DECARBONISING SOUTH AFRICA'S POWER SYSTEM - JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
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JUST TRANSITION AND
CHAPTER
CLIMATE PATHWAYS STUDY
FOR SOUTH AFRICA
DECARBONISING
01
SOUTH AFRICA’S
POWER SYSTEM
IN PARTNERSHIP WITH
ACKNOWLEDGEMENTS
RESEARCH SUPPORTED BY
UK PACT South Africa: UK PACT has partnered with South Africa to support action
on Just Transition pathways and a low-carbon economic recovery. As the third largest
economy in Africa, South Africa plays a critical role in economic and policy priority
setting at a continental level and across the Southern Africa region. South Africa’s long-
standing participation in the United Nations Framework Convention on Climate Change
(UNFCCC) processes creates a solid platform for an impactful and transformational UK
PACT partnership. Moreover, UK PACT seeks to support climate action that will contribute
to the realisation of other development imperatives in South Africa, such as job creation
and poverty alleviation. Priority areas of focus for UK PACT in South Africa are aligned with
key national priorities in the just energy transition, renewable energy, energy efficiency,
sustainable transport, and sustainable finance. UK PACT projects can contribute to
addressing industry-wide constraints, common metropolitan challenges, and bringing
city, provincial and national level public and private partners together to address
climate priorities.
We Mean Business: This is a global coalition of nonprofit organisations working with
the world’s most influential businesses to take action on climate change. The coalition
brings together seven organisations: BSR, CDP, Ceres, The B Team, The Climate Group,
The Prince of Wales’s Corporate Leaders Group and the World Business Council for
Sustainable Development. Together we catalyze business action to drive policy ambition
and accelerate the transition to a zero-carbon economy. NBI has been a regional network
partner to WMB since the beginning of 2015.
Supported by: Strategic Partnerships for the Implementation of the Paris Agreement
(SPIPA): Climate change is a global threat that requires a decisive and confident response
from all communities, particularly from major economies that represent roughly 80 % of
global greenhouse gas emissions. The 2015 Paris Agreement complemented by the 2018
Katowice climate package, provides the essential framework governing global action to
deal with climate change and steering the worldwide transition towards climate-neutrality
and climate-resilience. In this context, policy practitioners are keen to use various platforms
to learn from one another and accelerate the dissemination of good practices.
of the Federal Republic of Germany
To improve a geopolitical landscape that has become more turbulent, the EU set out
in 2017 to redouble its climate diplomacy efforts and policy collaborations with major
emitters outside Europe in order to promote the implementation of the Paris Agreement.
This resulted in the establishment of the SPIPA programme in order to mobilise
European know-how to support peer-to-peer learning. The programme builds upon and
complements climate policy dialogues and cooperation with major EU economies.
This publication was produced with the financial support of the European Union’s Partnership Instrument and the
German Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety (BMU) in the context of the
International Climate Initiative (IKI). The contents of this publication are the sole responsibility of National Business
Initiative (NBI) and do not necessarily reflect the views of the funders.
The African Climate Foundation: The ACF is the first African-led strategic climate
change grant-making foundation on the continent. Building on the success of partner
organisations like the European Climate Foundation and ClimateWorks Foundation,
the ACF was established to provide a mechanism through which philanthropies can
contribute to Africa’s efforts to address climate change. As an African-led and African-
based foundation, we are committed to supporting African solutions to the climate
change challenges facing the continent.
2 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
PARTNERS
National Business Initiative
At the National Business Initiative (NBI), we believe in collective action and
collaboration to effect change; building a South African society and economy
that is inclusive, resilient, sustainable and based on trust. We are an independent,
business movement of around 80 of South Africa’s largest companies and
institutions committed to the vision of a thriving country and society. The NBI works
with our members to enhance their capacity for change, leverage the power of our
collective, build trust in the role of business in society, enable action by business to
transform society and create investment opportunities.
Business Unity South Africa
BUSA, formed in October 2003, is the first representative and unified organisation
for business in South Africa. Through its extensive membership base, BUSA
represents the private sector, being the largest federation of business
organisations in terms of GDP and employment contribution. BUSA’s work is largely
focused around influencing policy and legislative development for an enabling
environment for inclusive growth and employment.
Boston Consulting Group
BCG partners with leaders in business and society to tackle their most important
challenges and capture their greatest opportunities. BCG, the pioneer in business
strategy when it was founded in 1963, today works closely with clients to embrace
a transformational approach aimed at benefitting all stakeholders — empowering
organisations to grow, build sustainable competitive advantage, and drive positive
societal impact. Their diverse global teams are passionate about unlocking
potential and making change happen, and delivering integrated solutions.
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 3
TERMINOLOGIES
AFOLU Agriculture, Forestry and Feedstock Raw material to supply or P2X Power-to-X
Other Land Use fuel a machine or industrial Peak-load Maximum of electrical power
Base load Permanent minimum load process demand
a power supply system is GDP Gross Domestic Product PGM Platinum Group Metals
required to deliver GHGI Greenhouse Gas National PM Particular Matter
Bn Billion Inventory PSP Pumped-storage plant
C&I Construction & Installation Green Hydrogen produced from PV Photovoltaic solar energy
CAIA Chemicals & Allied Industries‘ hydrogen renewable energy sources
QES Quarterly Employment Survey
Association GJ Gigajoule
QLFS Quarterly Labour Force
CAPEX Capital expenditure Gt Gigatonne (1 thousand million Survey
CCGT Combined Cycle Gas Turbine tonnes)
RE Renewable Energy
CCUS Carbon Capture Utilisation & GTP Gas-to-Power
REIPPPP Renewable Energy
Storage GW Gigawatt Independent Power Producer
CDP A disclosure platform for I-O Input Output model (used in Procurement Programme
companies and cities to socio-economic modelling) SA South Africa
report on their carbon IDDRI Institute for Sustainable
emissions, water usage, forest SAM Social Accounting Matrix
Development and
management and climate- International Relations SAREM South African Renewable
related financial disclosures Energy Masterplan
IEA International Energy Agency
CGE Computable General Scope 1 All direct emissions from
IGUA Industrial Gas Users emissions activities of an organisation
Equilibrium (used in socio- Association of Southern
economic modelling) under their control. Incl.
