There is a looming risk of more turbulence ahead for energy markets, the International Energy Agency (IEA) warns in its latest World Energy Outlook publication.

“The world is not investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets,” the 2021 edition of the flagship report warns.

Released against the backdrop of fuel shortages and surging energy prices across the world, but particularly in the UK and parts of Europe and Asia, the report states that transition‐related spending is currently inadequate to meet rising demand for energy services in a sustainable way.

Investments are also falling well short of what is required for limiting global warming to 1.5 °C above pre-industrial levels, as contained in the report’s net zero emissions (NZE) scenario.

Global average temperatures are already 1.1 °C higher than those of the pre‐industrial age, with visible impacts on weather and climate extremes.

$4-TRILLION-A-YEAR BY 2030

To achieve the NZE pathway, yearly investments in clean energy would have to rise to $4-trillion by 2030, more than triple today’s levels.

Much of this investment, the report says, would have to be directed towards four key measures to “keep a 1.5 °C path within reach”, including: a massive additional push for clean electrification; a relentless focus on energy efficiency, a broad drive to cut methane emissions from fossil fuel operations; and a big boost to clean energy innovation.

“There is a looming risk of more turbulence for global energy markets,” executive director Dr Fatih Birol warns, pointing to deficits across all sectors and regions, underpinned by inadequate clean energy investment and falling oil and gas investment.

He dismisses any suggestion that the current crisis has been precipitated by the clean energy sector, describing such arguments as a "gross mischaracterisation".

"I think the issue is not that we have too much clean energy . . . but that we have too little clean energy."

The crisis, he asserts, is the result of a strong growth recovery, fuelled by fossil fuels and higher emissions, extreme weather events that curtailed hydropower production in some regions and a surge in planned and unplanned gas plant outages.

Birol expresses particular disappointment with the way the gas industry has been managed in the run-up to the crisis.

"Natural gas has been presented as a reliable, affordable energy source, which could complement the clean energy.

"But the current volatility in the natural gas markets, I believe, is not a good news for the natural gas industry and the natural gas industry didn't get good marks from millions of consumers around the world and I think they should take note of this."

While investments in wind, solar and electric vehicles are gaining momentum, the pace, Birol argues, remains too slow to reach net zero emissions by mid-century and to compensate for lower fossil fuel spending that is currently geared towards a world of stagnant or even falling demand.

The amount being spent on oil and natural gas has also been dragged down by two price collapses in 2014/15 and in 2020.

Boosting deployments of clean energy technologies and infrastructure provides a way out of the impasse, but the IEA stresses that it needs to happen quickly, or global energy markets will face a turbulent and volatile period ahead.

“Clear signals and direction from policy makers are essential. If the road ahead is paved only with good intentions, then it will be a bumpy ride indeed.”

STUBBORN INCUMBENCY

Birol warns, too, that the world’s encouraging clean energy momentum is running up against the “stubborn incumbency” of fossil fuels in energy systems.

The world’s consumption of coal, for instance, is set to grow strongly this year, pushing carbon dioxide emissions towards their second largest annual increase in history.

However, under all scenarios presented in the report, coal use ...

As part of its Sustainable Development Goal Seven (SDG7) Programme, the United Nations Economic Commission for Africa (UNECA) announces that the Development Bank of Southern Africa (DBSA) and Pimco have reached terms on their issuance of R3-billion of debt securities, which signals the first closing.

The SDG7 Programme, which was launched in February 2020, is aimed at deploying private capital in Africa to support the development of renewable energy.

South Africa, one of the initial national sponsors of the programme and through President Cyril Ramaphosa’s office and the DBSA, persisted in efforts to finalise the deal despite slowdowns associated with the pandemic, UNECA notes.

Pimco, which attended and announced its desire to act as a key investor at the launch of the programme, has engaged in assessing and structuring several potential assets from different countries, focusing first on refinancing debt to provide liquidity for further green generation.

The SDG7 Programme is built on three fundamental pillars namely climate, finance and governance, which serve to assure that proceeds are exclusively deployed to support the development of renewable energy generation, UNECA says.

“The success belongs to South Africa and the DBSA for their single-mindedness in recognising the value of attracting foreign private debt investment into the energy sector, and to Pimco for committing to the green energy transition on the African continent.

"This first close is an important signal to the many other countries interested in the SDG7 Programme who recognise the value of attracting private capital to support economic growth and green industrialisation. We look forward to concluding further transactions as part of the programme in the very near future,” UNECA executive secretary Dr Vera Songwe says.

