JETP partners plan to help South Africa
The international partners of South Africa's Just Energy have affirmed their commitment to help finance much-needed grid expansion in South Africa.This comes as South Africa has a number of renewable energy projects on the horizon, but faces increasing pressure on its grid capacity.
The International Partners Group (IPG) issued a statement indicating that public and private finance institutions would work together with the group and South Africa to find financing solutions for the country's transmission network. This followed a roundtable at the Africa Climate Summit that took place in Nairobi, Kenya, this week.
The IPG includes the UK, US, France, Germany and the EU – which at COP26 in 2021 formed a US$8.5 billion climate pact with South Africa. The Just Energy Transition Partnership (JETP), as it is known, is aimed at helping South Africa decarbonise its economy – targeting the energy sector, which is mostly coal-dominated and also developing the green hydrogen and new energy vehicles sectors.
Funding for the energy sector is also geared toward transmission – government estimates South Africa needs more than R200 billion to expand the grid so that it can connect more renewable energy generation projects.
A survey by Eskom and the country's wind and solar PV associations shows that about 66 GW of renewable energy projects are in the pipeline. Rethabile Melamu, CEO of South African Photovoltaic Association noted that the private sector is "actively engaged" in developing renewables at scale - but the grid needs to be expanded to connect these projects.
The IPG in its statement said it would support the expansion of the grid:
"JET financing remains available to support transmission as South Africa decides on the financing models and procurement arrangements to build around 1 400km of new transmission lines needed each year up to 2030."
Germany
According to the IPG, Germany, through the development bank KfW, is working on a €200 million sovereign loan to Eskom – targeted at the transmission network in the Northern and Western Cape provinces, where current capacity is constrained. This is expected to allow 2.2GW of new renewable energy projects to be connected.
"Finalisation of the loan needs Eskom and National Treasury approval," the statement read.
Similarly, the UK is also willing to provide finance through the African Development Bank (AfDB). The UK's guarantees to the AfDB enable it to lend an additional US$1.3 billion to South Africa for just energy transition purposes or sectors.
More facilities could also be made available through the European Investment Bank, the IPG said.
Some of the partners – as well as Denmark, which is considering joining the JETP – are also involved in improving technical capacity or helping to assist with regulatory arrangements and other efforts to optimise the use of the existing grid.
"It is critical that concrete steps are taken to address the transmission bottleneck so that South Africa has a reliable energy supply, not just in the short term but the long term," said Busisiwe Mavuso, chief executive of Business Leadership South Africa. "We are pleased to see international partners looking at financing this vital area with their Just Transition funds, and we hope to see the government take up the offer," Mavuso said.
Importantly, the partners endorsed the participation of the private sector to help find finance solutions. "The IPG believes that, alongside other development partners and the private sector, they could together mobilise significant finance for transmission in South Africa," it said.-Fin24