UN DSG: Keep goal of 1.5°C alive by closing climate finance, mitigation gaps with urgent, robust action

Following are UN Deputy Secretary-General Amina Mohammed’s closing remarks, as prepared for delivery, to the Commonwealth Heads of Government Meeting’s Climate Change Side Event “Keeping 1.5 Alive — the Glasgow Climate Pact and Building Momentum towards the twenty-seventh Meeting of the Conference of the Parties to the United Nations Framework Convention on Climate Change”, in Kigali today:

We are at the mid-point between the twenty-sixth Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) and COP27. The Glasgow Climate Pact, the main outcome of COP26, laid bare huge gaps on mitigation, on finance and on adaptation as well as the actions that needed to be taken over the course of the coming years to close these gaps through just transitions. Let us be frank, almost sixth months after Glasgow, we are off track. Today we have heard that there is political will behind the Glasgow Climate Pact, and renewed commitment to deliver the Paris Agreement.  But, this intent is not translating into action.

Last year, global emissions were at their highest level ever. The nationally determined contributions submitted last year would result in an increase in global emissions of 14% by 2030.

Science tells us that, for us to be on a credible pathway to limit global average temperature rise to 1.5°C, global emissions need to decline by 45% below 2010 levels by 2030.

The battle to keep the 1.5°C goal of the Paris Agreement alive and prevent the worst impacts of the climate crisis will be won or lost this decade. With each passing day of inaction, the pulse of the 1.5°C goal gets weaker and weaker.

At Glasgow, all countries agreed to revise and strengthen their nationally determined contributions.  Group of 20 (G20) nations account for 80% of global emissions. Their leadership is needed more than ever to bend the global emissions curve towards 1.5°C. Thanks to the COP26 President Alok Sharma for the continued leadership.

On finance, the $100 billion commitment made over a decade ago remains unmet, and the trillions needed to ensure a low-carbon, climate-resilient future are yet to be mobilised.

Developing countries continue to face extraordinary barriers to accessing the finance they need, particularly to protect themselves from the worst impacts of climate change which are happening now.

This story plays out against a devastating backdrop. According to the Intergovernmental Panel on Climate Change, at 1.5°C of warming, people living in Central and South America, most of Africa, small island developing States and South Asia, are 15 times more likely to die from a climate impact. The recent climate discussions in Bonn did not reflect the reality of this emergency.

We have six months to Sharm el-Sheikh. The window to demonstrate that the countries are taking serious steps, as agreed in Glasgow, has not yet closed. We still have hope that it can be done.

This means countries bringing forwards new and enhanced nationally determined contributions, underpinned by concrete policies.  Especially from those that have not yet done so, and those major emitters that are not yet on a 1.5°C pathway. We need to go a step further. And this is why the Secretary-General has called for coalitions of support around key emerging economies to accelerate the transition away from coal.

It means donors providing clarity on when and how the $100 billion promise will be met, as well as providing the road map for the doubling of adaptation finance. It is a handshake that is not only fair but that will also help address the trust deficit. It also means multilateral developing banks playing their part in mobilising the trillions of needed private finance. We need to see concrete progress towards reforming rules around eligibility and burdensome access criteria that many developing countries face.

Local solutions need to be supported. Loss and damage needs to be seriously addressed. Youth need to be taken seriously and meaningfully engaged.  We must keep focused on protecting the most vulnerable.

This is why the Secretary-General has called for 100% coverage of early warning systems over the next five years.

One out of every three persons in world is not covered by an early warning system. These persons are predominately in least developed countries and small island developing States. This is unacceptable when we know we have the technology and the tools to achieve this.

Multilateralism is under strain, yet the Commonwealth has the potential to lead the way and provide a model for cooperation. You are a diverse group of countries, spanning many regions of the world, languages, religions and cultures. You include major economies, both developed and developing. You include those already suffering from the impacts of climate in action. And you unite around common values.

So, today, I end with this appeal to you, Commonwealth leaders. Let us not step back from our commitments and revert to the lowest common denominator.  We must close the gaps on mitigation, adaptation, finance and on loss and damage with urgency and ambition.

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Insights on food innovation and related investment opportunities

Thought leaders from Franklin Templeton and its specialist investment managers weigh in on the challenges and opportunities facing the food and agriculture sector of the future

The Franklin Templeton Institute released its latest insights paper, “Food innovation: Investing to feed our future,” focusing on the innovation and investments needed to feed a growing global population in the face of climate change and geopolitical conflict. The paper features perspectives from a variety of Franklin Templeton experts. Highlights of their remarks include:

Over the coming decades, investors, asset managers and researchers will be increasingly focused on the challenge of feeding a growing global population in the midst of climate change, geopolitical shocks and uncertainty. It is clear to Franklin Templeton that innovation in food and agricultural technology will be necessary to boost agricultural productivity and the nutritional value of food while reducing the negative impacts of agriculture on the environment. 

The war in Ukraine is a stark reminder of the geopolitical risk in agricultural supply lines. This crisis arrived on the heels of Covid-19 pandemic-induced inflation, which has increased food prices over 30%, creating an additional US$42 million in monthly costs to feed vulnerable populations. Asset managers have a responsibility to actively identify opportunities and risks in the financial markets, to protect clients’ assets by generating, sustainable risk-adjusted returns. Understanding investment and impact is what sustainable investment is all about: taking care of people, the planet and prosperity. Food is essential to each.

The future of food, including the innovation and technology that will be needed to safely produce and distribute the food we need, will impact global investors across asset classes. The necessary innovations in the food industry must be financed. Whether it be funding for improving traditional farmers’ production, the move to high efficiency indoor agriculture, startups developing alternative proteins, or helping companies build supply-chain resilience, all will require large capital inputs from equity, fixed income and private markets. In equities alone, food makes up US$4.9 trillion, or approximately 4% of global market capitalisation. Further, it is critical that carbon trading and carbon markets also developed as soon as possible.