“We are gratified to help initiate this programme for the UNECA and the continent and appreciate the endorsement from private international financial institutions such as Pimco, which are not only engaged in the South African economy, but see the particular opportunity in supporting our clean energy transition,” says Finance Minister Enoch Godongwana, who served as chairperson of the DBSA during the initiation and early stages of this transaction.

Standard Chartered acted as placement agent and structuring adviser for this transaction, while Fieldstone is the SDG7 Programme adviser and is the transaction originating bank.

South Africa’s ongoing steelworker strike is likely to lead to job cuts, further hammering an industry that’s been in decline for several years, according to the country’s main employer body.

The week-long walkout by as many as 300,000 members and allies of the National Union of Metalworkers of South Africa has affected five provinces and disrupted supply chains to major firms, including carmaker BMW AG. The labor group is weighing a response to a renewed pay offer, spokesperson Phakamile Hlubi-Majola said Tuesday.

“These strikes lead to employers having to put people on short-time and having to let some of the workers go,” Gerhard Papenfus, CEO of the National Employers Association of South Africa, said by phone. “It ultimately leads to job losses.”

The strike threatens to derail the potential recovery of South Africa’s economy from the coronavirus pandemic, which triggered the biggest annual contraction since at least the end of white-minority rule in 1994, and worsen an employment crisis. The joblessness rate rose to a record 34.4% in the second quarter.

There are just 500 steelworkers in East London, a coastal industrial town, compared with 4 500 a decade ago, according to Papenfus.

STRIKE SEASON

South Africa is heavily unionised and strikes from mining to manufacturing are a regular occurrence when pay deals expire and need to be renegotiated. A similar Numsa walkout in 2014 lasted more than three weeks.

The Steel and Engineering Industries Federation of Southern Africa said “all if not most” of its membership has been affected by this year’s shutdown due to the “knock-on effect throughout the sector.”

“We are still seriously engaging one another,” CEO Lucio Trentini said in an emailed response to questions. He declined to give details of the offer as the matter is under consideration. Numsa had demanded an 8% increase in the first year of a new deal, compared with the latest inflation rate of 4.9%.

BMW, which has a plant north of Pretoria, had produced almost 700 fewer vehicles than planned as a result of the strike as of Monday, spokesperson Hailey Philander said by phone, without specifying what the target was.

The walkout has turned violent in some places, Neasa’s Papenfus said, with those picketing trying to push those still working into joining the strike.

“At a meeting I was at yesterday some of the strikers started breaking down the walls,” he said. “That is very intimidating.”

If South Africa can unlock disruptive technology, in particular green hydrogen, it could decarbonise its petrochemicals and chemicals sectors and become a leading global producer of green fuels and chemicals for both domestic use and export.

The outlook for South Africa’s crude refineries, however, is less positive with the aging fleet unable to produce the cleaner fuels required by impending regulations stipulating the transition to ultra-low sulphur petrol and diesel products from September 1, 2023.

These are two of the main findings of a study undertaken by the National Business Initiative (NBI) in collaboration with Business Unity South Africa and the Boston Consulting Group to investigate the prospects for the decarbonisation of the domestic chemicals and petrochemicals sector.

The industry currently accounts for 13% of South Africa’s emissions, 90% of which are produced by Sasol, which uses coal and gas to produce synthetic fuels and chemicals at Secunda and Sasolburg.

The industry employs about 140 000 people directly and sustains more than 690 000 indirect jobs.

The final report will be released on October 21 ahead of the COP26 climate talks in Glasgow, Scotland, at which NBI will have a pavilion stand where it hopes to showcase South Africa’s green industrialisation prospects.

In a presentation on the study’s findings, NBI head of environment Stephen Nicholls said South Africa’s opportunity to be a global manufacturer of green fuels and chemicals was based on the country’s three competitive advantages in the production of green hydrogen and synthetic fuels.

“First, South Africa has some of the best solar and wind resources on the planet.

“Second, it has access to sufficient land and access to seawater for desalination, which can also serve a dual purpose of improving water security.

“And third, it has unique Fischer-Tropsch technology for the beneficiation of hydrogen into hydrocarbons such a e-methanol and sustainable aviation fuels (SAF),” Nicholls explained.

Green hydrogen is produced by using renewable electricity to split water into hydrogen and oxygen, using an electrolyser.

Sasol, which has placed green hydrogen at the centre of its recently updated strategy, is currently studying, in partnership with Enertrag, Afrox and Navitas, the production of SAF using green hydrogen at its Secunda complex, in Mpumalanga.

