OUR BURNING PLANET

Renewables vs Coal: Timeline of a fatally rigged fight

By Kevin Bloom 16 January 2020
Caption
Until the anti-Ramaphosa faction suggested the idea, there was no talk of Eskom switching departmental homes. Now that the idea has been suggested, what’s so ridiculous about a new department that merges energy and the environment, asks the writer. (Illustrative image sources: Photos: Bloomberg / Getty Images / Nicholas Axelrod | Factory emitting smoke / Unsplash | Wind turbines in Liverpool, England / Getty Images / Christopher Furlong) / Juniperphoton)

Why is South Africa’s renewable energy sector so politically outgunned? The answer stretches back a decade, to a $35bn wind and solar initiative proposed by our government at the climate change conferences in Cancun and Durban. From 2011, the narrative takes in the impossible contracts imposed on the renewable IPPs, an obscure court case brought by coal truckers against Eskom and others, and the awesome behind-the-scenes power of the coal lobby.

I.

It was the first and only climate conference ever to hang its hopes upon the African solution. At COP17 in Durban in December 2011, when negotiations between the world’s largest carbon emitters inevitably stalled, delegates were encouraged to hold firm to the tradition of “indaba” — the descriptive noun, in the isiZulu language, that refers to an informal gathering where all can take part and anyone can talk, but where participants must come with a desire to listen.

Throughout the 12-day summit, the UN Framework Convention on Climate Change, the oversight body for COP (Conference of the Parties), had displayed on its website a summary of the tradition’s ethos: “In successful indabas, participants come with open minds, motivated by the spirit of the common good, listening to each other to find compromises that will benefit the community as a whole.”

As a bridging technique, this was nothing short of inspired. In the first week of COP17, the South African hosts had held three indabas, all with the aim of cajoling powerhouses such as China, India, Brazil and the United States to agree to a set of voluntary emission reduction targets by 2020. At COP15 in Copenhagen in 2009, these same nations, aided and abetted by South Africa, had done away with the hard targets of the Kyoto Protocol — a decision that was now threatening to place the “common good” beyond reach.

It is your choice what kind of history you want to make,” said Maite Nkoana-Mashabane, COP president and South Africa’s then-minister of international relations and co-operation, as negotiations stretched past the conference cut-off time into 1am on Sunday.

By 3am on Sunday, the European Union was staring down China and India, with both sides intransigent on the language that would determine the legal form of the mooted treaty. Nkoana-Mashabane, aware that the EU was about to stage a walkout, hustled China and India into a last-ditch indaba with Britain, France, Sweden, Poland, Brazil, Gambia and the United States. When the sun came up, after Brazil’s chief negotiator had forced a compromise, COP17 was hailed a success.

Except that in hindsight it wasn’t, because almost none of the signatories to the COP17 agreement would meet their targets, affirming the culture of breach and deceit that would characterise every subsequent treaty from the all-important Paris Agreement to the non-starter efforts of Poland and Madrid. Although carbon emissions would rise through the decade, hitting an all-time high in 2019, a year when global heating would deliver a smorgasbord of never-before-seen climate horrors to every continent on Earth, the community of nations would remain true to the charade.

Relatively, then, Durban in 2011 was a more innocent time. Back at COP17, there were still delegates who believed. In the final week of the conference, when energy minister Dipuo Peters took the stage to announce the official launch of the South African Renewables Initiative (SARI), there were many in the audience whose applause was heartfelt.

South Africa already benefits from international partnerships in the energy field,” she said, “but this is different. SARI will not only contribute towards the growth and deployment of renewable energy, the reduction of greenhouse gas emissions and enhanced energy access, but, equally importantly, it will enable South Africa to boost the development of new green industries, and new green jobs in renewable energy and its value chain.”

SARI, it turned out, had arisen from the energy crisis of 2008, when rolling blackouts had crippled the South African economy, forcing the mines to tap back on production just as palladium and platinum prices were hitting record highs. In government’s first international release of the plan, unveiled at COP16 in Mexico in 2010, trade and industry minister Rob Davies had extolled the virtues of South Africa’s wind and solar resources, declaring that they would “contribute to the country’s energy security” and establish the basis “for a robust and growing economy”.

The deep background to this statement was the fact that Eskom, South Africa’s coal-based power utility, which for decades had been emitting greenhouse gases on par with the dirtiest utilities in Europe, had been unable to raise the finance for the build of new plants. In December 2007, when President Thabo Mbeki apologised for not heeding Eskom’s call for capital expansion, it was already too late. And so the Department of Trade and Industry, working with the Department of Energy, hatched a plan to “unlock green growth”. The idea, as presented at COP16, was to design and implement a “viable financing mechanism” that blended domestic commitments with concessionary resources and risk guarantee instruments, which in turn would leverage “the far larger sums required from private finance at an affordable cost to South Africa”.