Africa process emissions, fuel
COP26 United Nations Conference of IRENA International Renewable
the Parties combustion on site, such as
Energy Agency gas boilers, fleet vehicles and
CO2e Carbon dioxide equivalent IPCC Intergovernmental Panel on air-conditioning leaks
CSIR Council for Scientific and Climate Change Scope 2 Indirect emissions from
Industrial Research IPP Independent Power Producer emissions electricity purchased and
CTL Coal-to-liquid IRP Integrated Resource Plan used by the organisation.
DACCS Direct Air Carbon Capture kg Kilogram Emissions are created
and Storage during the production of the
LCOE Levelised cost of energy electricity that is used by the
DFFE Department of Forestry,
Fisheries and the LCOH Levelised cost of H2 organisation
Environment Mha Million hectares SMR Small Modular Reactors
DG Distributed Generation is MQA Mining Qualifications SSA Sub-Saharan Africa
an approach that employs Authority SSP Sector Skills Plan
small-scale technologies to Mt Megatonne (1 million tonnes) Synfuels Synthetic Fuel
produce electricity close to NDC Nationally Determined
the end-users of power TCFD Task-Force on Climate-
Contribution Related Financial Disclosures
DMRE Department of Mineral NG Natural Gas
Resources & Energy TWh Terawatt-hour
Nedlac National Economic UCT University of Cape Town
EG Embedded Generation is Development and Labour
electricity generation which is Council UN United Nations
connected to the distribution UNFCCC United Nations Framework
NPV Net Present Value
network rather than to the Convention on Climate
high voltage National Grid n/a Not applicable Change
EPRI Electronic Power Research O&M Operation & Maintenance WACC Weighted Average Cost of
Institute OCGT Open Cycle Gas Turbine Capital
EU European Union OE Oxford Economics WS# Workshop(#)
EV Electric vehicle OECD Organisation for Economic
FAO Food and Agriculture Co-operation and
Organisation of the UN Development
OPEX Operating expenditure
4 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
CONTENTS
Acknowledgements 2
JUST TRANSITION
AND CLIMATE Terminologies 4
PATHWAYS STUDY
FOR SOUTH AFRICA Overview of CEO Champions 6
1. FOREWORD 8
SERIES INCLUDES: 2. INTRODUCTION 10
01 Decarbonising South Africa’s power
system 2.1 The purpose of this report 10
02 Decarbonising the South African 2.2 The case for change 10
petrochemicals and chemicals
sector
2.3 Objective and approach 14
03 The role of gas in South Africa’s
transition
3. DECARBONISING POWER IN SOUTH AFRICA 19
04 Decarbonising mining in
South Africa
3.1 Scope and approach of the power sector analysis 20
05 Decarbonising the agriculture,
forestry and land use sector in 3.2 Key findings of the power sector analysis 22
South Africa
06 Decarbonising the South African 3.3 How to enable the transition of South Africa’s power sector 37
transport sector
07 South Africa’s green hydrogen 4. OUTLOOK 42
opportunity
08 Challenges and opportunities for
a Just Transition
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 5
OVERVIEW
OF CEO
CHAMPIONS Joanne Yawitch
NBI CEO
Cas Coovadia
BUSA CEO
Onboarding of additional
CEOs ongoing
It is with great sadness Avenir
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Calibri
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tassum que platur?
that we heard of
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ad quiberuptat quis recae. In porum quis
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sum cuptint molum fuga. Et ommo magnis ndaecta tiorpor errorro odis rempor sae cuptatur autam ut venducium
the passing of Dr. Johan
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bla num sim volorum as verferupta plis reiun- re qui omnihil ex et ut etur molent paribus soluptatem idus auditia et as
van Zyl. We wish to extend
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sum, esseruptatem harumquo que eum quatemporum fuga. Nequi apitis volupta tempera deniet faccae providu stibus
facidelique sero modit re et la sant faceperum re, archita aut enisquia ducim et doluptati beriatempe perspe plit harchillabo.
ipsus ut resequis ut odis dolum eaquis et aut Labo. Itaqui tectia corestio. Ut magniminto con remquibusant debis molupti-
harit, quam aut et eatem ut quae velentur bus, quia volupti busdae cum aruptatist etus et aut duciatem que dellest,
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ende ommo dem que sae rerferum dolupti ipienderum quam quaspit as nest, ut mos nostis maximil laborerum escia
dolectam, nimpore storumq uaturibus ipsapi-
our deepest condolences
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et et facia pereicabo. Percill orumque magni et quiatet iunt eos moluptat pra qui di omnimo temolor estrum se plibus et qui
re qui omnihil ex et ut etur molent paribus dolorrum eatusdanis corion rem ipsae nonsequo doloribus ut liquia que dolup-
soluptatem idus auditia et as repudig entio- tatio doluptaepero derum, tecti beriore, non cusam earumqu atiamet aut
rum aut ab in consequam qui omnimin ne et quasped mi, conem ut mil ipsum est, essum adis dolore molore laborpo
untur aut ene pe lis quatemporum fuga. repelenis molest quiate con nonserum adisi sam, cus sinctas ulparib ustius
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to his family, his friends,
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bo. Labo. Itaqui tectia corestio. Ut magnimin- perro in con corit ex eribus et, abore et vendi ommod quiam, quianto illest,
to con remquibusant debis moluptibus, quia temqui beat.
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and to his team at Toyota.
mos nostis maximil laborerum escia eriatquid- eaquasped et volecabo. Nem vere voluptu rehendusae nonsed que dem quo
it quamust, to moluptis minvento cusciamus et omnis eum fuga. Genihit quatibus mil ipsapel eceptatusam hitas sum, nam,
We will always be grateful
Johan van Zyl for Dr. van Zyl’s support as André de Ruyter Fleetwood Grobler
Executive Chairman: Toyota a CEO Champion and for Eskom CEO Sasol CEO
South Africa the valuable contribution
he made to this work.
