South Africa projects $40 billion funding gap in energy transition

South African government has projected a funding gap of $40 billion (279.1 billion yuan) in its energy transition plans from coal to clean energy.

While briefing the Portfolio Committee on Mineral Resources and Energy on the Just Energy Transition investment plan on Tuesday, Mondli Gungubele, the minister in the presidency, said the plan would require a total investment of $86 billion.

The investment will cover a five-year period focusing on three priority sectors, namely electricity, new energy vehicles and green hydrogen.

Mondli said the electricity sector alone will require an investment of $59.3 billion over a five-year period, to cover infrastructure, just-transition measures in Mpumalanga, and sector-wide as well as municipal support measures.

He said the new energy vehicles sector will require $7.4 billion to transition the automotive sector value chain to protect sector employment and promote sustainable manufacturing.

The green hydrogen sector on the other hand will require $18.4 billion to position the country as a leading exporter and for local use in hard-to-abate sectors, including the provision for port infrastructure.

According to the South Africa's Just Energy Transition Investment Plan for the initial period of five years, 2023-2027, $156 million will be required for skills development as well as $18.4 billion for municipal capacity.

Sahlulele Luzipo, the committee chairperson, said the committee might consider inviting the National Treasury to hear how the investment shortfall will be covered.

South Africa has committed to achieving 420-350 megatonnes of carbon dioxide equivalent by 2030, depending on the level of support received.

While addressing a hybrid special sitting on December 2, Joanne Yawitch, the commissioner for Residential Climate Commission, said the Just Energy Transition Investment Plan is depended on the scale and nature of financial support from international community to complement the domestic resources.

At the COP26, France, Germany, UK, EU and the US forged a Just Energy Transition Partnership, forming the International Partners Group, mandated to mobilize $8.5 billion between 2023 and 2027 to support South Africa's just energy transition.

The funds will be directed to the electricity sector for expansion of transmission grid, decommissioning of coal plants, deployment of renewable energy and supporting economic diversification in affected coal mining areas.

In its Just Energy Transition Investment Plan, South Africa has invited international and local investors and donors to collaborate with the country on the transition journey.

South Africa has been grappling with climate and energy-related risks including shortages of electricity supply, under-investment in the electricity system, as well as physical, social, and transition risks.

The country's high carbon-intensity of production and economic dependency on fossil fuel value chains require specific interventions to manage, according to the Just Energy Transition Investment Plan.

This is in addition to mitigating the transition consequences particularly impacted workers, communities, small business, and exporters' exposure to carbon trade barriers.

It is estimated that the value at risk for the South African economy arising from the energy transition stands at $50 billion.

South Africa is one of the most carbon-intensive developing economies globally, emitting 0.6kilograms of carbon dioxide per dollar of Gross Domestic Product, according to the government data.

It's also the largest carbon emitter in Africa, driving 40 percent of the continent's total emissions. The electricity sector contributes half of the country's greenhouse gas emissions.