One year later, it appeared that the plan was a go. Minister Peters announced at COP17 in Durban that a declaration of intent had been signed with the governments of the United Kingdom, Norway, Germany and Denmark, as well as with the European Investment Bank. The final version of the SARI document, published with the government’s coat-of-arms, spoke of the creation of up to 40,000 new jobs, a 20% reduction in the greenhouse gas intensity of South African exports by 2025 and a $35-billion investment in renewables capacity by 2030.

Also, renewables would supply 19 gigawatts of electricity into the national grid by 2025, with the initiative mitigating 27 million tons of carbon emissions per year at full ramp-up, or a total of 575 million tons by 2049.

SARI, said Minister Peters, would play a big role in achieving the country’s climate change commitments, which President Jacob Zuma had announced at Copenhagen in 2009. These commitments, she made clear, were a 34% reduction in carbon emissions by 2020, and a 42% reduction by 2025.

For the record, South Africa emitted 464 million tons of carbon in 2012, with the energy sector responsible for 84% of the total. In late 2019, the Global Carbon Atlas uploaded its latest data — our country had moved up a spot to claim the title of 13th largest carbon emitter in the world, at 468 million tons per annum. This was three places and 48 million tons ahead of Australia, a nation which in early January 2020 was justifiably rebuked by climate activists for “burning down its own house”.

II.

In March 2019, Judge Piet Meyer of the North Gauteng High Court delivered a ruling in an obscure yet pivotal matter that demonstrated the lengths to which the coal lobby would go to quash renewable energy in South Africa. By then, although SARI had long been abandoned, the vision of a centralised renewables hub funded by a range of local and international finance instruments had been revived by President Cyril Ramaphosa’s Eskom Sustainability Task Team. Insiders offered Daily Maverick two potential theories for the demise of SARI, both of which held implications for the prospects of Ramaphosa’s climate finance deal and for the future of the renewables industry as a whole. Judge Meyer’s ruling, because of what it revealed about the enduring tactics of the coal sector, provided the necessary context for each of these theories.

The applicants in the matter were the Coal Transporters Forum, or CTF, a voluntary association of 50 or so trucking companies on contract to Eskom. The respondents were Eskom itself, the National Energy Regulator of South Africa (Nersa), the energy minister and 35 Independent Power Producers (IPPs). The CTF had brought the application on the basis that Eskom had no right to conclude power purchase agreements with the renewable IPPs until Nersa had ratified the terms. The relief sought by the truckers was a thinly disguised declaration of war: they wanted the agreements that Eskom had already signed with the IPPs to be judged null and void.

Of great help to observers and interested parties, who by default were all South Africans, Judge Meyer included in his ruling an outline of the legislative framework that had governed the renewables sector in the country since 2008. In July of that year, he reminded us, the Cabinet had adopted a “peak, plateau and decline trajectory” — the so-called PPD — which declared that our emissions would grow for a while as new coal-fired plants came online, peak between 2020 and 2025, remain flat for a decade and “decline in absolute terms” from around 2030.

Judge Meyer was unequivocal about the genesis of the PPD trajectory and its place in South Africa’s energy policy. As a passage that held the government accountable to its own words and deeds, paragraph 4 was a remarkable juristic intervention, a nod to the scientific consensus that would no doubt be cited by other South African judges as the ravages of climate collapse played out.

Government’s policy accepts that coal will remain the primary source of energy generation for the foreseeable future,” he noted. “However, it also acknowledges that coal has significant detrimental impacts on the environment, resulting in measurable external costs, also known as ‘negative externalities… The most significant impact is the emission of greenhouse gases which make the earth’s surface warmer and in turn contributes to climate change.”

The Integrated Resource Plan of 2010, added the judge, because it had been informed by the PPD trajectory, included a cap on carbon emissions. As South Africa’s original IRP, he stated, this document had laid the groundwork for the “first determinations” on renewable energy under the Energy Regulation Act of 2006. In August 2011, referring to section 34 of the Act, the energy minister had duly authorised the procurement of “3,725 megawatts of new renewable energy” by 2016. The following year, continued Meyer, the minister had ordered that a “further 3,200 megawatts” come online between 2017 and 2020.