As emissions continue to grow and global temperatures continue to rise, higher carbon dioxide levels in the atmosphere reduce nutrient levels in foods. Mitigation of these trends will require a broad range of solutions, including addressing issues around policy, land use, diet, waste, subsidies, and trade agreements. At the same time, the food system is highly complex and interconnected, and deployments of capital must consider unintended consequences. Changes in the system create ripple effects that have long-term impacts and can lead to severe disruptions.

As we invest in innovation to help reduce negative externalities, it will be necessary for investors to more effectively measure and price environmental impact. The economic value of natural systems and the risks to these systems’ further degradation must be accounted for in asset pricing. Half of global GDP has significant risk exposure to changes in nature. It is estimated that this transition will generate US$10 trillion in additional business revenue and cost savings and over 395 million jobs by 2030, of which US$3.6 trillion and 191 million jobs are directly related to changing the food system. For investors, there are opportunities to help fund the global economy’s transition to a nature-positive economy.

The banking sector has a key role to play in managing and mitigating the impact of the food supply chain on biodiversity and climate change. The global food system is responsible for 70% of global water use, over 50% of biodiversity loss and over 33% of greenhouse gas emissions contributing to climate change. Banks provide a wide variety of finance to companies involved in agriculture and food supply chains, including term loans, trade finance, revolving credit and project finance. We are seeing that some of the leading banks are recognising their impact on the food system in their approach to agricultural lending activities. We believe that banking leaders will seize the potential investment opportunity in this space while also effectively managing risks associated with the food sector.

Banks can further incentivise change by setting eligibility criteria that preclude the conversion of forest or ecosystems. These conditions can be applied retrospectively, by looking at what producers have done and removing eligibility as appropriately, or prospectively, by applying a penalty interest rate once the loan has been received. Further, supply-chain financing can have a broader influence with buyers or financiers supporting “conversion-free” supply chains, whereby they choose to buy or finance only those agricultural commodities that are not linked to deforestation or conversion of other ecosystems.

Banks will need reliable and robust biodiversity data to enable target setting, and there is a real need for more streamlined biodiversity-related key performance indicators. We are encouraged by the development of reporting frameworks, including the Principles of Responsible Banking (PRB) and the Task Force on Nature-related Financial Disclosure (TNFD), which will facilitate lenders and investors to make more informed assessments on the risks and opportunities associated with the food supply chain.

A productive and sustainable agricultural system starts with rebuilding healthy soils through nature-positive practices, representing cost-effective, sustainable, and scalable ways to sequester carbon and generate positive ecosystem benefits. Regenerative agriculture is centered around practices that promote soil health, crop diversification and human health. The Croatan Institute estimates that regenerative agriculture could mitigate up to 170 gigatons of CO2 emissions and generate nearly US$ 10 trillion in net financial return over the next 30 years. More than US $700 billion of financing is needed to scale these agricultural solutions in the United States over the next 30 years, representing a significant opportunity for investors to invest in a more sustainable food system.

Due to the transition period required to rebuild soil health, the investment opportunity for regenerative agriculture is primarily concentrated in private markets.  This includes real asset strategies that acquire conventional farmland to be transitioned to regenerative or organic, as well as venture and growth equity funds that invest in innovations to support the scaling of regenerative practices across the value chain in areas as diverse as soil monitoring sensors, biologics, marketplaces, satellite technology, regeneratively-grown food products, and more.  While there are no cure-all solutions, it is critical to transform the agriculture and food system toward nature-positive solutions to help manage risk, meet our climate targets and preserve the environment for future generations.

There is a common misconception that Gulf Cooperation Council (GCC) states are behind the curve in terms of applying environmental, social and governance (ESG) practices, but we see that GCC states are making progress in areas such as carbon emissions and food security, presenting unique opportunities for investors.

We believe GCC markets are better placed than most in terms of adopting ESG protocols because the largest emitters of greenhouse gases – national oil companies and utilities – are government owned. This gives governments much more control in terms of implementing necessary technological upgrades and regulatory changes. Initiatives such as seawater harvesting, soil improvement techniques, microalgae production and groundwater conservation have all played a part in improving food production in the region.

Despite the bold and ambitious policymaking and programming, the GCC is still only 31 percent food secure, on average, and storage and transportation of locally cultivated produce is still very inefficient. It is estimated that US$200 billion of investment is required annually until 2050 to meet the GCC food supply and demand gap. These investments are needed across the full value chain, including capital to improve efficiency gains, technology and the development of novel processed food. Investments will also be needed to support better logistics, help reduce waste across the system and improve storage capabilities. We see that there is an opportunity to invest in companies applying technologically advanced production and farming technologies to disrupt the region’s alliance on imported food.

Like clean energy infrastructure before it, vertical farming will mature into a defined real asset sector that will be a part of well-diversified portfolios. Over the next several years, vertical farms will create alternative use cases for underutilised land and vacant buildings, and create opportunities to drive lasting social and environmental impact.

A confluence of powerful short-term and long-term market factors give vertical farms the potential to become a major disruptor in the food and agriculture space. The global population is growing, the supply of arable land is shrinking, weather patterns are becoming far less predictable, eating habits are shifting and demand for sustainable products is growing. We need solutions that increase yield; use less water, chemicals and land; and reduce our dependence on long, wasteful and complex food supply chains. Vertical farming promises to not only increase global food security, but also to provide forward-thinking investors with strong opportunities to bring scale to this burgeoning space.