Leila Fourie Mxolisi Mgojo Alan Pullinger Hloniphizwe Mtolo
JSE Group CEO Exxaro CEO First Rand CEO Shell SA CEO
Lungisa Fuzile John Purchase Paul Hanratty Deidré Penfold
Standard Bank South Africa AgBiz CEO Sanlam CEO CAIA Exec Director
CEO
6 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
Vivien McMenamin Taelo Mojapelo Roland van Wijnen Njombo Lekula
Mondi SA CEO BP Southern Africa CEO PPC Africa CEO PPC MD SA Cement and
Materials
Gavin Hudson Vikesh Ramsunder Nyimpini Mabunda Nolitha Fakude
Tongaat Hulett CEO Clicks Group CEO GE SA CEO Anglo American SA Chairperson
Portia Derby Mark Dytor Yusa Hassan Tshokolo TP Nchocho
Transnet CEO AECI CEO Engen MD and CEO IDC CEO
Alex Thiel Stuart Mckensie Marelise van der Westhuizen Ishmael Poolo
SAPPI CEO Ethos CEO Norton Rose Fulbright CEO Central Energy Fund CEO
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 7
1.
FOREWORD
JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
South Africa is a signatory to the United Nations The work done by the business community has
Framework Convention on Climate Change (UNFCCC) interrogated the energy, liquid fuels, mining, chemicals,
and to the Paris Agreement. As an energy and emissions agriculture, forestry and other land use, transport and
intensive middle-income developing country, it recognises heavy industrial sectors. The results of the modelling
the need for it to contribute its fair share to the global and analytical work have been informed by numerous
effort to move towards net-zero carbon emissions by industry experts, academics and scientists. The results
2050, taking into account the principle of common but demonstrate that these pathways do exist and that even a
differentiated responsibilities and the need for recognition country with an economy that is structurally embedded in
of its capabilities and national circumstances. an energy intensive production system can shift.
South Africa is highly vulnerable to the impacts of climate The results of this work to date have shown that this can
change and will need significant international support to be done, and that to realise these pathways, efforts must
transition its economy and to decarbonise. Furthermore, begin now. Timing is of the essence and the business
given the country’s high rate of inequality, poverty and community is of the view that there is no time like the
unemployment and the extent of dependence on a fossil present to create the regulatory and policy environment
fuel-based energy system and economy, this transition that would support transitioning the economy.
must take place in a way that is just, that leaves no-one Accordingly, business can commit unequivocally to
behind and that sets the country onto a new, more supporting South Africa’s commitment to find ways to
equitable and sustainable development path; one which transition to a net-zero emission economy by 2050.
builds new local industries and value chains.
Furthermore, in November, South Africa will table its
In response to the above imperatives, the National revised Nationally Determined Contribution (NDC)
Business Initiative, together with Business Unity South to the UNFCCC. Business recognises the need for
Africa and the Boston Consulting Group has worked with greater ambition to position the country as an attractive
corporate leaders to assess whether the pathways exist for investment destination and increase the chances of
the country’s economic sectors to decarbonise by 2050 accessing green economic stimulus and funding packages.
and whether this can be done in such a way as to build Specifically, business would support a level of ambition
resilience to the impacts of climate change and to put the that would see the country committing to a range of
country onto a new, low emissions development path. 440 to 350–370 Mt CO2e by 2030. This is significantly
8 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
Upington, Northern Cape. Photo: scatec.com/locations/south-africa
more ambitious than the NDC put out for public comment Business sees the support of the international community
and would require greater levels of support with regard as essential for the country to achieve its climate
to means of implementation from the international objectives. For this reason, business believes that a more
community than is currently the case. It is also consistent ambitious NDC, and one that would place the country
with international assessments of South Africa’s fair share firmly on a net-zero emissions by 2050 trajectory, would
contribution to the global effort, and it would also ensure have to be conditional on the provision of the requisite
that the no-regret decisions, that would put South Africa means of support by the international community. In
onto a net-zero 2050 emissions trajectory, would be this light the business community will play its part to
implemented sooner. develop a portfolio of fundable adaptation and mitigation
projects that would build resilience and achieve deep
While South Africa has leveraged a degree of climate decarbonisation.
finance from the international community, the scale and
depth of the transition envisaged will require substantial Despite the depth of the challenge, South African business
investments over an extended period of time. Critically, stands ready to play its part in this historical endeavour.
social costs and Just Transition costs must be factored in. Business is committed to work with government and other
Significant financial, technological, and capacity support social partners, with our employees, our stakeholders,
will be required to support the decarbonisation of hard and the international community, to embark on a deep
to abate sectors. Early interventions in these sectors will decarbonisation path towards net-zero and to build the
be critical. resilience to the impacts of climate change that will ensure
that our country contributes its fair share to the global
climate effort.
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 9
2.
INTRODUCTION
2.1 THE PURPOSE OF THIS REPORT
This report, focussing on the decarbonisation of South Africa’s power sector, is the first in a series
being released to illustrate the findings of this project. These reports are intended to leverage
further engagement with sector experts and key stakeholders, beyond the extensive stakeholder
engagement that has been undertaken from August 2020 to June 2021 within the respective
technical working groups of this project. We hope this will foster continued dialogue during the
project as we work towards a final report that will collate the individual sector findings and provide
collective insight.
2.2 THE CASE FOR CHANGE
2.2.1 CLIMATE CHANGE AND THE RACE TO GLOBAL Hence, mitigating the worst impacts of climate change
NET-ZERO EMISSIONS BY 2050 requires all countries to decarbonise their economies.
In the 2019 World Meteorological Organization report,
Climate change is the defining challenge of our time. ‘Statement on the State of the Global Climate‘, the United
Anthropogenic climate change poses an existential threat Nations (UN) Secretary-General urged: “Time is fast
to humanity. To avoid catastrophic climate change and running out for us to avert the worst impacts of climate
irreversible ‘tipping points’, the Intergovernmental Panel disruption and protect our societies from the inevitable
on Climate Change (IPCC) stresses the need to stabilise impacts to come.”
global warming at 1.5ºC above pre-industrial levels.