The study states that the demand for green hydrogen could rise to between 160- and 300-million tons as countries seek to use hydrogen and hydrogen derivatives to decarbonise the hard-to-abate sectors of aviation, marine and long-distance land freight, chemicals, steel and cement.

South Africa, along with countries such as Chile, Namibia, Saudi Arabia and Australia had the opportunity to become specialist green fuels and chemicals producers, Nicholls said.

President Cyril Ramaphosa also highlighted the green hydrogen opportunity recently, saying South Africa stood ready to be “a major exporter in this market, to use hydrogen to rapidly decarbonise our existing industries, and attract industrial investment from across the globe”.

The NBI study added that South Africa was well placed to supply the European market, where yearly demand for hydrogen and power fuels could rise to about 30-million tons by 2050.

Besides a conducive policy environment, Nicholls said it would be critical to establish international partnerships and pilot projects to drive research and development, offtake agreements and to secure the cheap financing required to unlock the opportunity.

The country’s conventional refinery fleet, by comparison was expected to shut down by 2030, owing to its decreasing competitiveness against imports.

Nicholls said the risks associated with these closures – including the security of supply, social and balance of payments risks – will have to be well managed over the medium term.

“But the changing demand landscape also creates opportunity for South Africa in the long-term.

“South Africa could become a ...

The Coega Development Corporation (CDC) has issued a request for proposal (RFP) for service providers able to offer a technical solution for a proposed greenfields manganese export terminal at the deep-water Port of Ngqura, in the Eastern Cape.

The CDC has been appointed as the implementing agent for the project on behalf of Transnet National Ports Authority (TNPA).

TNPA has, for several years, proposed the relocation of the manganese terminal and the liquid bulk terminal from the Port of Port Elizabeth, in Gqeberha, to the Port of Ngqura.

Transnet CEO Portia Derby reported recently that the group intended narrowing its current multichannel approach for manganese exports to the two channels of Saldanha Bay and Ngqura.

She said the aim was to build a 16-million-ton-a-year manganese terminal at the Port of Ngqura, while increasing yearly capacity at the Port of Saldanha to six-million tons.

The Port of Ngqura terminal should also be scalable to 22-million tons in future.

The RFP represents the first stage of a two-stage procurement process and is designed to identify suitably qualified service providers to design a technical solution for a covered, or enclosed, manganese stockyard and new export terminal.

The decision to move away from an open stockyard is based on a desire to ensure a near-zero dust facility.

Successful bidders from stage one will be invited to proceed to stage two, whereby they will be required to carry out detailed designs and proceed to construction.

CDC’s executive manager for infrastructure planning and development Dr Mpumi Mabula says the objective of the project is to secure a service provide to build world-class end-to-end services to the manganese sector in South Africa.

“As far as Coega is concerned, we see the development of a new Manganese Export Terminal at the Port of Ngqura as contributing towards sustainable and inclusive growth,” Mabula said in a statement, adding that the project would unlock significant investment in the mining sector through the improvements to logistics infrastructure and services.

The RFP documents are available on the CDC website (www.coega.co.za) and the closing date for responses is 12:00 on December 3.

The City of Johannesburg (CoJ) signed a power purchase agreement (PPA) with the privately-owned Kelvin Power Station to increase electricity supply for the city by 100 MW.

CoJ executive mayor Mpho Moerane signed the PPA on October 8 alongside Gauteng Premier David Makhura and CoJ Environment and Infrastructure Services Department MMC Tania Oldjohn at the City Power headquarters, in Booysens.

The agreement is expected to boost power supply reliability in Johannesburg and reduce load-shedding.

“The city, through City Power, had entered into a 20-year PPA with the Kelvin Power Station owners Aldwych Consortium, as the existing agreement was due to expire in a month’s time. The agreement will ensure the city receives 100 MW more in addition to the 80 MW it received from Kelvin and bring the total output from the power station to 180 MW."

Makhura said the agreement would result in an additional 12% electricity supplied in Johannesburg.

The agreement comes as State-owned power utility Eskom is constrained from providing additional capacity, and the CoJ deems extending the current Kelvin agreement necessary for a further two years.

“The challenges of prolonged electricity outrages in Soweto, Ivory Park, Orange Farm, Finetown, Diepsloot and Sandton made it urgent for the city to enter into the new agreement on Kelvin.

"The agreement will help CoJ move from the position where power outages are normalised in some Johannesburg communities, especially where the majority are living below the breadline[, to where power outages are the exception],” Moerane said.