In the event, although the fact was wide of Judge Meyer’s mandate, the government would fall far short of these targets. By 2019, while Eskom had bought a total of 6,400 megawatts from the renewable IPPs, only 4,000 megawatts would actually be in use. The shortfall, as Daily Mavericks Stephen Grootes pointed out during December 2019’s Stage 6 load shedding, was due to something called the “maximum export rule” — a government-sponsored contractual limit, worked into the purchase agreements, on the amount of renewable energy that could be transported to the grid.

But these limits, as much as they favoured the coal lobby over taxpayers, would not satisfy the truckers. Again, the CTF’s core complaint to the court was that Eskom’s agreements with the IPPs were illegal, chiefly because the regulator had not ratified the terms. In his judgment, Meyer stated that “all parties in the know” had testified that the truckers were misinformed.

Despite CTF’s protestation to the contrary,” he concluded, “the evidence is simply overwhelming that the regulator issued to each successful IPP bidder an electricity generation licence after following a public participation process for each project, including public hearings, and [that] it issued a written decision.”

Accordingly, Judge Meyer dismissed the application with costs.

It was at this point that things got properly bizarre. Incensed by their failure to get the entire South African renewables project erased from existence, the coal truckers divulged the extent of their desperation to City Press. The CTF’s spokesperson, Tshepho Kgadima, a coal mining entrepreneur, insisted that there was still a “debate” about the link between carbon emissions and climate change. He called Meyer’s ruling “a gross miscarriage of justice”. He then explained why it was “impossible” that the renewables providers could service Eskom’s needs.

It is the laws of physics,” said Kgadima, pronouncing on the unreliability of wind and solar. “They do not contribute a single megawatt to the grid.”

Such views, while extreme, were hardly divorced from the publicity stunts that the fossil fuel lobby had been employing in countries like Australia and the United States. In recent years, as the effects of climate change had moved from the abstract into the all-too-real, both Prime Minister Scott Morrison and President Donald Trump had used lumps of coal as on-stage props, suggesting that there was nothing to fear. Question was, how did this worldview play back into the implosion of SARI?

The first theory that Daily Maverick heard about SARI’s demise came from a high-level consultant on the project, a source who was in the room when a presentation was made in 2011 to National Treasury and Pravin Gordhan, then serving his first term as finance minister. According to this source, Treasury was so fond of the idea that it decided to claim ownership for itself, after which the project was canned.

Although unverifiable, what the theory had going for it was the fact that in April 2010, days before the World Bank granted South Africa a $3.75-billion loan to be used primarily for the completion of Medupi, Gordhan had published an op-ed in the Washington Post.

A strong body of opinion holds that multilateral development banks should be discouraged from funding coal-burning power projects with carbon dioxide emissions that contribute to climate change,” Gordhan wrote. “We share this concern but, after careful consideration, have concluded that the course we have chosen is the only responsible way forward.”

Gordhan, in other words, while not denying the impacts of climate change, had moved to correct the under-capitalisation mistake of Mbeki by doubling down on coal. The massive layouts that would be required for the completion of Medupi and Kusile, which at the time were being touted as “low emission” miracles, did not fit with a public sector renewables drive priced over the long-haul at $35 billion. If the strategy was welcome news to the climate change deniers in the coal lobby, or so the theory went, that was just an unintended consequence.

The second theory about SARI’s demise, not entirely unconnected, was floated by WWF’s Saliem Fakir, who had also been a key consultant on the initiative. According to this reading, SARI had been purposely downgraded into the abovementioned renewables IPP programme.

The funny thing,” Fakir told Daily Maverick, “was that after it disappeared into the ether, we began to realise that the IPP programme was copying some of our thinking. The different bid windows, the industrial components, etcetera.”

Which may well have been true, except for the one aspect of the IPP project that couldn’t have come from SARI’s thinking — the ANC-backed contractual red tape.

III.

Had SARI been implemented in 2011, with the seed capital that had been promised by the UK’s Department for International Development, would South Africa be discussing the prospect of Stage 8 load shedding in 2020? In a best-case scenario, given the 19 gigawatts of renewable energy forecast by 2025, would SARI have saved us? The question is largely moot, because the coal lobby would have been hovering anyway.

In South Africa, as in other countries that are major exporters of coal, oil or natural gas — Australia, the US, Saudi Arabia, Russia — the bottom line is that fossil fuels are synonymous with “power”. Behind every fossil fuel lies a critical mass of interests, a coalition that has ways and means of pushing its agenda through. As far as the global coal barons are concerned, the names are well known. Australia’s Clive Palmer spent $60-million on a 2019 election campaign that attacked Morrison’s left-wing competition, effectively paving the way for controversial projects like the Adani mine. The US’s Robert E Murray, who was chief executive of the largest coal mining company in the United States, donated $300,000 to Trump’s inauguration; ever since, the president has been doing his bidding.