For a 66% chance of limiting South Africa, in order to contribute its fair share to
warming by 2100 to 1.5°C, the global decarbonisation drive, bearing in mind the
this would require the world principle of ‘common but differentiated responsibilities
to stay within a total carbon and respective capabilities’, should similarly set a target
budget estimated by the of reaching net-zero emissions by 2050, and also keep it
IPCC to be between 420 to within a fair share of the global carbon budget allocated,
570 gigatonnes (Gt) of CO2, estimated to be between 7 and 9 Gt CO2e.2
to reduce net anthropogenic
emission of CO2 by ~45% Even if global warming is limited to 1.5°C, the world will
of 2010 levels by 2030, face significantly increased risks to natural and human
and to then reach net-zero systems. For example, 2019 was already 1.1°C warmer than
around 2050.1 pre-industrial temperatures, and with extreme weather
events that have increased in frequency over the past
1 IPCC. 2018. ‘Special Report on Global Warming of 1.5°C’.
2 Extrapolation of the medians of various methodologies described by Climate Action Tracker. The full range is 4–11 Gt CO2e.
10 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA“Time is fast running out for us
to avert the worst impacts of
climate disruption and protect
our societies from the inevitable
impacts to come.”
Mr Antonio Guterres,
United Nations Secretary-General
Photo: UN Climate Action Summit
decades, the consequences are already apparent.3 More country experiencing greater variability in rainfall as well as
severe and frequent floods, droughts and tropical storms, an increased risk of extreme weather events.
dangerous heatwaves, runaway fires, and rising sea
levels are already threatening lives and livelihoods across Rising temperatures and increased aridity and rainfall
the planet. variability may have severe consequences for South
Africa’s agricultural systems, particularly on the country’s
South Africa will be among the countries at greatest ability to irrigate, grow and ensure the quality of fruit
physical risk from climate change. South Africa is already and grain crops; and on the health of livestock, such as
a semi-arid country and a global average temperature sheep and cattle which will see decreased productivity
increase of 1.5°C above pre-industrial levels translates and declining health at temperature thresholds. Parasites
to an average 3°C increase for Southern Africa, with the tend to flourish in warmer conditions, threatening people
central interior and north-eastern periphery regions of as well as livestock and crops. Increasing temperatures
South Africa likely to experience some of the highest and rainfall variability threaten South Africa’s status as
increases.4 Research shows that a regional average a megabiodiverse country. Severe climate change and
temperature increase of over 1.5°C for South Africa temperature increases could shift biome distribution,
translates to a greater variability in rainfall patterns. resulting in land degradation and erosion. The most
Models show the central and western interiors of the notable risk is the impact on the grassland biome,
country trending towards warmer and dryer conditions, essential for the health of South Africa’s water catchments,
and the eastern coastal and escarpment regions of the combined with the risk of prolonged drought.
3 World Meteorological Organization. 2019. ‘Statement on the State of the Global Climate’.
4 Department of Environmental Affairs, Republic of South Africa. 2018. ‘South Africa’s Third National Communication Under the United Nations Framework
Convention on Climate Change’.
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 11Finally, rising ambient temperatures due to climate change South Africa has predominantly coal-based power
and the urban heat effect threaten the health of people, generation, the coal-to-liquid process in the liquid fuels
particularly those living in cramped urban conditions and sector, and a coal-reliant industrial sector. In the mining
engaging in hard manual labour, as higher temperatures sector, three of the four most significant minerals in South
result in increased risk of heat stress and a reduction in Africa’s commodity footprint are at risk given the global
productivity. Therefore, limiting global climate change and efforts to curb emissions: thermal coal, Platinum Group
adapting to inevitable changes in the local climate will be Metals (PGMs) with mainly palladium, and iron ore. The
critical to limit the direct, physical risks to South Africa. Like fourth mineral is gold.
many developing countries, South Africa has the task of
balancing the urgent need for a just economic transition The bulk of South Africa’s exports comprise carbon
and growth, while ensuring environmental resources are intensive commodities from the mining, manufacturing,
sustainably used and consumed, and responding to the and agricultural sectors which will become less
local physical impacts of climate change.5 While South competitive in markets in a future decarbonised world.
Africa is highly vulnerable to the physical impacts of These sectors also provide the majority of employment
climate change, its economy is also vulnerable to a range of unskilled labour at a regional level.
of transition risks posed by the global economic trend
toward a low-carbon future. The carbon intensity of the South African economy, key
sectors, and export commodities must be seen against the
South Africa is also facing a significant trade risk. South backdrop of the country’s key trading partners committing
Africa ranks in the top 20 most carbon intensive global to ambitious decarbonisation goals. By early 2021,
economies on an emissions per Gross Domestic Product countries representing more than 65% of global carbon
(GDP) basis, and in the top five amongst countries with dioxide emissions and more than 70% of the world’s
GDP in excess of USD 100 billion per annum. The South economy have made ambitious commitments to carbon
African economy will face mounting trade pressure, as neutrality. Seven of South Africa’s key export markets have
trade partners implement their low-carbon commitments. all set net-zero targets, including the European Union (EU),
Figure 1: Volumes of South Africa’s exports to leading partners in 2018 (ZAR billion)
EU plans to implement carbon Trading partners with a
1 240 206 border adjustment by 2023. net-zero target
Carbon border
226
tax planned
113
84
64
59
59
25 24 19 361
INDIA
UNITED
KINGDOM
JAPAN
CHINA
HONG
KONG
UNITED
ARAB
EMIRATES
EUROPEAN
UNION
WORLD
COUNTRIES
UNITED
STATES
AFRICAN
OTHER
REPUBLIC
OF KOREA
Source: World Integrated Trade Solution. 2018. ‘Press research’.
5 Department of Environmental Affairs, Republic of South Africa. 2016. ‘South Africa’s 2nd Annual Climate Change Report’.
