South Africa Faces an Energy Dilemma
Bloomberg Markets|August - September 2021
POWER FAILURES have become routine in South Africa. At the same time, the country wants to wean itself off the coal that generates more than 80% of its electricity and makes it the world’s 12th-biggest source of greenhouse gases.
PAUL BURKHARDT

Most of South Africa’s power stations are near the end of their lives. An average of about 1,000 megawatts of capacity is set to be decommissioned annually over the next decade, which presents an ideal opportunity to begin overhauling the energy system. The question is how.

The government aims to cut emissions to net-zero by 2050. Its energy blueprint envisions the construction of scores of solar and wind-powered plants. But there are widespread doubts that those projects can happen fast enough, or be reliable enough, to replace coal. So a controversial fossil fuel remains part of the planned energy mix: natural gas.

“Electricity capacity will have to be replaced,” Mineral Resources Minister Gwede Mantashe said on June 11 during an interview in Mozambique’s capital, Maputo, where he suggested that new pipelines could be built to tap more natural gas from the country’s offshore fields. “Gas is an alternative,” he said. “It can be a game-changer.”

PLANS TO USE natural gas to produce at least a quarter of almost 12,000MW of additional power by 2030 are hotly contested. The fuel generates less than half the greenhouse gases that coal does, but replacing the dirtiest fossil fuel with a cleaner one will make South Africa’s emissions target difficult to meet.

Financing for gas-fired plants may also be hard to come by. Several development finance institutions, which are crucial funders of many energy projects in Africa, are revising their investment mandates to exclude the fuel. South Africa may have to rely on companies such as General Electric Co. and Exxon Mobil Corp. that have expressed interest in developing the new gas projects.

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