Mon. Aug 19th, 2019

Can South Africa go into the future with Eskom as it is?

Budget Speech 2019 Eskom costThe debate to ‘unbundle’ Eskom over the next few years seems to be gathering pace.

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Many role players in the local energy sector continue to second guess policy makers while waiting for the completion and adoption of the final Integrated Resources Plan (IRP). This is the plan that should serve as a basis for SA’s spending decisions on energy.

The energy sector, possibly because of its strategic importance and the billions of rands that get spent or generated through it, has probably attracted a lot more political interference in it than all other economic sectors; more than it is good for it and, now we know, for South Africa. It has also attracted massive levels of corrupt dealings. This is also why we keep being told that the entire South African economy would collapse were Eskom to completely fail; that is, to fail more than it already has.

The only Integrated Resources Plan development process that seems to have gone without major glitches in the new dispensation was the 2010-2030 one. The process to develop it had begun while Thabo Mbeki was President and Trevor Manuel Finance Minister. South Africa had gone through at least a decade of economic stability and growth, and all indications were that the demand for electricity would continue to grow.

South Africa and fossil fuels

In that process, all key players had been consulted and given the chance to contribute to developing a realistic IRP that took into consideration factors such as economic growth, electricity demand projections, the expected decommissioning of old coal power stations, climate change issues – including the need to move away from fossil fuels towards cleaner sources of energy – the need to strengthen and grow the country’s electricity baseload, etc. 

The outcome of it all made a case, amongst others, for the building of a fleet of new nuclear power stations that would add some 9.6 Gw of electricity to the grid.

But the 2010-2030 IRP was also completed at a time when the world’s economy had begun to experience a meltdown that would also take emerging economies like South Africa down with it. Crucially, with economic activity that had massively slowed down, electricity projections that were less robust, and a marked drop in electricity demand, not only could South Africa no longer afford to invest in additional 9.6 Gw of nuclear power, new demand projections no longer justified such an investment. But the Zuma presidency, reportedly already having committed to spend the estimated R1 trillion on a nuclear newbuild project, would have none of any talk that sought to revise needed nuclear capacity down.

As a result, no IRP was gazetted in 2013 as it should have – because IRPs have to be revised every three years or so. The highly charged political discourse around nuclear newbuild also saw no IRP in 2016.  The Zuma administration was determined to go ahead and spend at least one trillion rand that South Africa did not have on a nuclear newbuild project whose size was no longer in sync with the economic realities of the country. Under the Zuma presidency, nuclear energy, already having historic image issues of its own, was highly politicised and rendered even more suspect than it deserved.  

It was towards the end of the Zuma presidency that the growing space that was gradually being afforded to renewable energy sources and Independent Power Producers was suddenly shut down. This was quite ironic because it was also under the Zuma presidency that South Africa’s much celebrated Renewable Energy Independent Power Producer Procurement Program (REIPPPP) had been born and, for a short period, seemed to thrive.

At the 2015 South Africa International Renewable Energy Conference (SAIREC2015), then Energy Minister Tina Joemat-Pettersen had even boasted about the country’s plans to increase the R9.2bn it had already spent on IPPs. The REIPPPP almost died a sudden death after the deployment of former Eskom CEO, Brian Molefe, to Eskom. For reasons that might or might not be revealed before the end of the Zondo Commission of Inquiry into state capture, Molefe preferred an investment in the nuclear newbuild program.

Fast-forward to 2018-2019, the energy policy lights have begun flickering on and off again, perhaps more on than off, giving some indication that there is renewed interest on the government’s part to invest in renewable energy. It may seem a simple matter to many observers, but the politics of energy provision can be rather murky.

Nuclear not completely off the table

Different interest groups are at loggerheads with one another. Those interested in nuclear power after its image was reputationally damaged by suspicions of corrupt dealings between the Zuma administration and the Russians are still interested to have their piece of the pie, and government has indicated that they will get it when resources allow, as nuclear is not completely off the table.

Trade Unions are worried that any move from fossil fuels will trigger job losses in coal mining and the transportation of coal to various mines around the country. And Independent Power Producers (IPPs), driven either by pure profit motive or by a strong belief in the need for the world to move to cleaner sources of energy with less emissions of toxic gases into the atmosphere, also insist on being heard. 

They argue that the costs of renewable energy have come down tremendously since the time of Tina Joemat-Petersen and that they compare favourably to current Eskom costs per kilowatt hour. Storage technology for renewable energy, they insist, has also been vastly improved.

To these arguments, Eskom points out that the IPPs do not have to pay for overheads such the running and maintenance of the national grid, on which the IPPs depend to get their power distributed. It also argues that the claimed technology to store renewable energy during for use during peak periods or at night is vastly inadequate for a country like South Africa.

Complete overhaul of Eskom needed

In all of this, the debate to ‘unbundle’ Eskom over the next few years seems to be gathering pace. Many experts believe that It doesn’t make sense to keep Eskom as it is because the businesses of power generation, distribution and transmission have to sit in different hands in order for them to be operationally and cost-effective. More room has to be created for IPPs to play a bigger role in generation and Eskom, which will always control the national grid, can focus its resources on distribution and or transmission to ensure that electricity supply reaches all parts of the country and the economy.    

Government will have to bite the bullet, over the next few years, and start the process to decommission South Africa’s old power stations as they get old and reach their retirement age. To reassure trade unions, the existing fossil fuel workforce will need to be armed with new skills to integrate a world of cleaner energy. The renewable energy sector also has a crucial role to play in this journey, as it too must be seen to invest in an energy skills development plan of the future.

Whatever happens in the coming weeks and months – especially given the state in which Eskom currently finds itself – there is a growing need for all South Africans to show interest and participate in discussions about the kind of energy the country will need, into the future, especially given affordability and environmental considerations that have to be part of the mix.

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