12 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICAPhoto: Shutterstock.com
China, the United States, the United Kingdom, Japan, South Africa has a number of significant assets including
and South Korea.6 plenty of sun and wind. Renewables-dominated
energy systems and local manufacturing are key. South
At the UN Climate Change Conference of the Parties Africa’s coal assets are aged, and decommissioning
(COP26) in November 2021, all countries are expected to coal plants can be done within the carbon budget and
set out more ambitious goals, including setting concrete with minimal stranded asset risk. South Africa’s motor
mid-term reduction targets. The COP26 Presidency’s vehicle manufacturing expertise could be transitioned
stated priorities include ‘seizing the massive opportunities to electric vehicle production. The country’s stable and
of cheaper renewables and storage’, ‘accelerating the well-regulated financial services sector, among the most
move to zero-carbon road transport’, and ‘the need to competitive in the world, would make a strong base for
unleash the finance which will make all of this possible and green finance for the continent. The combination of wind
power the shift to a zero-carbon economy’. and solar enables the right kind of conditions for green
hydrogen, setting the stage for South Africa to be a net
Over and above this, select geographies like the EU are exporter. The role of PGMs in hydrogen and fuel cell
also considering carbon border taxes which could impact technology and the increased demand for certain mined
future trade. It is therefore essential to consider how South commodities, like copper for use in green technology,
Africa’s competitiveness in global markets, and therefore could bolster the minerals sector. South Africa’s
the viability of its industries, will be affected should key experience with the Fischer–Tropsch process positions it
trading partners start taking steps to protect their net-zero to be one of the world leaders in carbon-neutral fuels. And
commitments and enable their net-zero carbon growth other innovations are thus waiting to be unlocked.
trajectories. South Africa will need to address the risks and
seize the opportunities presented by climate change. The imperative is clear: South Africa must
decarbonise its economy in the next three
South Africa will also have the chance to tap into new decades and transform it into a low-carbon,
opportunities. Goldman Sachs estimate that around climate-resilient, and innovative economy.
35% of the decarbonisation of global anthropogenic This transition also needs to take place in
greenhouse gas emissions is reliant on access to clean a manner that is just and simultaneously
power generation, and that lower-carbon hydrogen addresses inequality, poverty and
and clean fuels will be required for hard-to-decarbonise unemployment to ensure that no-one is left
sectors.7 South Africa has key strategic advantages which behind and that our future economy is also
can be leveraged to tap into such emerging opportunities. socially resilient and inclusive.
6 United Nations News. 2020. ‘The race to zero emissions, and why the world depends on it’.
7 Goldman Sachs. 2020. ‘Carbonomics: Innovation, Deflation and Affordable De-carbonisation’.
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 132.2.2 THE NEED FOR A JUST TRANSITION debt to GDP ratio, with growth of ~6% for the last ten
years, and the consistently negative balance of trade.13
With a Gini coefficient of 0.63, South Africa is one of the
most unequal societies in the world today.8 A recent study These challenges are more severe given further
shows that the top 10% of South Africa’s population owns deterioration during the COVID-19 pandemic. It is
86% of aggregate wealth and the top 0.1% close to one- therefore critical that South Africa’s transition is designed
third. Since the onset of the COVID-19 pandemic, levels and pursued in a way that is just; meaning that it reduces
of poverty have further increased and have likely shifted inequality, maintains and strengthens social cohesion,
beyond 55% of the population living in poverty. In July eradicates poverty, ensures participation in a new
2020, a record 30.8% of the population was unemployed.9 economy for all, and creates a socio-economic and
Exacerbating this are levels of youth unemployment that environmental context which builds resilience against the
are amongst the highest in the world.10 physical impacts of climate change.
As South Africa grapples with the economic recession This transition requires action, coordination, and
accompanying the pandemic, and copes with the need collaboration at all levels. Within sectors, action will need
to rebuild the capacity of the State and its institutions to be taken on closures or the repurposing of single
following a decade of state capture, it must start assets. Job losses must also be addressed with initiatives
rebuilding and transforming its economy to make it like early retirement and re-skilling programmes, with the
resilient and relevant in a decarbonised world. However, latter having the potential for integration with topics like
while a transition towards a net-zero economy will create skills inventories and shared infrastructure planning and
new economic opportunities for South Africa, it is also a development. A national, coordinated effort to enble the
transition away from coal, which without careful planning Just Transition will also be crucial to address the education
and new investments, will put many jobs and value chains system and conduct national workforce planning. In order
at risk in the short-term, and exacerbate current socio- to implement its Just Transition, South Africa will need to
economic challenges. leverage global support in the form of preferential green
funding, capacity-building, technology-sharing, skills
Today, the coal mining sector provides almost 0.4 million development, and trade cooperation.
jobs in the broader economy, with ~80k direct jobs and
~200 to 300k indirect and induced jobs in the broader To move towards this net-zero vision for the
coal value chain and economy. The impact is even broader economy by 2050, South Africa must mitigate
when it is taken into account that, on average, each mine rather than exacerbate existing socio-economic
worker supports five to ten dependents. This implies challenges and seize emerging economic
a total of ~2 to 4 million livelihoods.11 The low-carbon opportunities to support its socio-economic
transition must do more than simply address what is development agenda. How to ensure a Just
directly at risk from decarbonisation. The transition must Transition towards net-zero and advancing
also address the broader economic concern of stalled GDP South Africa’s socio-economic context is
growth of ~1% for the last five years, rising unemployment therefore the key guiding principle of this study.
with ~3% increase over the last five years,12 deteriorating
2.3 OBJECTIVE AND APPROACH
Key objectives of this study. Achieving net-zero emissions many different views on what defines a Just Transition
in South Africa by 2050, whilst ensuring a Just Transition, in South Africa, which decarbonisation ambitions
is a complex and unique challenge. Extensive studies South Africa is able to pursue and commit to, and
examining how a Just Transition towards a lower-carbon how a transition towards a lower-carbon economy can
economy can be achieved in South Africa have already be achieved.
been conducted or are currently underway. There are
8 The World Bank. 2021. ‘South Africa Overview’.
9 StatsSA. 2017. ‘Poverty Trends in South Africa. An examination of absolute poverty between 2006 and 2015’.
10 Chatterjee, A., et al. 2020. ‘Estimating the Distribution of Household Wealth in South Africa’.
11 Minerals Council of South Africa. 2020. ‘Facts and Figures’.
12 Department of Statistics, Republic of South Africa. 2021.
13 South African Reserve Bank. 2021.
14 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICAThis study is not advocating for a particular position. It is mining regions and the mining workforce, the mining
not setting ambitions around levels and timelines for South sector was assessed as part of the project’s first phase.
