South Africa
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Transition to clean energy ‘unstoppable’, report reads

Renewables are set to account for about 50% of the global electricity mix within the next seven years, up from 30% now.

The latest World Energy Outlook by the International Energy Agency estimates that, given the expected rapid uptake of renewable energy and electric vehicles, the share of fossil fuels in global energy supply, which has been stuck at about 80% for the past few decades, could decline to 73% by 2030.

This could see global energy-related carbon dioxide emissions peak by 2025.

However, even if these expected shifts are realised, the demand for fossil fuels globally is set to remain far too high to achieve the Paris Agreement goal of limiting the rise in average global temperatures to 1.5°C.

“The transition to clean energy is happening worldwide and it’s unstoppable. It’s not a question of ‘if’, it’s just a matter of ‘how soon’ — and the sooner the better for all of us,” said Fatih Birol, executive director of the IEA.

“Governments, companies, and investors need to get behind clean energy transitions rather than hindering them. There are immense benefits on offer, including new industrial opportunities and jobs, greater energy security, cleaner air, universal energy access and a safer climate for everyone,” Birol said. 

The report highlighted the gap between current grid spending trends and the investment required to reach climate goals as one of the main constraints to speeding up the pace of renewable energy rollout.

Data presented in the report shows by the end of the decade the world is set to have manufacturing capacity for more than 1,200GW of solar panels per year, but it is projected to deploy only 500GW in 2030. 

Connection queues

This is partly because grid expansion is not happening fast enough to connect new renewable energy projects to transmission infrastructure fast enough.

Many advanced economies, including Italy, Spain, the UK and US, are suffering from grid connection queues for wind and solar projects, the IEA said.

“However, the biggest challenges are in emerging market and developing economies, where responsibility for investment often lies with cash-constrained and heavily indebted public utilities,” according to the report.

The IEA referred specifically to SA and Eskom, saying Eskom’s debt burden of about $20bn does not only raise the country’s risk premium and borrowing costs, it also limits the utility’s ability to invest in expansion of the transmission grid.

As previously reported by Business Day, Eskom will have to build 14,000km of new transmission lines and expand distribution infrastructure, at a cost of at least R390bn, over the next eight to 10 years to avoid another electricity crisis in the near future.

A shortage of grid capacity has already slowed down the rollout of the government-backed independent power producer programme. In the most recent bidding round for the programme, grid constraints resulted in the procurement of only 860MW out of an anticipated 5,200MW.

Electricity minister Kgosientsho Ramokgopa told parliament this week Eskom’s financial position places significant limitations on its ability to attract sufficient capital towards expanding the transmission grid.

Private sector

Ramokgopa said the ministry would soon present a report detailing “transmission financing pathways aimed at fast-tracking transmission infrastructure investments” to cabinet.

The IEA report suggests development finance institutions and governments look at developing business models that allow the private sector to participate in grid development and strengthening, for example, through independent power transmission projects that are designed to offer rights over a specific transmission line through a tendering process.

The report also shows spending by SA households on energy as a share of total household income is about 50% above the global average.

While households are spending about 4% of total household income on energy globally, in SA this was about 7% in 2022, up from 6% in 2021. This was about on par with Brazil, India and Spain, but households in the UK, France, Australia, Korea, the US and Canada were spending 3%-5% of household income on energy.

By 2030, the share of low emissions electricity generation in SA’s energy mix could reach 40%, up from 12% now, but it would depend to a large extent on whether new transmission infrastructure can be built quickly enough.

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