For investors, large-scale emissions reductions in agriculture from developing technologies are a long way off from monetization, but plant-based food categories look to be growth stories, and in many cases, these foods are getting a push from large consumer staples names.

Changes in consumer preference are already reducing the harmful climate effects of cultivating beef, as the shift in consumption from beef to chicken has already resulted in less land used for meat production. Changing consumer preference is also relevant in the milk arena, where consumers have been gravitating toward replacing almond milk and soy milk with oat milk. For any diet-based strategy geared toward lowering carbon emissions, consumer taste will continue to be a critical variable in growing this space.

Two goals of COP26, the United Nations (UN) Climate Change Conference included curtailing deforestation, with Brazil as a focus, and building resilient agriculture. Brazil’s beef industry has faced pressures over deforestation as supermarkets and consumers steer clear of beef linked to the demise of the Amazon rainforest. The ability to trace cuts of beef to a single animal and ranch within Brazil, including tagging cattle with chips after birth to digitally track movements, will be crucial for minimising revenue losses and reputational damage from food safety concerns. Without digital traceability, Brazil’s largest meatpackers face potential bans from markets like Europe and potentially China.

A global carbon market would give Brazil’s government a tangible monetary incentive to enact more climate-friendly policies that will limit deforestation. A global carbon market that confers monetary value to forests and farmland soils could benefit not only Brazil and the Amazon, but also rainforest countries, such as Indonesia.

Challenging weather conditions have impacted food production and resulted in increased consumer prices across the globe. Sustained commodity price increases have demonstrated the need for a more stable food supply and present investment opportunities for credit issuers who can lead with innovative solutions to meet rising global demand and consciously work to mitigate the social impact of climate change.

Credit issuers should work to provide local farmers with education and capital investments, possibly in the form of micro loans or other local partnerships to implement best practices in land management, water efficiency and crop resiliency. Credit investors would be able to earn an investment return while also contributing to overall increased agriculture sustainability and reduced greenhouse gas emissions through lower tilling needs, improved crop resiliency and increased farmer profitability.

One of the biggest opportunities for companies to mitigate the risk of higher input costs resulting from shrinkage of supply-induced impacts related to climate change is by investing in agricultural innovation and technologies that support more sustainable land practices, more resilient crops and higher crop yields. The debt capital markets currently provide some of the best investment vehicles to address the wide scale mitigation of climate risk in our food supply.

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The launch of the Olifants Management Model programme

The signing of the Heads of Terms for an OMM Framework Agreement on 23 March 2022 by Dr Sean P Phillips, the Director-General of the Department of Water and Sanitation (DWS), represents a significant milestone for the Olifants Management Model (OMM) Programme and paved the way for its official launch by Minister Mchunu on 9 May.

The signed agreement initiates the start of the next implementation phase of the Programme and confirms key areas of negotiation between institutional and commercial members, such as governance
structures, programme scope, funding of CAPEX, securing of pipeline capacity, resourcing partnerships and more.

The agreement also confirms joint responsibility for the funding of study costs (by both institutional and commercial users), and that the Programme will be implemented by a transformed Lebalelo Water User Association (LWUA). The LWUA will be rebranding in future and is set to become a renamed entity with a new logo and corporate identity; for the time being, the name is proposed as the Olifants Management Model Water User Association (OMM WUA).

The OMM Programme represents a significant opportunity for socio-economic development (SED) given the extent of the capital and operation spend. In line with the five identified priority areas for SED (see diagram below), the OMM team have set up a series of three ideation sessions to help identify potential SED initiatives. The sessions are focused on Potable Water and Sanitation, Education and Enterprise Development with an emphasis on how technology and connectivity can be leveraged.

To date, two workshops (Potable Water and Sanitation as well as Education) have been held in Polokwane with good representation from local, provincial and national government departments. The ideation sessions will culminate in a funding partners workshop with a view to driving sponsorship for initiatives identified through the process.

The five priority areas for socio-economic development
READ ALL ABOUT THE OMM WUA IN GREEN ECONOMY JOURNAL ISSUE 52
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The reality of SA’s electricity crisis

South Africa’s power sector is navigating an almost perfect storm of a growing electricity supply deficit, exacerbated by Eskom’s deteriorating generation because of increasingly unreliable coal plants, resulting in skyrocketing electricity prices. Together these forces are crippling the economy.

With the country emerging from a Covid-induced economic slowdown over the past two years, it is becoming clear that we have been lulled into a false sense of progress regarding the rollout of new energy generation. The stark reality of the situation is alarming, with almost weekly load shedding and the possibility of stage 8 recently mentioned by the government. We are on track to break another record for the worst year of load shedding. By Eskom’s own admission, load shedding so far for 2022 has already exceeded their predictions and is set to worsen in the months ahead.

Figure 1: Hours of load shedding from 2014 to 2021[1]

Given the delayed roll-out of the emergency power procurement plan, which was set to start a year ago and due to come online this month, Eskom has been forced to rely even more heavily on its diesel-fueled generators, at an enormous cost to the utility. South Africa also faces growing pressure to transition to clean energy to meet environmental commitments and avoid punitive international trade terms.

Key questions that need to be answered are: What has been done to address this situation? Will the current plans be enough, and how could the country accelerate the power sector’s reform?

PLANNED INTERVENTIONS: BUT ARE THESE ENOUGH?

South Africa’s successful Renewable Energy Independent Power Producer (REIPPP) programme over the past 10 years and planned reform of the power sector and transition to cleaner energy has been internationally recognised and achieved significant support.