Eskom and CoJ, through City Power, reached an agreement on October 7 to start the take-over of the Soweto electricity supply.

He added that the Kelvin PPA includes revised terms and conditions that allow for the greater operating risk of Kelvin to be transferred to the operator of the power plant, as it is better placed to manage variable input costs.

“CoJ remains committed to helping Eskom resolve electricity supply challenges in all affected communities. The Kelvin Power Station agreement is a demonstration of the commitment by the City’s current leadership to better serve the people of Johannesburg,” he said.

Makhura said the PPA was a concrete step to ensure a reliable supply of electricity to the people of Johannesburg, emphasising that wo things for CoJ to pursue were electricity and roads, as they have a significant impact on the economy.

Makhura further called on water utility Rand Water to resolve the issue of water supply throughout Gauteng.

President Cyril Ramaphosa has doubled down on his argument that South Africa needs to act with “urgency and ambition” in transitioning to a low-carbon economy, but stressed that such increased ambition could not be achieved without financial support from developed economies.

In his latest weekly newsletter, the President backs moves to raise grants and loans, at concessional rates, from the international community to support the country’s and Eskom’s just transition.

This, again, places him at odds with Mineral Resources and Energy Minister Gwede Mantashe, who has questioned plans to raise concessional finance, warning that it could be a “dangerous step”.

However, the newsletter also places some pressure on Finance Minister Enoch Godongwana, given the National Treasury’s seeming hesitancy to embrace such plans, owing to the possible debt implications.

“This is not about charity.

“It is about fairness and mutual benefit,” Ramaphosa writes.

“Countries with developed economies carry the greatest responsibility for climate change as they have historically been the biggest polluters, while developing economies are the worst affected.

“That is why wealthier countries have an obligation to provide significant financial support for developing economies to adapt to climate change and reduce emissions.”

Ramaphosa adds that the energy transition at Eskom, as well as the development of green industries such as electric vehicles and green hydrogen, will need to be underpinned by these forms of financial support.

The President’s message follows a recent visit to South Africa of climate envoys from France, Germany, the UK, the US and the European Union in the run up to the COP26 climate talks scheduled for Glasgow, Scotland, in November.

During meetings with the envoys, a just transition financing facility, supported by concessional finance, was proposed to enable South Africa to implement the ambitious climate action outlined in its updated National Determined Contribution (NDC), while also addressing the social impacts of the transition.

South Africa has deposited an updated NDC range of 420- to 350-million tons of carbon dioxide equivalent (Mt CO2-eq) for 2030 with the United Nations Framework Convention on Climate Change, which represents a marked improvement on its 2015 pledge of 614 Mt CO2-eq to 398 Mt CO2-eq.

“Where we get to in this range depends on the support we get for our transition.

“Increased ambition cannot be achieved without the support from the more developed economies living up to the promises they have made in the past to provide financial support to developing economies.

“This needs to be in the form of grants, loans at concessional rates and private investment,” the President writes.

During a July Climate Ministerial meeting, hosted in London, Forestry, Fisheries and the Environment Minister Barbara Creecy called on developed countries to ensure access to long-term, predictable and affordable climate finance for developing countries.

While bemoaning the fact that rich countries were still failing to honour their $100-billion-a-year pledge made in 2015, Creecy argued that the figure should be increase to $750-billion a year by 2030, in light of the scale of the adaptation and mitigation challenges being faced by developing countries.

Ramaphosa also used his newsletter to highlight both the risks of the transition and to stress that “there are huge economic opportunities that we must seize”.

Besides the health and environmental risks, the President underlined both the direct economic risks, such as the increased threat of drought, and the broader economic risk posed by the imposition of trade barriers on carbon-heavy goods.

“As our trading partners pursue the goal of net-zero carbon emissions, they are likely to increase restrictions on the import of goods produced using carbon-intensive energy.”

However, South Africa was also “endowed with abundant resources that can be harnessed to open up new frontiers of investment...

The domestic wind industry plans to approach the Department of Mineral Resources and Energy (DMRE) with a series of recommendations for boosting local content and direct South African involvement in the deployment of 4 300 MW of new wind capacity over the coming three years.

The proposals focus primarily on embedding greater predictability and flexibility into the procurement rounds, which resumed this year following a seven-year disruption – a pause that resulted in some aspects of the domestic supply-chain, built between 2011 and 2014, being lost.

