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- Negotiations are under way for Denmark to join the just energy transition partnership.
- Denmark intends to raise $165 million as part of its efforts to join the group, says an official.
- Prime ministers of Denmark and Netherlands were in SA this week to strengthen partnerships in energy.
- For climate change news and analysis, go to News24 Climate Future.
Denmark seeks to support South Africa’s shift to renewable energy and is in talks to join the Just Energy Transition Partnership (JETP) with other developed nations.
During a panel discussion on the just energy transition on Wednesday, Jeppe Skårhøj, investment advisory in strategic sector cooperation for the Danish Embassy in Pretoria, said negotiations are under way for Denmark to join the JETP.
The JETP was first launched at COP26 in Glasgow two years ago, with UK, US, Germany, France and the EU offering South Africa $8.5 billion to help decarbonise its economy.
Skårhøj said that joining the JETP was aligned with Denmark’s climate ambitions. The country has goals to reduce carbon emissions by 70% by 2030 and achieve carbon neutrality by 2050.
Denmark also wants to play a role in reducing emissions globally. “It is only logical for Denmark to join the JETP,” Skårhøj said. This means helping South Africa reduce its reliance on coal in a “just” manner.
Denmark has more than 30 years of experience in transitioning its economy and has the technical know-how to assist South Africa, Skårhøj said. Denmark intends to raise $165 million in its efforts to join the JETP.
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‘Huge’ potential
Earlier on Wednesday, Denmark’s Prime Minister Mette Frederiksen attended the opening of the renewable energy developer’s headquarters in Cape Town. Frederiksen mentioned the importance of the two countries working together to achieve a “green transition” that is also just and creates jobs.
“…We are committed to sharing all our experiences with you… We hope that some of the experiences with renewables in Denmark could be useful for you (South Africa). You are really blessed with rich natural resources, solar and wind, and the potential is huge,” said Frederiksen.
Earlier this week, Frederiksen and Dutch Prime Minister Mark Rutte jointly visited South Africa to strengthen cooperation on energy and the just transition.
Officials from Denmark and South Africa signed an amended agreement on the existing energy partnership programme, founded in 2017. The programme sees Denmark support South Africa’s ambitions to reduce greenhouse gas emissions through the deployment of more renewables.
Furthermore, Danish companies are also starting to invest in renewable energy capacity in South Africa. Copenhagen Infrastructure Partners (CIP) acquired a majority stake in Mulilo earlier this year. The acquisition is significant because it marks CIP’s first investment into South Africa.
Niels Holst, a partner at CIP, said the Mulilo acquisition was also the first investment into a company. “We have historically always done the project work ourselves,” he said.
Instead of building up its own capabilities and spending the next five years figuring out how South Africa’s energy market works, CIP felt it better to partner with Mulilo, which already has the experience. CIP would then support their growth.
He explained that through the CIP’s New Markets Fund, a pool of capital backed by pension funds and insurance companies, investments are made in middle-income countries like South Africa. CIP specifically invests in the early stage development of renewable energy projects.
Holst said that CIP would be investing much more than $200 million (R3.7 billion) in growing Mulilo and investments in energy projects.
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Holst said that in the past, South Africa was a “less certain” investment destination. But recent regulatory changes to liberalise the energy market has been perceived as a commitment by the government to attract investment into energy.
“That is why we felt comfortable to invest… We see that there is a real commitment here. We also see there has been a gradual opening up in the market,” Holst said.
The opportunities do not only exist in the emergency energy procurement rounds, but also in the allowance for corporates to enter into power purchase agreements with Independent Power Producers.
Last year, government scrapped the licence threshold on energy generation projects – essentially removing limits for the private sector to procure their own power. Tracking by the government shows there are about 13GW of projects in the pipeline. About 4GW of these have been granted budget quotes. After this stage, it would take up to 24 months for these projects to start feeding power.
“We believe this is a place where we can deliver very large volumes of power in the coming years. What that will do is [to] give people like us the comfort that we can invest in the country. We can build supply chains, we can build employment and skills and reduce costs,” said Holst.
Holst said from a commercial perspective, there is a real opportunity in South Africa that would also yield climate benefits mainly through reducing global emissions.
Robert Helms, associate partner at CIP, explained that South Africa’s established renewable energy market, which was enabled through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), was also a contributing factor to invest.
The programme has produced the “infrastructure” around building renewable energy projects, said Helms. “It’s not a market where we have to start from scratch, as with many of the other countries,” said Helms.
The REIPPPP has been around since 2011. There have been six procurement rounds so far, with plans to launch two more. However, the programme was stalled in 2016, which created policy uncertainty among renewable energy developers and also resulted in local solar PV manufacturers shutting down.
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