Can Eskom keep lights on in a low-carbon economy?

COMMENT

We are told that Eskom needs new investment in coal mines to keep the lights on even while our banks, reading from a different script, are saying “no, no, no”.

The ANC’s head of economic transformation, Enoch Godongwana, told Carte Blanche viewers that Nedbank and Standard Bank have said “they are not going to put money in coal any more. To me, that’s an invitation for prescribed assets,” he said in a reference to the party’s investigation as to whether it should force pension funds to invest in developmental projects.

Bloomberg reported that Godongwana said the country has 66-billion metric tonnes of coal reserves, while Eskom has said new mines aren’t being opened quickly enough to ensure supply for its power plants.

Standard Bank meanwhile faces a resolution tabled by nonprofits Just Share and the Raith Foundation and activist Theo Botha, for consideration at its annual general meeting on May 30, to include climate risk disclosure in its reporting.

READ MORE: Eskom: The abyss just gets deeper

A 2015 G20 initiative launched the Task Force on Climate-related Financial Disclosures to understand how climate change will affect global markets, and what information companies need to disclose to the investment community to assess climate-related risk and opportunity.

“Every rand invested by South African banks in new fossil fuels increases climate risk, renders it hard to transition to a low-carbon economy, and exposes the banks to reputational and financial risks,” Just Share says in a memorandum that explains why it wants Standard Bank shareholders to vote in favour of disclosing climate risk. The board has recommended that shareholders vote against this resolution.

EE Publishers reported last month that Standard Bank will no longer finance coal projects in Africa and globally. It pulled out of financing two coal-fired independent power producers, the 577-megawatt Thabametsi in Limpopo and 306-megawatt Khanyisa in Mpumalanga.

“South African banks appear to be falling in line with new OECD [Organisation for Economic Co-operation and Development]country protocols, which prohibit the construction of new coal-fired power plants other than those that will use the latest ultra-supercritical steam-generation technology, which provides increased efficiency (typically greater than 45%), and lower CO2 emissions,” EE Publishers said. “The Thabametsi and Khanyisa plants are designed around circulating fluidised bed boiler technology, operating at sub-critical pressure and temperature, giving efficiencies of about 32%.”

READ MORE: Eskom reveals billion rand losses in annual financial results

Nicole Loser of the Centre for Environmental Rights says legal challenges have been brought against Thabametsi and Khanyisa since 2015, because they are greenhouse-gas intensive. Court action ensuring licensing conditions are strictly met have delayed the build and seen the projected cost of the plants rise above R20-billion.

Neither of the two coal power producer shave been built because of civic action.Investors in projects such as these can end up with stranded assets, says Loser.

As someone who has watched Enoch “make-the-pensioners-pay”Godongwana for many years now, my impression is that he is usually on the right side of the economic issues he has had to deal with. He’d do well to consider now, notwithstanding the Eskom albatross around our collective necks, how we join the rest of humanity in transitioning expeditiously to a low-carbon economy.

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Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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