Since 2019, the government has announced several notably bold plans, given the country’s historical reliance on Eskom’s centralised command and control of electricity supply. These have included:

  • Eskom’s unbundling and energy sector reform in September 2019 (“Roadmap for Eskom in a Reformed Electricity Supply Industry”).
  • Updated Integrated Resource Plan (IRP-2019) in October 2019, which outlined the planned electricity procurement over the next 10 years and the transition in the energy mix towards renewables.
  • Launch of Emergency Power Procurement Plan (RMIPPPP) in 2020 and announcement of RMIPPPP preferred bidders in March 2021.
  • The resurrection of the REIPPP programme, with the launch of Bid Window 5 in April 2021 and the announcement of preferred bidders in October 2021. It follows a hiatus of procurement from Independent Power Producers since Bid Window 4 was announced in 2015.
  • Government’s move to unlock private power generation and grid access by lifting the Nersa licensing threshold to 100MW in August 2021.
  • Local research and the development of green hydrogen and battery storage, technologies that are globally acknowledged as key to power generation in the future.

Over the last six months, plans by Independent Power Producers have been complicated by an international supply backlog in the equipment required to build new power plants, together with a significant increase in shipping and insurance costs.

Unfortunately, the delays and unpredictability of contracting Independent Power Producers since 2015 has almost wiped out the local supply industry, necessitating a measure of foreign-sourced procurement. However, there is optimism about re-igniting the development of the local supply sector, given the amount of renewable energy set to be rolled out over the next 10 years. 

MUCH HAS BEEN ACHIEVED ON PAPER

In theory, much has been achieved in terms of the intention to reform the energy sector and unlock new sources of electricity supply. In summary, the following steps to take electricity generation forward have been made:

  • RMIPPPP: 11 Independent Power Producers were awarded almost 2 GW of new power contracts more than 12 months ago, but only three are nearing financial close.
  • REIPPPP Round 5: 25 Independent Power Producers were awarded 2.6 GW of new power in August 2021 in the most heavily contested bid window, resulting in the lowest tariffs awarded so far in South Africa.
  • Private power generation: dozens of projects totaling some 4 GW are in the pipeline for registration to avail of the <100 MW embedded generation cap.
  • IRP 2019 has outlined the decommissioning of more than 10 GW of coal by 2030, replacing it with 31 GW of new power (incl 21 GW of renewables) over this period.
  • Eskom’s unbundling has progressed and the first step of legally separating its transmission operations into a separate company was achieved in late 2021.

THE REALITY OF THE SITUATION

Despite the ambitious plans and the initial steps taken, there is growing frustration with the glacial progress that is being made towards fully executing them. South Africa is one to two years behind the new power schedule outlined in the IRP 2019.

The first three projects under the RMIPPP programme concluded Power Purchase Agreements by Eskom in early June 2022, with financial close expected within 60 days, but most of the programme has stalled. Environmental issues and litigation plague the Karpowerships, and the pass-through of gas costs are now prohibitively expensive for Eskom. Many REIPPP Round 5 projects are struggling to close, given the significant price adjustments of engineering, procurement and construction contracts against the backdrop of the tight margins bid under the REIPPP programme. Private power projects are also struggling to meet Nersa’s stringent requirements – 18 projects have been registered, including 16 in April 2022, since lifting the licensing threshold in August 2021.

The capacity of Eskom’s national transmission grid is highly constrained in the Northern and Western Cape, limiting the potential for new projects to connect to the grid. Furthermore, the reliability of Eskom’s coal plants is rapidly deteriorating. The Energy Availability Factor (EAF) for the year to date has averaged less than 60%, and the trajectory is increasingly moving in the opposite direction to the 75% targeted EAF that was envisioned in the government’s plans under the “Roadmap for Eskom in a Reformed Electricity Supply Industry”. The increasing cost of maintaining Eskom’s aging assets, together with the huge cost over-runs and interventions to address design flaws of mega coal plants Medupi and Kusile, has driven up the real cost of electricity by more than 600% over the past 15 years.

Figure 2: Eskom average tariff vs. inflation (CPI)[2]

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

THE ROADMAP TO TURNING AROUND THIS DIRE SITUATION

  • We urgently need to simplify and fast track the registration of license-exempt projects (<100 MW) through better coordination between Nersa, Eskom, the Department of Mineral Resources and Energy (responsible for electricity procurement), the Department of Public Enterprises (responsible for Eskom) and National Treasury.
  • To assist Eskom, private concessions should be given to Independent Power Producers to upgrade parts of the grid network where they need to connect. Independent Power Producers could achieve cost recoveries if the wheeling fees Eskom charges for using its grid network were reduced.
  • To expedite the financial close of Round 5, consideration should be given to granting a one-off adjustment to the tariffs to help projects address the unexpected increase in equipment supply costs. Doing so would arguably be cheaper than the cost to the economy for every day of load shedding, plus the cost of running diesel generators by Eskom.
  • Instead of a new bidding process for Round 6 of the REIPPP programme, there could be an award of Power Purchase Agreements (PPAs) to the lowest range of bidders that missed the tariff cut off in Round 5.
  • Another update to the IRP is needed given the delays in project closings and performance deterioration in Eskom’s coal plants. This should include the increased allocation to electricity procurement from Independent Power Producers by municipalities in good financial standing, expected to be a growing factor in South Africa’s electricity sector reform in the years ahead.
  • A formal plan to facilitate the use of Eskom’s infrastructure by municipalities in good financial standing that wish to procure electricity directly from Independent Power Producers, and consumers who wish to sell power into the grid, would greatly assist in rolling out the decentralisation of power away from Eskom generation.
  • The updated IRP should include an increase in the speed and scale of developing additional renewables and battery storage.

