Eskom CEO André de Ruyter has said South Africa has no choice but to shift from coal to renewable energy as it is becoming impossible to secure funding for new coal projects.

Also, a plan by the European Union to impose a carbon border tax could render South African exports, including from the the key vehicle manufacturing sector, much less competitive.

In a podcast interview with David Ansara, a political analyst and chief operating officer at the Centre for Risk Analysis, De Ruyter said many lenders have now taken an “in-principle decision not to fund any further coal projects”.

“Even the Chinese financing institutions have said they will not finance any new coal-fired projects. So, coal is no longer a fuel that is acceptable to the international financial community,” he said.

“Even if you had the opportunity to build a new coal-fired plant, you wouldn’t be able to finance it, you wouldn’t get the environmental approvals and you would not get the insurance to continue running your plant,” he added.

“We can rail against this ‘injustice’ and say the rich world built their economies on coal and we’re not able to do the same, but the bottom line is that having a grudge against reality doesn’t help.”

Another important aspect to consider is that coal is no longer a cheap energy option compared to renewables, the cost of which has plummeted in recent years. On cost considerations alone, it doesn’t make sense not to favour renewable energy over coal-fired projects.

Half the cost

“We are seeing the ‘levellised’ cost of renewables coming in at half of our cash cost of running an almost fully depreciated coal plant,” De Ruyter said. “So, if you include the full cost of depreciation in your comparison, even with that low load factor, you still have a significant cost advantage over a coal plant.”

Also counting against coal is the fact that large projects, which new coal plants invariable are, are fraught with execution challenges. “In South Africa, they are also fraught with corruption: Medupi and Kusile are poster children if ever you wanted to see what goes wrong when you have corruption extending its baleful influence over a mega project — overspent, way behind schedule and not performing to expectation.”

De Ruyter said South Africa has a “unique opportunity” to pivot away from fossil fuels given the country’s ample wind and solar resources. It also may have no other choice.

“As of next year already, the Europeans will be imposing a carbon border tax, which will attribute a carbon footprint to all commodities as well as some as agricultural and manufactured goods exported from South Africa,” he said.

“Our car manufacturers are desperate to get access to green energy because they are very concerned that their major markets — the European Union — will, with the imposition of this carbon border tax, make their products uncompetitive.”

De Ruyter added: “There’s a saying in the energy industry that ‘the stone age didn’t end because of a lack of stones; the coal age won’t end because of a lack of coal’. Just because we have this resource doesn’t mean that we should burn every last lump of it.” — © 2022 NewsCentral Media