Here we have Mike Teke, chief executive of Seriti Resources and former president of the South African Chamber of Mines. In November 2019, it was announced that Seriti had entered into a “binding agreement” to purchase a company called South Africa Energy Coal (SAEC) from the Australian conglomerate South32. Prior to the conclusion of the deal, local media houses were reporting that SAEC was providing 14% of Eskom’s coal, with Seriti providing 20% — the acquisition, these reports stated, would see Seriti vying with Exxaro Resources for the role of number one supplier, which would require a trip to the Competition Commission. In this context, there was one important detail that almost every media house foregrounded: Teke had donated R600,000 to Ramaphosa’s CR17 election campaign.

There was, of course, more. In September 2019, Mail & Guardian‘s Sabelo Skiti and Thanduxolo Jika revealed that Teke and Seriti director Lefa Mbethe, along with a team from South32, had visited officials from the Department of Mineral Resources and Energy (DMRE). The meeting, they alleged, took place a full week before the Australian company informed its shareholders that Seriti had won the exclusive rights to negotiate for SAEC.

The deal had attracted criticism of advantage and political patronage,” noted the journalists, “because no other bidder was granted the same courtesy of a meeting [with] department officials.”

Has there ever been a case where a renewables acquisition has generated similar heat? Hardly, and by the same token, neither in recent memory has there been a case where a thriving and profitable coal company has been forced into near-bankruptcy, merely because the cabinet minister responsible refused to pick up the phone.

But this, as Peter Bruce observed in the Sunday Times in December 2019, is exactly what happened to ARTsolar, the last manufacturer of photovoltaic panels left in the country.

Starting with State Capture under Zuma and then negligence under President Cyril Ramaphosa,” wrote Bruce, “no new renewable energy projects have come on stream since about 2014. A string of them have already been licensed by Nersa, but that’s not enough. To be able to go to a bank and raise the money to buy solar panels from ARTsolar, licensed bid-window winners from round 4 (2014) would need Mantashe to pick up his telephone and tell the IPP office to call the waiting licensees and tell them to ‘close’ their financing.”

Bruce was referring, obviously enough, to mineral resources and energy minister Gwede Mantashe, who Our Burning Planet has written about at length, particularly in the context of his coercive dissembling in Xolobeni, his soft spot for Sasol and his love affair with “clean coal”. And so now, in the first few weeks of 2020, we learn that Mantashe is engaged in a battle royale with Gordhan, over who will take ultimate control of Eskom.

By Our Burning Planets reckoning, it’s six of one and half-a-dozen of the other. Whether Mantashe’s DMRE gets it or it stays in Gordhan’s Department of Public Enterprises, Eskom will remain what it is. His opposition to State Capture notwithstanding, there is zero indication that Gordhan has learnt from his mistake of 10 years ago, when — with the full support of his party — he recommitted the country to a path of catastrophic carbon emissions and citizen-killing air. There is even less indication that Mantashe will arrive at his Damascus moment.

Sure, the country’s new IRP, released by Mantashe in October 2019, makes provision for renewable energy (including hydro-power) at 32% of supply. But for that to actually happen, he would need to shred the paperwork that’s currently protecting the coal lobby. It’s clear as day by now that this is an unlikely outcome.

So let’s take the long view. Acknowledging that the showdown for control of Eskom is a staged fight for factional purposes, and further acknowledging that our environment minister Barbara Creecy is incidental to these purposes, the much larger truth is that climate breakdown is not incidental to anything. Up until the anti-Ramaphosa faction suggested the idea, there was no talk of Eskom switching departmental homes. Now that the idea has been suggested, what’s so ridiculous about a new department that merges energy and the environment?

Remember, in May 2019, when Ramaphosa saw fit to merge the departments of mining and energy? What’s so ridiculous about undoing that colossal mistake and creating a super-ministry with Creecy at the helm? After all, in her short time at the Department of Environment, Forestry and Fisheries, this outlier ANC veteran has been relentlessly pushing for “evidence-based” policy.

By which she means policy that is climate aware. From the energy point of view, the proposal is rendered less laughable by the fact that Eskom needs to decommission 70% of its coal-fired fleet by 2040. As Our Burning Planet pointed out in its assessment of Ramaphosa’s $11-billion climate finance deal in October 2019, there’s no way that the funding to replace these plants will come from new coal. As far as global capital is concerned, humanity’s only viable future is renewables.

Ramaphosa, in attempting to play both sides, is gifting that future to South Africa’s coal lobby. What he could use, it seems, is a series of genuine government indabas. Unlike the pretend indabas at COP17 in Durban, it would be great if they served the common good. DM

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