Africa’s emission reduction. Nor is this study prescribing The second phase of the study focuses on the transport
sector- or company-specific emission reduction targets. and AFOLU sectors. Eventually, the study will provide a
comprehensive view of the South African economy, its
The study does aim to develop the necessary technical and potential future net-zero economy and the pathways that
socio-economic pathways research and analysis to support can lead to this future economy as informed by various key
decision-making and bolster a coordinated and coherent stakeholders (see Figure 2).
effort among national and international stakeholders. This
research is anchored around three key questions: The study is a collaborative effort, aiming to create a
‘unified voice of South African business’ on the country’s
What is the cost of inaction for South Africa, should it fail needs, opportunities, and challenges in achieving a
to respond to critical global economic drivers stemming net-zero economy, involving multiple stakeholders
from global climate action? from all sectors. The governance arrangement that has
What would it take, from a technical perspective, to overseen this work is key to enabling this collaborative,
transition each of South Africa’s economic sectors to multi-stakeholder approach: across multiple levels, key
net-zero emissions by 2050? stakeholders are involved in the content development.
What are the social and economic implications for South
Africa in reaching net-zero emissions by 2050? The sector assessments are conducted within technical
committees which include South African and international
Approach of this study. To understand how a transition experts and stakeholders from private and public
of the South African economy towards net-zero emissions sectors, as well as civil society and academia. An advisory
can be achieved, this study assesses each sector and board consisting of high-profile representatives from
intersectoral interdependencies in detail (with this report various sectors including industry, government, labour,
detailing the initial findings of the electricity sector civil society, and academia; and a steering committee
analysis). Our analysis of the South African economy is consisting of selected private and public sector
structured along understanding what the decarbonisation representatives provided continuous direction on content
pathways could be for key heavy emitting sectors, namely: development. In addition, a group of 27 Chief Executive
electricity, petrochemicals and chemicals, mining, metals Officers (CEOs) from across the private sector endorsed
and minerals, manufacturing, transport and AFOLU and guided the study development (see Figure 3).
(Agriculture, Forestry and Other Land Use) (Figure 2).
Given this is a multi-year project, a preliminary report will This report is the first in a series being released to illustrate
be released as each sector is completed. Towards the end the findings of this study. These reports are intended as
of the study, each sector analysis will be further refined consultation material to leverage further engagement with
on the basis of understanding interlinkages better. For sector experts and key stakeholders, beyond the extensive
example, insights gained from the transport sector analysis stakeholder engagement that was already undertaken
around the impact of electric vehicles on electricity from August 2020 to June 2021 within the respective
demand will be leveraged for further refinement of the technical working groups of this project. We hope this will
electricity sector analysis. foster continued dialogue during the project as we work
towards a final report that will collate the individual sector
The first phase of the study focuses on today’s key findings and provide collective insight. The first report is
drivers of South Africa’s emissions: electricity and the focused on the decarbonisation of the electricity sector in
petrochemicals and chemicals sectors which make up South Africa.
more than 60% of the country’s total emissions. Given
the socio-economic implications of decarbonising South
Africa’s energy landscape, particularly impacting coal
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 15Figure 2: Approach of this study
We are driving a collaborative study to create a unified voice of
SA Business at COP26 and accelerate Green Stimulus.
Phase 1a Phase 1b Finalisation
4–5 MONTHS 4–6 MONTHS
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG
PRIORITY SECTORS ALL SECTORS
Establish fact base
and reference points
(emissions baseline and ELECTRICITY PETRO- MINING OTHER
ELECTRICITY CHEMICALS SECTORS**
outlook to 2050)
Detail mitigation
measures and
opportunities per sector
TRANSPORT AFOLU*
Assess feasibility and
PETRO- impact (including
CHEMICALS socio-economic and Just Enhance emissions baseline Launch
Ramp-
Transition implications) with data for remaining publication
up to
sectors and fine-tune series
Launch Define feasible climate previously covered sectors
Event pathways for South Africa Continue
(including sector couplings) Expand impact assessment preparation
for remaining sectors and
for COP26
MINING fine-tune previous findings
Complete mitigation
pathways for South Africa
(including adaptation and
Analysis will be resilience impact)
completed at a sector
Finalise Just Transition
level and follows a
narrative and preparations
80/20 approach to for COP26
asset-based detailing
covering key assets only
(excludes adaptation ACCELERATING GREEN FINANCE
and resilience detailing) Develop Green Stimulus vision and strategy,
prioritise ‘no regret’ green projects and
prepare international funding requests
STAKEHOLDER ENGAGEMENT
with critical South African industries/business leaders, government ministries,
civil society, labour and COP26 representatives
* AFOLU: Agriculture, Forestry, and Other Land Use
**Other sectors include Minerals and Metals as well as Manufacturing and Construction Source: NBI-BCG project team.
16 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICAFigure 3: Governance set-up of the study
To ensure representative, balanced and fact-based content,
a comprehensive governance structure is in place.
CEO champions Advisory boards Steering committee
CEOs Industry, government and Company representatives
civil society representatives
Core project team
NBI, BCG, IDDRI
Technical committees and expert meetings
Energy sector Chemicals and Mining sector
Petrochemicals sector
Transport sector AFOLU sector Other sectors
Socio-economic modelling for a Just Transition
Four key objectives of governance structure
Enable multi-stakeholder Create a platform for Ensure that the final output Provide a fact-based
inputs through an inclusive collaboration and alignment is fact-based and balanced business perspective into
consultation process on key assumptions and in its recommendations national consultations and
methodology planning processes
hosted by government
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 17Photo: Shutterstock.com 18 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICA
3.
