US pulls out of South Africa energy deal
The electrification of South Africa's informal settlements through a United States Agency for International Development (USAID)-driven Power Africa's five-year electrification initiative with 24 municipalities - part of an ambitious government plan for universal energy access by 2030 - is among the first projects to be shelved.
This follows the US formally announcing it is cutting its Just Energy Transition (JET) partnerships with South Africa, a decision confirmed to the Presidency last week.
The US has decided to withdraw from the Just Energy Transition Partnership (JETP), a coalition of 10 donor nations working to assist developing countries in transitioning from coal to cleaner energy sources, according to several sources involved in the partnership cited by Reuters.
The JETP was first introduced during the United Nations (UN) climate talks in Glasgow, Scotland, in 2021, with South Africa, Indonesia, Vietnam, and Senegal named as the first recipients of loans, financial guarantees, and grants to support their shift away from coal.
In a statement yesterday, the Just Energy Transition Project Management Unit (JET-PMU) in the Presidency confirmed the US's exit from the JETP with South Africa and its departure from the International Partners Group (IPG).
The US's 2021 pledges to South Africa's JET Investment Plan (JET IP) comprised $56 million (R1 billion) in grant funds and $1bn in potential commercial investments by the US International Development Finance Corporation (DFC). No concessional loans were offered by the US to South Africa for the JET IP.
Joanne Yawitch, head of the JET-PMU in the Presidency, said: 'The withdrawal of the US from the JETP reduces the current overall international JET pledges to South Africa from $13.8 billion to $12.8 billion, largely in respect of commercial investment potential.'
She added that the JET-PMU is actively engaging with other grant-making organisations to source alternative funding for JET projects previously designated for support from the US grant funding.
Additional sources confirmed the US had withdrawn from the JETP in Indonesia and South Africa, while two foreign officials in Vietnam, according to Reuters, verified the US was pulling out of the JETP there too. One official indicated the US was exiting all JETP programmes, including those in Indonesia.
The decision will now likely mothball the investment commitments made by the DFC.
The Power Africa programme, part of USAID's Impact on Electrifying South Africa's Informal Settlements, has already been initiated in the Kouga Local Municipality in the Eastern Cape. According to the JET-PMU, it has so far connected more than 700 informal dwellings to the grid and increased capacity availability for newly constructed low-income houses.
This programme, in partnership with Denmark, the European Union, France, Germany, the Netherlands, and the UK, aims to support the South African government in meeting its decarbonisation commitments while delivering just outcomes for those affected by the energy transition. The US's commitment in support of JET has also funded activities in the Electricity, Mpumalanga Just Transition, Skills, and Municipalities portfolios of South Africa's JET Implementation Plan.
Analysts said the withdrawal of the funding, which had been earmarked for various projects including green hydrogen, electricity infrastructure, and skills development, may also impact the overall momentum of South Africa's energy transition. The JETP was seen as a key catalyst for driving investment and innovation in the renewable energy sector.
Despite the US's withdrawal, Yawitch said, 'South Africa remains steadfast in its commitment to achieving a just and equitable energy transition. All other IPG partners remain firmly committed to supporting South Africa's JET IP.'
A source, who declined to be named, added that there is still significant finance available and the IPG remains fully committed to the partnership.
'The US's withdrawal may have broader implications for the global effort to address climate change, as the JETP was seen as a model for supporting developing countries in their transition to cleaner energy,' the source said.First published by IOL
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