South Africa’s energy sector is in a state of disarray. Once one of the most reliable utilities in Africa, Eskom – the country’s state-owned power utility – now exists in a state of constant emergency which is currently threatening to push the country into civil disarray and economic catastrophe. Eskom has allowed its power plants to fall into disrepair to the disastrous extent that the company has been running at about 50% capacity. As a result, South Africans are living with consistent and continuous rolling blackouts, disrupting the local economy and negatively impacting residents’ quality of life.
South Africa’s energy (in)security isn’t just hurting its own citizens; it also threatens global efforts toward decarbonization and efforts to mitigate the impact of climate change. All pathways toward limiting global warming to 1.5º or 2º Celsius over pre-industrial averages include a rapid phase-out of coal, the dirtiest fossil fuel, across the globe. While many developed countries have made great advances in this regard, it has proven to be extremely difficult in developing economies. Nowhere is this more true than in South Africa.
What’s more, South Africa’s own decarbonization journey (or lack thereof) has a large influence on global emissions – far more so than most other developing countries. The nation is currently the world’s 14th-largest emitter of greenhouse gasses, and this is in large part due to the fact that the country’s energy mix is dominated by coal, which has about a 70 percent share of energy use. South Africa is also home to the Secunda plant, which is the single largest emitter of greenhouse gasses in the world. The plant, which converts coal to fuel and other chemicals, emits more greenhouse gasses than the individual totals of more than 100 nations.
As pressure to decarbonize increases around the globe, Sasol Ltd., the company that runs the Secunda plant, is realizing that it’s going to have to change its business plan in order to stay in investors’ good graces. The company came to this conclusion pretty late; their first plan to lower emissions was introduced in 2021. But that plan is extremely ambitious, targeting a 30 percent cut in emissions by 2030 and net zero by 2050.
In an effort to meet these ambitious targets, Sasol is scrambling to replace a portion of its coal consumption with natural gas and green hydrogen. The company is injecting $1 billion to explore for more natural gas reserves in neighboring Mozambique, and is simultaneously looking to set up a green hydrogen project on South Africa’s western coast. However, there are major issues with both of these potential power sources, and questions remain as to how the company will be able to replace coal in its mix when South Africa isn’t even producing enough energy to keep the lights on while it continues to rely heavily on coal. Securing enough energy to replace coal in Sasol’s operations will be no easy feat, and the company has expressed that it is “concerned” about supply.
Activists and analysts alike have questioned the company’s plans and commitment to reaching net zero emissions. Big lenders have suggested that a pivot from coal to natural gas, another fossil fuel with considerable emissions, is short-sighted and may be too little too late. “We still struggle to see how more gas makes long-term sense,” JPMorgan Chase & Co. said in a November research note. The financial firm went on to say that “an increasing number [of investors] find it difficult to justify owning Sasol as climate concerns mount,” it said. Meanwhile, activists have criticized Sasol’s plans as overly vague and potentially toothless. “The lack of adequate details, accountability measures and incentives means that Sasol does not have a feasible, measurable plan for it to achieve its emission reduction targets,” said Tracey Davies, director of Cape Town-based activist group Just Share, in a quote for Bloomberg.
Turning from one fossil fuel to another is one major issue, but the green hydrogen plan is even more of a head scratcher. Even in countries without the massive energy shortages that South Africa has, green hydrogen has been criticized for using too much green energy that could be more useful in other applications, such as powering the grid. Green hydrogen has to be made using green energy, which the nation does not have nearly enough of as it is. In the case of South Africa, green hydrogen is almost certainly counterproductive.
To be fair, Sasol is currently expanding its renewable energy production capacity through partnerships with European firms. But it will not be nearly enough to power the company’s targeted rate of decarbonization. It’s great that Sasol is acknowledging its need to join the decarbonization movement, and sees the economic sense of doing so, but holding the company accountable to its pledges will be another story. And the first step to that accountability is a decarbonization plan that makes sense and has actionable, feasible steps – and Sasol clearly hasn’t yet achieved that.
By Haley Zaremba for Oilprice.com
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