DECARBONISING POWER
IN SOUTH AFRICA
Key findings of the sector analysis
The future of the power sector in South Africa in 10 key findings
By leveraging its world class renewable energy sources, South Africa can fully
1 decarbonise its power sector, while unlocking the opportunity to stimulate economic
growth and job creation.
South Africa’s complementary wind and solar resources are among the best renewable
2 energy resources in the world, available on vast amounts of unused land.
By 2050, a renewables-dominated power system is the most cost-competitive system
3 for South Africa.
Transitioning South Africa’s power system to net-zero would require the deployment
4 of ~150GW wind and solar capacity by 2050 – this is almost four times the total capacity
of South Africa’s coal power plants today – and an investment of ~ZAR3 trillion within
the next 30 years, requiring significant expansion and upgrade to the transmission and
distribution infrastructure.
To reach net-zero by 2050, South Africa would need to speed up deployment of renewable
5 energy capacity; at least 4GW of renewables will need to be installed every year – roughly
ten times the current pace of new-build.
Natural gas as a transition fuel will be critical in this journey – initially growing as an
6 enabler to the integration of wind and solar into the power system at scale, gas will then
be gradually replaced by other technologies to reach net-zero emissions.
The transformation of South Africa’s power system can result in net-positive job creation,
7 if South Africa can successfully localise elements of the renewable energy value chain
and effectively re-skill the workforce.
South Africa’s world class renewable energy resources also allows a highly competitive
8 production cost of H2 below 1.60 $/kg by 2030, putting South Africa as potentially one
of the largest global exporters of green H2 and green fuels.
To help fund this journey and ensure competitive cost of capital, access to international
9 green finance will be required to succeed.
To enable this pathway, cross-sector collaboration and a conducive policy environment
10 will be critical.
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 193.1 SCOPE AND APPROACH OF THE POWER SECTOR ANALYSIS
The aim of the power sector modelling is to identify
potential pathways that could lead to a just, net-zero Real relative costs versus
transition of South Africa’s power sector by 2050. The cost reflective tariffs
modelling provides a comprehensive fact-base of what
it would take to decarbonise the sector while improving The need for cost reflective tariffs is a critical enabler
overall energy security for the country. As such, this fact- to the implementation of the proposed pathways.
base attempts to quantify the techno-economic and socio- However, conclusions on cost reflective prices
economic trade-offs between the different electricity cannot be drawn from this study. This study models
supply system options, each based on a ‘dominant’ the real, relative costs which include:
technology set. These findings are intended to serve as Incremental Capital Expenditure (CAPEX),
inputs for aligning broad, diverse stakeholder views and Operating Expenses (OPEX), and fuel cost for the
for strategic decision-making in the power sector. supply mix (gigawatt [GW] and terawatt-hours
[TWh])
The power sector modelling is not intended to: Grid upgrade costs for increased Renewable
Energy (RE) generation (ZAR 3 billion/GW of wind
1. Quantify the exact power sector price path or make a or solar energy)
recommendation on what is required to achieve a cost Transmission and distribution costs (20c/kWh)
reflective tariff (the absolute price that various end Other costs: carbon sequestration costs for
consumers will pay for electricity over time, see side bar Direct Air Carbon Capture and Storage (DACCS)
‘Real relative costs versus cost reflective tariffs’) (ZAR 270/tonne for sequestration, over and above
2. Detail the exact power supply mix per year and replace operational costs of ~ZAR 2000–3000/tonne),
national power system planning demand-side response costs (ZAR 3000/
3. Provide detailed, system-level solutions for complex kilowatt [kW]).
technical challenges like grid stability or system inertia.
These real costs exclude:
The power sector modelling is intended to: Inflation (all costs are real)
Cost premium of committed Independent Power
1. Quantify the ‘book-end scenarios‘ of real relative costs Producers (IPPs) for the next 10–15 years (e.g.,
between different strategic choices around supply early Renewable Energy Independent Power
technologies for South Africa’s power system Producer Procurement Programme [REIPPPP]
2. Provide sufficient resolution to quantify key metrics that rounds)
will influence strategic decision-making, for example: Cost of servicing historical Eskom debt
Supply capacity and generation Last-mile distribution costs (1–2c/kWh)
Cumulative emissions Cost of other grid investments like smart grid
Real relative costs between different supply system upgrades.
options.
20 JUST TRANSITION AND CLIMATE PATHWAYS STUDY FOR SOUTH AFRICAFigure 4: Six-step approach to power sector analysis
Analytical approach to power sector modelling.
1 2 3 4 5 6
Assess the Identify the Identify optimal Assess last-mile Define net-zero Identify key
starting point supply gap 2050 system decarbonisation pathways trade-offs and
archetype options enablers
Assess the current Quantify the 2050 Identify the cost Assess cost-optimal Develop potential Identify key trade-
power sector supply-demand gap optimal net-zero tech options net-zero pathways offs of the net-zero
context globally for South Africa power system for for last-mile for the power sector pathways
and locally the country in 2050 decarbonisation
Identify the supply- Map two book-end Identify and
Assess the demand gap driven Quantify the cost Identify various pathways to reach compare trade-
challenges and by: and emissions of last-mile the optimal net-zero offs along two
opportunities from three baseline tech decarbonisation 2050 supply mix dimensions:
Growth in
a socio-economic dominant system options available
electricity demand Low emissions Techno-economic:
and environmental archetypes: to reduce residual
path: accelerated cost, emissions,
perspective Coal plant emissions in the RE
RE dominant decommissioning new-build CAPEX
decommissioning dominant system to
of coal with all coal and abatement
Coal and CCUS zero/net-zero
off by ~2042 cost
dominant
IRP aligned path: Socio-economic:
Conventional
coal ramp-down jobs, GDP
nuclear dominant
in line with the IRP
Identify critical
Assess broader with the cost of
enablers and no-
trade-offs higher emissions
regret desicions to
qualitatively (e.g.