EXECUTION OF THESE PLANS ARE THE KEY TO A BRIGHTER FUTURE

There is an urgent need to fast track the build-out of new power generation to minimise the reliance on Eskom’s coal plants and reduce the negative impacts of load shedding. Many positive factors support energy reform, including the extensive national grid infrastructure, significant amounts of private investment in the pipeline, South Africa’s vast natural resources, and global support for the clean energy transition.

The key issue is prioritising, coordinating and executing decisions that are primarily still on paper. We cannot afford further delays; this is a national emergency for South Africa. We need to do more, faster. However, inflexible regulatory paradigms restrict private sector investors who have the capital, expertise, and the will to make a difference. Significant capital investment is required to upgrade/strengthen the grid. It cannot be left up to Eskom alone and offers an opportunity for public-private partnerships that will ultimately lead to a brighter future for our country.


[1] Source: CSIR Energy Centre

[2] Source: https://bit.ly/3xu4KFa

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JSE unveils Sustainability and Climate Disclosure Guidance

The Johannesburg Stock Exchange (JSE) has released its Sustainability and Climate Disclosure Guidance that aims to promote transparency and good governance, and guide listed companies on best practice in environmental, social and governance (ESG) disclosure.

In December 2021, the bourse published the Draft Sustainability and Climate Disclosure Guidance for public comment, which paved the way for a comprehensive consultation process with a broad group of stakeholders including market participants, sustainability specialists and corporate governance bodies.

“The JSE recognises the need to create an enabling environment for better disclosure practices, especially in light of regulation and guidance that are changing rapidly globally. The Sustainability Disclosure Guidance is intended to help companies to align with recent and imminent changes in global standards and international best practice regardless of their experience in sustainability reporting,” says Leila Fourie, Group CEO at the JSE.

The JSE disclosure guidance combines global best practice with local relevance, and simplifies ESG disclosure for both listed and private companies in a context of a myriad of frameworks, guidelines, standards and ratings in the market.

Unpacking the JSE Disclosure Guidance

The Sustainability Disclosure Guidance is an impact-focused, overarching reference document that has a basic set of metrics which are rooted in existing, well-established global standards. It is the blueprint which will assist companies to understand what matters, both on a local and global landscape, and start disclosing.

Parallel to that, is the Climate Disclosure Guidance which specifically aims to clarify current global best practices in climate-related disclosure and provides a step-by-step guide to get issuers started on this journey. The guidance can be a starting point for those tasked with preparing reports with the goal of integrating climate-related information for the first time, while also providing additional resources that can help deepen the journey into climate-related disclosure for those that are more advanced.

“It is our hope that the JSE Disclosure Guidance will help to improve business leadership, performance, accountability and transparency across the entire sustainability ecosystem,” concludes Fourie.

While organisations will have the prerogative to draw fully or in part from the guidance framework to augment their existing disclosure practices, the JSE supports the understanding that the structure of any high-quality disclosure is similar for organisations of all forms and sizes.

The JSE has long championed sustainability as it was the first emerging market – and the first stock exchange globally – to introduce a sustainability index in 2004. It is also a signatory to the United Nations-backed Principles for Responsible Investment and a founding partner of the Sustainable Stock Exchanges Initiative. The JSE is also home to the existing FTSE/JSE Responsible Investment Index and launched the Green Bond Segment in 2017, which was expanded to a fully-fledged Sustainability Segment in 2020.

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UK PACT-funded project to support 250 buildings and five SMMEs in the race to meet EPC deadline

In an effort to accelerate the uptake of energy performance certificates (EPCs) in South Africa, the Green Building Council South Africa (GBCSA) and the Carbon Trust are calling for 250 building owners and five SMMEs to participate in an EPC project funded by UK PACT (Partnering for Accelerated Climate Transitions).

Since inception of the UK PACT-funded project in March 2021, GBCSA and Carbon Trust have supported the South African National Energy Development Institute (SANEDI), and the National Department of Mineral Resources and Energy (DMRE) with implementation of a mechanism to support South Africa’s new EPC regulation that aims to drive energy disclosure within South Africa’s existing building stock.

“Climate change and sustainability continues to move up the corporate agenda with global stock exchanges (including the JSE) and investors placing ever increasing emphasis on ESG management and reporting,  EPCs could become an important part of South Africa’s national decarbonisation strategy, driving energy efficiency in buildings and ultimately aiding the just transition to a low-carbon economy,” says Jonathan Booth of the Carbon Trust.

South Africa’s EPC regulation was made effective in December 2020 with the requirement for certain types of public sector buildings greater than 1000m² and of private sector buildings greater than 2000m² to obtain an EPC within a two-year period.  

As the December 2022 deadline for obtaining an EPC looms for affected building owners, the project is shifting focus from helping to lay the EPC groundwork (read about the project’s first year here) to supporting the implementation of the mechanism. This is anticipated to accelerate the uptake of EPCs in South Africa.

The project team is now actively seeking to support building owners with EPC groundwork and SMMEs who would like to become SANAS accredited inspection bodies.

Call to support 250 building owners in obtaining EPCs

Support will be offered to 250 building owners/managers in obtaining EPCs, whose building fits the following criteria:

  • The building is older than two years with no recent major refurbishments
  • The buildings are of one of these Occupancy Classes
    • Entertainment & Public Assembly
    • Theatrical & Indoor Sport
    • Places of Instruction
    • Offices
  • A minimum of 12 months of energy data is available for the building
  • Public sector buildings greater than 1 000m2, private sector buildings greater than 2 000m2

Owners (or building/facilities managers) of the selected buildings will be provided with:

  • Introductory EPC training
  • An EPC tool to facilitate data gathering and to assist with the necessary calculations
  • Availability of an email based ‘help desk’ to provide ongoing support

If you are a building owner or manager responsible for obtaining your building’s EPC and would like to benefit from this support, sign up online here.

