UK Climate Investments (UKCI) is a joint venture between Macquarie’s Green Investment Group (GIG) and the UK Government’s Department for Business, Energy and Industrial Strategy (BEIS). It has received GBP £200m from the UK Government’s International Climate Fund to be used to help developing economies adapt to climate change. The group has announced that GBP £14m of this fund will go to clean energy projects across South Africa, specifically projects led by H1 Holdings. H1 holdings is a majority black-owned and managed developer of renewable energy infrastructure. This money will fund H1 Holdings’ development of the 4MW Kruisvallei Hydro project in the Free State Province, the 140 MW Kangas Wind Farm in the Northern Cape Province, and the 110MW Perdekraal East Wind Farm in the Western Cape Province.

The projects are due to provide clean energy for roughly 200,000 homes per year, beginning in 2020. They are expected to cut greenhouse gas emissions in the region by 844,000 tonnes. South Africa’s fuel mix is currently dominated by fossil fuels. Figures from 2015 show fossil fuels making up 78 per cent of the country’s fuel mix, with coal making up 59 per cent, making it the primary energy source.

While South Africa has limited oil and natural gas deposits, its coal reserves have made it one of the leading economies in Africa and the African petroleum industry. The coal reserves have been instrumental in allowing South Africa to locally source 90 per cent of its electricity supply, keeping electricity imports to only 5 per cent and exports at 5 per cent. South Africa provides 40 per cent of Africa’s electricity, and has historically been one of the cheapest energy producers in the world. However, with increasing pressure to phase out coal-powered energy production worldwide, the country’s local production could take a major hit sometime in the near future. The national utility service Eksom has already experienced problems this year. Maintenance issues have led to outages and spending on coal has rapidly increased while Eksom has experienced supply shortages and fraud and corruption cases.

A study by the University of Cape Town’s Energy Research Centre (ERC) has claimed that in order to fulfil its climate change commitments, South Africa will need to phase out coal-fired power by 2040. This could seriously affect the country’s economy which relies heavily on coal energy. The study reviews a draft of South Africa’s Integrated Resource Plan (IRP) for 2019, showing that the draft places annual capacity constraints on renewable energy sources, which energy experts claim will force 1,500 MW of new coal power into the energy mix over the next decade. The ERC argues that no new coal plants should be allowed, as they would require subsidies from consumers and continue to emit greenhouse gasses. The study encourages South Africa to adopt new energy sources into the fuel mix to save consumers money and move toward emission goals.

UKCI’s investment into H1 Holdings' new energy projects could promote the growth of renewable energy industries and keep South Africa’s energy supply locally-sourced despite a coal industry with increasing setbacks.

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