Coal, as a plentiful natural endowment in the country, is poised to remain a pivotal part of the South Africa’s energy mix for the foreseeable future; however, this comes with risks and challenges, and it is imperative that more renewable-energy capacity, new technologies, considerable investment and collaboration are pursued as the country undertakes its energy transition.

This was highlighted by Energy Council of South Africa CEO James Mackay, delivering a keynote address during the first day of the Coal & Energy Transition Day event on July 23.

He warned that climate change was speeding up the energy transition and that the cost of this would be more expensive than anticipated.

Moreover, he said the country had fallen behind its committed transition targets.

Mackay pointed out that the abatement of loadshedding and rapid reform of the sector were exposing multiple system challenges with high complexity.

He explained that the country’s energy system was transitioning from a centralised, monopoly system towards a decentralised, digital and market-led system.

Key investments and transition enablers that must be pursued include grid expansion and market reform.

Mackay highlighted that there was potential for upwards of 500 000 jobs from localising value chains in terms of grid expansion. However, a lack of local capacity was a key implementing risk, he cautioned.

He added that a shift to a market system would impact on all generators and consumers and warned that market inefficiency would stall investment.

He stressed, therefore, that critical capabilities required were digital and cyber, real-time market regulatory oversight, transition policies and vesting contracts, implementation skills and market efficiency and transparency.

While coal-fired power generation remained in the country’s supply plans until 2073 in current plans, Mackay said that, under market reform, coal-fired power was increasingly “out of the money” as more competitive forms of power generation were introduced.

Moreover, he pointed out that coal-fired power risked global and national commitments to emissions reductions. South Africa, despite being a developing economy, was among the top 20 emitters globally.

Mackay explained that coal power was facing a rapidly increasing cost base, adding to State-owned utility Eskom’s decline and presenting an affordability risk.

He warned that Eskom could be displaced from the merit order owing to high costs of generation relative to new capacity.

Therefore, with energy being pivotal to the functioning of any modern economy, Mackay stressed that all technologies, collaborative partnerships and significant investment would be required to manage this complex energy transition.

He added that a liberalised market and agile policy were key to the energy transition.

Meanwhile, during a panel discussion, speakers said that, with regard to considerations around the energy transition, there was consensus that there was a definite need for a deliberate change in the energy mix, and that necessary strides were already being made.

However, differences arose in terms of the urgency that this would require, as well as the deadlines faced.

It was also emphasised that the use of transition fuels must not be overlooked; for example, Sasol using gas instead of coal for feedstock.