Call to support five SMMEs to become SANAS accredited inspection bodies

The just transition to a low-carbon future and job creation within the green economy are major imperatives both internationally and in South Africa. The EPC legislation plays its part in addressing this by supporting SMMEs involved in the fields of energy efficiency, energy management or energy auditing within the built environment to potentially attain SANAS accreditation as Inspection Bodies. The role of these Inspection Bodies is to verify the data for EPCs and to issue the EPCs.

“EPCs are a good first step for building owners to understand their impact, improve energy efficiency and eventually target net zero. While the industry is faced with several challenges, I personally am very excited about the positive job opportunities and skills in understanding a buildings energy use this regulation will create” says Lisa Reynolds, CEO of GBCSA.

Five SMMEs will be offered financial and technical support to help them obtain accreditation from SANAS as an Inspection Body able to issue EPCs.

If you are an SMME and interested in becoming a SANAS-accredited Inspection Body, apply online here.

For information around upcoming EPC training and awareness, workshops please contact info@gbcsa.org.za.

Coming soon: +IMPACT 18: UNCOVER THE A-Z OF EPCs

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“Landmark” power purchase agreements signed, but Mantashe still punts multiple energy technologies

“Leave the issue of environmental challenges to environmentalists. They will take us to court, allow us [the Department of Mineral Resources and Energy] to go to court… Eskom must not enter that space. They must take up energy. That’s it.” This was said by Minister Gwede Mantash, at the signing ceremony of the first three power purchase agreements under the RMI4P on 2 June. 

by Julia Evans, Daily Maverick

Mantashe was addressing Eskom CEO André de Ruyter, emphasising that Eskom should focus solely on energy generation, and not let environmental concerns stop it from having procurement in a range of energy technologies like gas and nuclear. The three power purchase agreements (PPAs) of the RMI4P, signed at the Independent Power Producers (IPP) offices, were dubbed “landmark projects” as they are considered to be the largest renewable projects of solar and battery combined technologies in the world. 

The Risk Mitigation Independent Power Producer Procurement Programme (RMI4P) was introduced to the market in August 2020 and aimed to close the immediate energy supply gap, as indicated in the 2019 Integrated Resource Plan, and reduce the extensive use of diesel-based peaking electrical generators in the medium to long term. 

The RMI4P had a target of procuring 2 000 megawatts (MW) of new generation capacity from different generation projects.  

Of the 11 PPAs awarded to preferred bidders in March and June 2021, three of the projects have now been signed, which saw Norwegian renewable energy company Scatec enter a 20-year agreement with Eskom to dispatch 150MW (all projects are 50MW each) to the national grid, between 5am and 9.30pm daily. 

Bernard Magoro, the head of the IPP office, called the RMI4P a “long journey” — the bid window was opened to the market in August 2020, and now, nearly a year after all the preferred bidders were announced, some of the PPAs are being signed into agreement.  

Delays can be attributed to ongoing litigation and administrative problems, such as three gas-fired projects failing to secure environmental permits to operate and red tape put up by the National Energy Regulator of SA (Nersa) delaying renewable projects. 

De Ruyter said at the signing ceremony: “This is unique technology in that for the first time we now have dispatchable renewable energy thanks to a combination of solar and batteries. 

“And this addresses one of the key challenges of renewable energy in that, typically, without storage, they are self-dispatching.” 

Jan Fourie, Scatec’s general manager for Sub-Saharan Africa, told Daily Maverick that to his company’s knowledge their project would be one of the biggest solar photovoltaic (PV) and battery projects on the planet. 

“It proves that dispatchable renewables are possible. It’s cost-effective. And it’s available today,” said Fourie. 

“So I think it takes away the argument that renewables are intermittent.” 

The “landmark” projects will be built in the Northern Cape 12-18 months after the financial close (3 August 2022) and have an installed capacity of 540MW of solar PV capacity and 1.1GWh of battery storage. 

Mantashe said that while he was excited about the contribution these projects will make, “I want a bigger contribution”, and the process of building generators needed to be reviewed and shortened to address the urgent issue of load shedding. 

“We must find a formula of cutting that process out and make it easy to do business in South Africa,” said Mantashe. 

Prices for these projects were bid at R1 884.61 per MWh – which is favourable compared to the R2 300 to R9 000 per MWh Eskom is currently paying. 

The projects have attracted R16-billion in investment and will create about 4 968 job opportunities (measured in job years) during their construction and operation. 

Anti-bribery and corruption clause 

De Ruyter said the agreements include anti-bribery and corruption clauses. 

“This is very important, of course. Eskom’s recent history has been characterised by capturing corruption, and we have therefore taken a very firm stance on this,” he said. 

“We are able to give the South African public the assurance that these agreements have been done with the very strictest standards of corporate governance and ethics. 

“I think it shows what the art of the possible is if we are all together held accountable for maintaining the highest standards of governance.” 

The benefits of renewable energy 

Terje Pilskog, the CEO of Scatec, whose company already has six renewable projects operational in South Africa said: “We believe South Africa’s abundant sun and wind resources combined with the quick turnaround of establishing renewable-based projects make for the most effective and sustainable solution to the energy risks the country is facing.” 

Pilskog illustrated the benefits of renewable energy, citing how it is cost-competitive relative to thermal energy, doesn’t experience pricing volatility like fossil fuels, is not linked to international commodity prices and is a big part of the solution of reaching commitments of the green transition and limiting global heating to 1.5 or 2°C above pre-industrial levels.  

