Green energy and its discontents: a gradual and balanced approach is needed
Volume 3, April 2023 Part 1
Introduction
Like every momentous shift in history, the path towards the green energy transition is not without its discontent. Making the transition a success requires that we attend not just to environmental factors but also to socioeconomic imperatives. The core mission of such a shift should be to achieve an innovation-driven and green economy that is inclusive and equitable.
Given that the country has a large number of young people who are unemployed and suffers high levels of inequality, the government must manage the transition in a way that does not worsen the socio-economic tensions in the country. It should set out to improve living standards and build more stable and resilient communities. According to Statistics South Africa Quarterly Labour Force Survey of the last quarter of 2022, South Africa’s expanded unemployment rate is 42.5 percent. While this is a 0.5 percent decrease from the previous quarter, it is unacceptably high.
Although there is growing convergence among countries on the urgency of combatting climate change and shifting the production and consumption patterns towards greener and sustainable forms, there are different perspectives regarding the means, pace, and policy sequencing to achieve such objectives.
Some countries, mainly advanced industrial economies, are better placed rapidly to lower their fuel emissions and change their industrial processes. They possess strong and inclusive institutions that can cushion the vulnerable during a disruptive transition. And their citizens generally enjoy high standards of living. Moreover, these countries’ social and economic structures are broadly equitable and more resilient; they are reinforced by fiscal capacity and a social and economic infrastructure that is robust.
Despite their relative economic strength and social resilience, industrial economies place a premium on energy security. When the gas supply tightened in the wake of Russia’s invasion of Ukraine in early 2022, emissions from natural gas fell by 1.6 percent.
European countries did not celebrate such a positive outcome for the environment with alacrity; instead, this raised panic over an approaching winter of discontent at the end of that year and triggered frantic sourcing of coal from countries such as Colombia, Australia, and South Africa. Europe stepped up gas-to-coal switching, leading to 1.5% rise in coal-fired power generation in the European Union (EU) in 2022. Luxembourg, Denmark, and Germany unveiled the largest state aid packages per capital to cushion their citizens against spikes in energy prices by subsidising the retail price that consumers pay for energy - effectively subsidizing fossil fuels.
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The lesson here is that countries negotiate policy choices under conditions of uncertainty and in the face of security and social risks. These political economy calculations explain why top emitters in the world are moving slowly in ditching gas and imposing the burden of rapid decarbonisation on developing countries that rely on coal.
Historically and cumulatively since 1850, the largest emitters are US, China, Russia, Germany, and the UK. Carbon dioxide emissions by these countries a hundred years ago have cumulatively caused global warming today. Three of these - Germany, the UK, and the US - are leading the Just Energy Transition initiative to nudge South Africa to decarbonise rapidly. These countries must set a better example by accelerating their own decarbonisation and make significant payments, as part of climate repatriation, commensurate with their role in the historical depletion of natural capital, for causing uneven patterns of economic development globally, and for placing at grave risk small island nations.
A Polarised Debate
One of the strands in this debate on green energy transition in South Africa holds a view that the country should accelerate the decarbonisation of its power sector in exchange for concessional finance along with an increase in the uptake of renewable energy to expand generation capacity, a transactional intervention that presumably would also ease the financial stress of the public utility, Eskom.
Those who advocate for radical decarbonisation believe that the sooner we get out of fossil fuels and embrace renewable energy sources, the more we can avoid the problem of inefficient public utility, characterised by operational inefficiencies and rent-seeking behaviour. This argument is far from compelling since there are solutions to such corrosive tendencies. These solutions lie in enhancing governance, taking drastic measures against criminal behaviour, improving operational capabilities, and rethinking Eskom’s business model.
Undoubtedly, reliance on coal is unsustainable in the long run; neither is it helpful to depend solely on renewable energy sources that are bereft of baseload. As part of its business model innovation, Eskom must play a pivotal role in future energy markets rather than just be an off-taker of renewable energy sources. It must draw lessons from other state-owned enterprises such as France’s EDF, Denmark’s Energinet, the State Grid Corporation of China. As it exits coal gradually, Eskom should pivot strongly towards other cleaner sources of energy with baseload such as nuclear energy generation, while participating as a developer or partner in renewable energy.
There is a tussle in the European Union between major powers over reclassifying nuclear as part of green energy. France insists on ‘technology neutrality’ to broaden the options for clean energy to include nuclear and hydrogen than to privilege solar and wind energy sources. Germany, on the other hand, is ideologically opposed to the classification of nuclear as green. The UK too is considering reclassifying nuclear power as environmentally sustainable under Great British Nuclear. As John Doerr, a leading Silicon Valley investor in clean energy has pointed out, there are ongoing efforts to advance a new generation of safer reactors, Generation IV. These technologies could provide the second largest share of the world’s carbon-free energy, geared for safety and lower cost. Nuclear should therefore be part of the options for carbon-free energy and a coal replacement in South Africa.
South Africa’s primary dilemma is that it has a socioeconomic structure that is characterised by high levels of inequality and unemployment while at the same time facing mounting external pressure to retire its coal fleet at a twinkling of an eye. The country is yet to overcome the social legacy of apartheid, which created a coal-powered industrial structure that bolstered the living standards of a white minority at the expense of the black majority.
Finally, a narrowly focused debate on the decarbonisation of the power sector could detract from wider interventions that are needed to shift paradigms in other sectors of the economy, including transport, the built environment, and ICT towards broad-based and inclusive green innovations. Such interventions require mobilisation of energies across the public and the private sectors to create a shared value in this area.
Conclusion
As we march towards a brave new world of green technologies, we must ensure that those left behind and trapped at the bottom of the old industrial economy are the major beneficiaries of the new economy. The transition to the ideal state must reflect a broad energy mix rather than lean on a narrow set of technologies. It should guarantee energy security and inclusiveness.
Ignoring socioeconomic issues and energy security risks a populist backlash that could significantly slow down a necessary transition to a green industrial economy. For countries like South Africa that have high levels of unemployment and inequality, a green energy transition that ignores socioeconomic disparities could exacerbate social and political instability, further undermining stable governance and social cohesiveness.
Reducing the density of coal in our energy profile must allow us to build back better, give dignity to marginalised communities, boost local capacities and diversify the ownership structure across the value chain. The green energy transition must be both pragmatic and open-minded about various technologies that could support decarbonisation without compromising energy security.
