 billion to shut down coal-fired power plants owned by the national energy utility, Eskom Holdings SOC Ltd. , by 2040

  • $10 billion to compensate affected coal workers and rehabilitate the environment in idle coal mines

  • The researchers said funding for the program should come from the private sector in both South Africa and the rest of the world.

The researchers said government-linked institutions such as the Public Investment Corporation, which oversees 2.34 trillion rand ($149 billion) in mainly government workers’ pensions, the South African Development Bank Ltd and the Industrial Development Corporation, should play a role.

“Most of the $250 billion needed for an equitable energy transition in South Africa could be financed by private financial investment in scaling up renewables and other enabling infrastructure,” the researchers said. “About a third of funding will be required from fully mandated non-commercial capital providers” to support the social costs of the transition.

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