“It has achieved its rightful status as the lower-cost, clean alternative to fossil fuels. And we should seize the opportunities that are arising as a result.” 

However, Mantashe was not sold. 

Mantashe sticks to gas and nuclear

Today, we signed power purchase agreements with 3 projects under RMIPPPP. These projects are expected to add new energy to the grid within 18 months. We did this against the backdrop of #Loadshedding which hinder on our economy & on livelihoods. #InvestInSAEnergy #InvestSA pic.twitter.com/TUgnMIvbvJ

— Gwede Mantashe (@GwedeMantashe1) June 2, 2022

In his address at the ceremony, after expressing his excitement at the Scatec projects, he emphasised that the energy mix should include several types of generation.  

“My biggest problem as a person is the polarisation of the debate among energy technologies,” said Mantashe, saying that the debate made it seem that in order for one technology to expand, another must die. 

“We need all of them. We are short of energy. We don’t have universal access to energy. So everybody must have space to grow.” 

Mantashe said the IPP office should work to get the other eight RMI4P projects signed, including resolving the problem of Karpowership (which has three approved PPAs). 

Mantashe said he had seen Karpowership and gas-to-power technology work very well in Ghana and Gabon, as well as Europe.  

“In South Africa — no. All the gas projects that have been approved are taken to court. 

“But Europe has taken a decision that gas and nuclear are part of the energy mix. In South Africa, we don’t want to touch anything.” 

Mantashe added that Europe had labelled gas and nuclear as part of the energy transition. 

He said he made this point not because he thinks one technology is better than another, but because he believes multiple energy technology solutions can coexist together and resolve the problems of load shedding and energy poverty. 

New IRP finally being revisited 

In line with his thinking that multiple energies can coexist and solve issues, Mantashe revealed that on Wednesday night his department had made the decision to revise the Integrated Resource Plan (IRP), which last came out in 2019 and details what South Africa’s energy mix should look like based on cost and social imperatives. 

He said they were revisiting it now, as a big part of the plan had been implemented and they had to revise it now to look into the future, beyond 2030. 

Mantashe’s department has faced criticism for not updating the IRP sooner, as the introduction to the 2010 IRP (the last one to come out before the 2019 IRP), states:  

“The Integrated Resource Plan (IRP) is a living plan that is expected to be continuously revised and updated as necessitated by changing circumstances. At the very least, it is expected that the IRP should be revised by the Department of Energy (DoE) every two years, resulting in a revision in 2012.”  

When asked why the IRP had taken so long to be updated, Mantashe said the previous IRP came out in 2011, so this revision was happening a lot faster and they needed time to implement the plan and assess results. 

The minister also said that revising the IRP would be a very long process, so he could not give specifics on when it would come out.

This article first appeared on Daily Maverick and is republished here under a Creative Commons license.

Green Economy Journal Issue 52

READ GREEN ECONOMY JOURNAL ISSUE 52: On page 20, a case study details the renewable energy solution modelled for a tailings processing and exploration diamond mining operation. It demonstrates the engineering and economic feasibility of various hybrid energy approaches.

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Global electric vehicle outlook for 2022

Electric vehicle sales breaking records in 2021, four times 2019 market share

The annual International Energy Agency Global Electric Vehicle Outlook report for 2022 indicates sales of 6.6-million electric cars last year – a new record, rising to nearly 10% of global car sales and double that of 2020. There are now more than 16.5-million electric cars on the road, tripling from 2018.

China is the global EV sales leader, with Europe and the United States making up the top three markets. More electric cars were sold in China last year than globally in 2020, while in Europe electric car sales continued their year-on-year sales increase, by more than 85%. Two and three-wheelers have high EV market share, especially in Asia, where China again dominates, registering 9.5 million new electric two- and three-wheelers out of the 10 million registrations. Vietnam and India are the other largest markets for these vehicles.

“There are five recommendations to government outlined in the recent Global EV Outlook 2022 report from the IEA,” says Hiten Parmar, Director of the uYilo eMobility Programme. “Firstly, to maintain and adapt support for electric vehicles, to kickstart the heavy-duty EV market, to promote the adoption of EVs in emerging and developing economies, expand EV infrastructure and smart-grids and, finally, to ensure secure, resilient and sustainable EV supply chains.”

According to the IEA’s report, there has been nearly 40% expansion in the number of public chargers last year, reaching 1.8 million, meaning there is now about 10 EVs per public charge point. South Africa is the market leader for Africa, having installed over 300 public chargers to date through various service providers, with the latest expansion projects including ultra-fast (150 kW) chargers.

The model range of EVs globally has shown a five-fold expansion since 2015, now numbering 450. This trend is also visible in heavy-duty vehicles which is showing an accompanying increase in sales in the United States and Europe, driven by the increase in available models, and economic and policy support. In emerging economies, a lack of model availability and high prices means EV adoption is still low.

“In South Africa, the electric vehicles currently marketed are exclusively from premium brands,” says Parmar. “Audi, BMW, Jaguar, Mercedes-Benz, Porsche and Volvo all have full electric models available, while the cheapest is from MINI. We still require a wider segment of models to drive further growth in the local market. This can only be realized within the mandate of the Department of Trade, Industry and Competition under the import duty framework, and local production incentives for manufacturing.”

The effect electric vehicles will have on the road transport sector, in reducing emissions and contributing to countries achieving their net-zero goals by 2050, will require EV market share to grow by 60% globally. This will require that all elements of the electric vehicle supply chain be significantly expanded, especially the battery supply chain, however more supply investment is needed to meet demand.

“Few areas of the new global energy economy are as dynamic as electric vehicles. The success of the sector in setting new sales records is extremely encouraging, but there is no room for complacency,” said IEA Executive Director Fatih Birol. 

