HOW SOUTH AFRICA SHUTDOWN COAL-FIRED POWER PLANT TO SECURE US$2.5BILLION CLIMATE FUND

South Africa is revising its timeline for the shutdown of coal-fired power plants in order to secure approximately $2.5 billion in climate finance, according to an agency in President Cyril Ramaphosa’s office.

The proposed timetable, to be presented to the Climate Investment Funds (CIF) in June, is aimed at ensuring the country remains eligible for funding under the Just Energy Transition Partnership (JETP), a $9.3 billion agreement with several wealthy nations. This assistance is contingent on South Africa reducing its reliance on coal, which currently makes up four-fifths of the nation’s electricity output.

Last year, South Africa informed its partners in the pact of its intention to postpone the planned shutdown of coal-fired plants, including 14 operated by state utility Eskom Holdings SOC Ltd., due to record electricity outages. However, new closure dates were not specified at the time.

The adjusted decommissioning plan linked to emissions targets will enable South Africa to access $500 million of 10- to 30-year loans with an interest rate of less than 1% and a grace period of eight years from the World Bank-affiliated CIF. This will facilitate concessional loans from multilateral development groups such as the International Bank for Reconstruction and Development, the African Development Bank, and the International Finance Corp.

In addition to public financing, South Africa plans to raise funds from private institutions and local development agencies. The proposal includes closing Eskom’s Camden, Grootvlei, and Hendrina power plants between 2027 and 2030, as well as shuttering units at other power plants to meet annual emission-reduction targets.

Once the CIF approves the proposal, decisions will be made regarding which South African entities will borrow the funds. Eskom may borrow money for decommissioning coal plants and transitioning to renewable energy, while the National Treasury may take responsibility for repayment related to alternative employment initiatives in coal-dependent communities.

Despite progress in easing electricity cuts and increasing renewable energy usage, the JETP has faced criticism from government ministers and labor unions, who argue that it could exacerbate outages and lead to job losses in the coal industry. However, supporters maintain that the aim is to strengthen the energy sector and facilitate a transition away from coal-fired power plants to meet emissions targets.

SOURCE: EngineeringNews