BTE Renewables CEO Robert Skjodt has been given responsibility for compiling the recommendations after he moderated a panel discussion with independent power producers (IPPs) and original equipment suppliers during the 2021 edition of Windaba, which took place in Cape Town this week.

Skjodt tells Engineering News that the industry is not concerned that it is unable to meet the 40% local-content threshold prescribed for the fifth bid window (BW5) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which is currently being adjudicated.

It is also confident of the 49% black ownership threshold being breached, despite the $8-billion capital expenditure involved.

However, the 24-month build timetable prescribed by the IPP Office is set to stretch the domestic supply chain to its limits as some 800 turbines are manufactured, transported and installed over the period.

Skjodt says IPPs will have more scope to integrate new entrants and small businesses into the programme if the schedule is extended.

The industry will, thus, propose that the delivery schedule be increased to 36 months to ease the bottlenecks and to create the time and space required for new entrants to invest and ramp up.

To create the certainty required for new investment in the supply chain, the industry will also request the DMRE to consider announcing fixed dates for future bid windows.

“Having greater predictability would improve prospects tremendously for companies and entrepreneurs seeking to raise finance for the investments required to position themselves for a role in the industry,” Skjodt argues.

While the resumption of the REIPPPP has been widely welcomed, there has already been some schedule slippage with preferred BW5 bidders yet to be named, despite earlier indication by the DMRE that BW6 would be launched before the end of September.

Following the BW5 submission closing date of August 16, the DMRE confirmed that it had received 39 onshore wind bids, suggesting significant over-subscription in light of the fact that only 1 600 MW had been allocated to the round.

Besides the recommendations on how to boost domestic participation and benefits from the REIPPPP, the industry is keen to engage with the DMRE and the IPP Office on how best to overcome the immediate grid-capacity constraints.

Although it would be too soon to introduce regional allocations, aligned with grid capacity, for BW6, Skjodt says that it would make sense to add a spatial component in future.

However, he also believes that IPPs could provide some innovative solutions for extracting additional capacity in provinces such as the Northern Cape, where the network is said to be at full capacity, as well as the Western Cape, which is approaching its capacity limits.

“Ultimately, we would like to engage with the DMRE and the IPP Office to find solutions that are favourable for the industry and its role in supporting the just transition through supporting domestic enterprise development and higher job creation.”

Creamer Media's Chanel de Bruyn speaks to Engineering News Editor Terence Creamer about President Cyril Ramaphosa throwing his weight behind South Africa’s green hydrogen export ambitions and encouraging South Africa to embrace green energy and decarbonisation.

The National Taxi Alliance (NTA) welcomes the proposed roll-out of a single integrated ticket that can be used across all modes of public transport, says NTA spokesperson Theo Malele.

He believes that such a system will create “healthy competition” in the public transport space.

It will also assist the taxi industry in curbing the estimated 40% loss in revenue that happens “between the driver and owner”.

Malele says it will, however, be necessary to incentivise the use of such a ticketing system among taxi drivers and owners, perhaps by sharing the potential revenue derived from advertising on these tickets/cards.

This should also help to offset the added collection costs within such a system, says Malele.

“We are in agreement with this innovation, but what is key is to have an educational drive among taxi drivers, owners and the general public.”

“We need this system so that commuters can choose which mode of transport they want to use on a particular day and into a particular corridor,” he adds.

“It means that [the taxi industry] needs to ensure that our vehicles are of a standard that would attract customers and retain them. And, even more so, that we attract more customers and increase the number of drivers in the industry.”

The Gautrain has made the first move to integrated ticketing in Gauteng by enabling the tapping of bank cards to travel on the urban rail system.

With the technology proved, the challenge now is to create fare regulations for Gauteng in the lead-up to the launch of an integrated ticketing system in the province, says Gautrain Management Agency (GMA) COO Tshepo Kgobe.

These regulations could be made available for public comment in “the next few months”.

The regulations encompass a number of issues, such as monthly discounts, subsidies, and zonal fee structures, for example.

“It is now up to us – the taxi industry and the various operators – to collectively agree a fare policy. This is the important part. The technology part is done,” says Kgobe.

The Gauteng Public Transport and Roads Infrastructure MEC Jacob Mamabola says the newly formed Gauteng Transport Authority (GTA) is responsible for public transport integration in the province.

“The policy issues reside there – the coordination, bringing everyone under one authority and one set of rules.

“The technology and systems are in place. All we need is for the GTA to tap into that and leverage the existing capacity.”

Mamabola, Kgobe and Malele spoke during Smarter Mobility Africa, held this week.