Currently the zero emissions announcements by automotive manufacturers are more ambitious than government targets, but they require policy support in order to be effectively materialised.

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Green means go for new generation capacity

Nersa has agreed to put into effect Operation Vulindlela’s suggestion to drop power purchase agreements as one of the requirements for registering embedded generation projects below 100MW.

In a bid to be recognised as a global leader in energy regulation, NERSA (National Energy Regulator of South Africa) confirmed that it would also be focusing on automating the 100MW registration process for embedded energy projects as part of a broader strategy to automate its business processes. (Although these facilities do not need a licence, they must be registered.)

This will ensure much-needed investment in new generation capacity and will alleviate load shedding.

The first two projects making use of licence exemptions for generation facilities of up to 100MW have successfully been registered with Nersa. The two projects are developed and operated by Sola Group and will generate power for Tronox Mineral Sands’ operations located in the North West. The registration of the projects took 73 days from submission.

Power will be wheeled across Eskom’ s transmission grid to Sola’s operations on the West Coast and in KwaZulu-Natal. The projects have 28GWh of excess energy per year, which Sola is looking to market to other interested clients connected to Eskom’s grid.

The licence exemptions are expected to unlock investment in the energy sector to help address the generation capacity gap of between 4 000MW to 6 000MW. Implementing the Operation Vulindlela recommendation will help unlock the investment conduits of 50 projects with the combined energy potential of 4 500MW.

Operation Vulindlela is a joint initiative of the Presidency and National Treasury to accelerate the implementation of structural reforms and support economic recovery. Operation Vulindlela aims to modernise and transform network industries, including electricity, water, transport and digital communications.


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A perfect storm is forcing green independence from the coal-dominant grid

By Lance Dickerson, MD, Revov

For all our best intentions and well-meaning words, it is often easier to continue with the status quo. However, a perfect storm in South Africa has catapulted us into a new energy future. While its painful now, we will be grateful in a decade or two from now.

South Africa has relied on an ever-weakening coal-based national power supply with Koeberg being the sole nuclear reactor. As far back as 1998 – some would argue earlier – the writing has been on the wall. In the years leading up to the 2010 World Cup, the new-builds such as Medupi were already too little, too late. This is even before the cost overruns, delays and expensive design flaws. This as other countries were investing billions into renewable energy builds.

We’ve had some great announcements locally. There is the 100MW private embedded exemption and if one drives along various routes such as the N2 in the Eastern Cape you will see growing wind farms, but where is the mass rollout of renewable power generation? Most South Africans can answer this question.

Over the same period, the world has become conscious of the environment and there’s been a push towards reducing carbon emissions. The Congress of the Parties (COP) 27 will proceed later this year in Africa, after the last edition of COP was criticised for underrepresenting the so-called Global South. All eyes will be on countries such as ours.

While one may well be cynical about the level of carbon emission concern globally, the truth is that many countries have already made bold commitments. Norway, France, UK, US: they’ve all made bold plans to reduce and outlaw internal combustion engines by various dates – all of which fall, by the grace of God, comfortably within our lifetime. We will see it.

China is light years ahead of a country like South Africa. Shenzhen, the home of electric vehicle (EV) maker BYD, has 16 000 electric buses and 22 000 electric taxis. Carmakers around the world are investing billions of dollars into research and development, from 100% EV makers to traditional brands plotting their plans to shift their businesses to the certain electric future.

None of this is new. We’ve known this in South Africa for years. We’ve known the world is moving to renewable energy and e-mobility. Ask the average South African for their thoughts on the mass rollout of electric charging stations and their answer will likely be: “Great, but where will the electricity come from?”

Everyone knows Eskom barely has its head above water. We feel it with incessant bouts of load shedding. This is part one of the perfect storm. Out of necessity the government will have no choice but to speed up the transition to renewable power generation, complete with private players that can deliver. Businesses and households have little choice but to find ways to protect themselves from this unreliability.

The second part of the perfect storm is the cost of fuel. The end of May will likely see a record fuel price increase, made worse by the temporary fuel levy grace period coming to an end. Running a generator during prolonged periods of load shedding is very quickly becoming something only those with very deep pockets can contemplate. One shudders to think that Eskom runs diesel generators to keep our lights on. The costs are eye-watering.

The third part of the perfect storm is the repo rate increase cycle, putting pressure on already squeezed retailers and consumers. Costs eventually have to be passed on. Imagine running a small or medium business that’s dependent on electricity to generate revenue while the power is removed in bouts of stage 2, 3, 4 (and possibly more) load shedding. Imagine the squeeze when read against increasing rent, increasing input costs and ever-more weary customers. How long is this sustainable?

The fourth part of the perfect storm is the willingness of private financial institutions and lenders to proudly advertise credit and funding lines for renewable installations. Businesses and private households will likely take up this offer precisely because it gives them the opportunity to develop freedom from dependence on a broken grid.

Within five years we will see huge investments in installations of all sizes: homes, small businesses and larger manufacturing and mining operations that require high-voltage solutions. Lithium iron phosphate batteries mean that the ability to store energy has come on in leaps and bounds.

That’s the perfect storm – where South Africans are forced to make the transition. However, the good news is that by using 2nd LiFe batteries, where the cells are repurposed from EV batteries, consumers and businesses can make the transition with the peace of mind that they are contributing to an important step in the circular economy: they are using batteries that don’t add further strain to the environment such as their first life counterparts.

That’s where we want to be: in a world where conscious decisions are made to look after the planet. If it takes us being forced, through a perfect storm of Eskom failures and economic headwinds, to get there so be it. Better late than never.

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