transition the power
environmental and
sector
socio-economic
impacts)
In addition, the CAPEX profiles arising from the techno- 1. Assessing the starting point: Assessment of the
economic modelling conducted in this phase of the current power sector context, including challenges and
project will also serve as the basis for a more detailed opportunities from a socio-economic, technical, and
socio-economic impact assessment that will quantify environmental perspective.
key socio-economic trade-offs in selecting an optimal 2. Identifying the supply gap: As a starting point for
pathway. This modelling will include jobs created (indirect, the assessment of the least-cost electricity system
direct, and induced), GDP impact, affordability of required supply option, the 2050 supply-demand gap was first
CAPEX profiles and resilience of the South African quantified. This supply-demand gap was calculated
economy to specific price shocks arising from the techno- using the Integrated Resource Plan (IRP) low-demand
economic modelling of various pathways. Although some profile14 as a basis for how electricity demand will
preliminary job numbers are referenced in this report, evolve from 2020 to 2050 and mapping this against
these numbers will be updated once more granular socio- available supply. Available supply was quantified by
economic modelling has been completed leveraging decommissioning existing infrastructure in line with
Social Accounting Matrices (SAMs) that have been the decommissioning dates outlined in the 2019 IRP.15
developed for this project to test the impact of pathways To account for the potential impact of demand-side
for different economic structures of the economy. management on supply requirements, a demand-side
response of 2.5 GW is assumed (ramping-up linearly
The power sector modelling is conducted along six steps from 0.3 GW in 2026 to 2.5 GW from 2035–2050). In
(Figure 4). subsequent phases, this demand assumption will be
updated to reflect key sector insights and findings
14 See section 3.3.2 for additional information on this projection.
15 Coal plants decommissioned according to IRP schedule (Figure 7 and 26 in IRP report).
CHAPTER 1: DECARBONISING SOUTH AFRICA’S POWER SYSTEM 21(e.g., electrification in the transport sector) and also systems is compared rather than narrowly comparing
the implications of sector coupling and more granular the technology costs of each generation technology
demand-side management. in isolation.
3. Identifying the optimal 2050 system archetype to 4. Assessing last-mile decarbonisation options:
meet future demand: Identification of the cost-optimal Identification of technological options that enable last-
net-zero power system for 2050 is based on three mile decarbonisation towards a (net) zero emissions
baseline technology-dominant system archetypes: power system. These are technologies that take the
(i) Renewables dominant; (ii) Coal and Carbon power sector from the emissions reductions achieved
Capture, Utilisation and Storage (CCUS) dominant; with known technologies implementable today to (net)
(iii) Conventional nuclear dominant. Each of these zero emissions.
archetypes comprise a range of supply technologies 5. Defining net-zero pathways: Development of potential
but are characterised by the supply technology pathways that enable the transformation of today’s
that accounts for the majority of power generation power sector into the identified, optimal 2050 (net) zero
in the system making it the ‘dominant’ technology. emissions power system archetype (including last-mile
The archetypes do not reflect where the supply is decarbonisation options).
generated (i.e., grid versus embedded or distributed 6. Identification of key trade-offs: Identification of
generation), but rather cost-optimally ensures supply potential trade-offs that will need to be considered and
meets demand. To assess the cost-optimal 2050 further assessed to identify the optimal pathway for
net-zero power system, the real relative cost of the the country.
3.2 KEY FINDINGS OF THE POWER SECTOR ANALYSIS
By leveraging its world class renewable energy The degradation of this coal fleet, coupled with the
sources, South Africa can fully decarbonise its delayed commissioning and underperformance of Medupi
power sector, while unlocking the opportunity to and Kusile, has been a significant contributor to load
stimulate economic growth and job creation. shedding in recent years.16 Energy shed has increased
from ~190 GWh in 2018 to ~1350 GWh in 2019 and ~1800
3.2.1 SECTOR CONTEXT: SOUTH AFRICA’S GWh in 2020 (approximately 10% of annual hours). Given
ELECTRICITY SECTOR AND THE NEED FOR A JUST the downward trend in the Energy Availability Factor (EAF)
TRANSITION from ~72% in 2018 to 65% in 2020, the low reliability of
power supply and the need for load shedding is likely to
South Africa’s power sector is facing challenges along persist.
multiple dimensions. Due to its reliance on a largely aged
coal fleet, the sector is unreliable, expensive, accounts Despite South Africa’s abundant and complementary wind
for a significant share of the country’s emissions, and and solar energy resources, less than 6% of electricity is
negatively impacts the environment – particularly water generated via renewables today. Around ~1% of power
availability, air quality, and consequently, health. The supply is generated via diesel generators for provision
current single buyer market structure is not conducive to of peaking capacity and power supply in times of supply
appropriate risk allocation. Non-discriminatory access and shortages.17 As a result of the significant reliance on coal
trading rules, subject to technical constraints, could enable for power generation, South Africa’s electricity system has
the market to develop in line with the net-zero pathways. a grid emission factor of ~1.0 tCO2e/MWh – among the
most carbon intense in the world. This makes the power
South Africa’s power sector is heavily reliant on abundant sector a key contributor to the country’s overall emissions:
local coal resources. Today, more than 80% of electricity it accounts for ~40% (~225Mt CO2e) of the overall national
is generated via coal powered plants, which make up a emissions baseline (Figure 5, 2017 data).
total generation capacity of ~38 GW. The existing coal
fleet is aged, and based on the 50-year decommissioning South Africa’s complementary wind and solar
schedule in the IRP, ~10% of coal power generation resources are among the best renewable energy
capacity will reach end-of-life by 2030, and >60% by 2045. resources in the world, available on vast amounts
of unused land.
16 Wright, JG., & Calitz, JR. 2020. ‘Systems analysis to support increasingly ambitious CO2 emissions scenarios in the South African electricity system’. CSIR
ResearchSpace.
17 Wright, JG., & Calitz, JR. 2021. ‘Statistics of utility-scale power generation in South Africa in 2020’. CSIR ResearchSpace.
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