Crank up old machine for new tricks

Eskom should be an independent system market operator, writes David Lipschitz.

So far in August, we’ve learnt:

File picture: Cindy Waxa. Credit: INDEPENDENT NEWSPAPERS

And all this is the news just in the past two weeks.

So how can we solve these problems?

The answer is a lot easier than we expect and is something I, and others, have been saying and writing about for the past five years.

Change Eskom to be the independent system market operator, buying and selling electricity across the grid, from its own power stations and from private producers, and allow people to choose from whom they wish to buy electricity. Eskom will become an Electricity Stock Exchange, dealing in electricity, setting prices potentially per second, and allowing people to buy electricity at a certain tariff in the future (creating an electricity futures exchange), or allowing private home owners and other rooftop owners (RTOs) to supply the grid with electricity at peak time.

Allow private people to invest in power stations before tax and before VAT, just like normal businesses. This will make RTO-based power stations, including batteries, immediately viable. The caveat will be that RTOs who install their own power stations must not use the public grid during peak time, ie 7am to 10am and 5pm to 9pm in the evening in winter, and 6pm to 8pm in the evening in summer.

Investment by the private sector will actually mean that RTOs will be able to sell electricity to Eskom at night and during peak times, and buy electricity from Eskom at off-peak times between 10pm and 6am, when most factories, businesses and shopping centres are closed, and Eskom has immense spare capacity.

Homeowners use half of the grid capacity, ie, 17GW of the grid at peak time. I believe that the 7 400 MW spare capacity requirement referred to above, could be installed by private people at a cost of R250bn or less. And this is private people’s money, not costing the taxpayer anything.

The saviours of South Africa are the private population, including people who live in townships, who also use electricity, and who also can be power stations; for example think of the Khayelitsha Power Station or the Scarborough Power Station.

If RTOs could invest before tax and before VAT in these small power stations, they would be immediately affordable. They would revolutionise South Africa as, firstly, tens of thousands of people will be employed installing these power stations, and then, as these private power stations allow Eskom to specialise in transporting the electricity around the grid and in providing mines and industry and business with the necessary electricity they need, and want, will create massive employment, thus bringing our country out of its poverty cycle.

Eskom and the cities are strangling the South African economy. They are allowing mineral wealth to be exported at an alarming rate and are increasing this export capability, with new rail capacity and new port expansions. Furthermore, they are dramatically increasing South Africa’s coal exports. Other countries are using this coal and their own renewable energy programmes, to make electricity, to convert our raw materials into finished goods using their labour, which South Africa is then reimporting.

We are exporting stuff for R1 and buying it back for R20. The production and the labour is offshore. This low cost export and poor exchange rates (great for the offshore importers) and our high cost imports causes our exchange rate to get even worse, causes our inflation to get even worse, causes our infrastructure and transport costs to get even worse, causes our unemployment to get even worse and causes our cost of living to dramatically increase while our quality of life dramatically decreases.

So let’s use our South African ingenuity to fix our problems. Let us get Eskom to become the central buyer and seller and distributor of electricity, and let us let RTOs and other people provide the electricity infrastructure South Africa needs from 6am to 10pm so that we can get our industry working with the base load they need.

By removing the 17 GW of homeowner use during the day and peak time from the grid, South Africans will solve their own problems, without the need for expensive and perhaps non-independent, foreign consultants, and without the need for expensive resources from the likes of the multinational electricity infrastructure providers and others, who also perhaps have their own home markets’ interests at heart and therefore either don’t finish building our local power stations or simply charge us two to three times what the power stations would have cost if they had built them at home.

Let’s make South Africa great. The unions want localisation. I want localisation. We can do it. But how?