The great Eskom privatisation debate
Our country is under attack by the neo-liberal agenda that seeks to undermine the gains of our liberation since 1994. The National Union of Mineworkers (NUM) has noted that the decision to partially privatise Eskom has already been taken without our involvement.
The difference between the cost of renewable energy generated by IPPs and the electricity generated by Eskom could harm the utility’s balance sheet.
As much as the NUM supports green energy, it cannot ignore scientific facts that green energy is not as cheap as it is portrayed to be by the capitalists who are dealing with it.
We have further noted that green energy is not even reliable. It doesn’t have the capacity to replace the base load as currently subjectively portrayed. The sun doesn’t shine every day and the wind doesn’t blow every day.
We have a problem with the selective and subjective bias that opportunistically purports the renewable energy as the alpha and omega for South Africa whilst completely turning a blind eye to the realities that these renewables can’t be used as base loads.
An independent power producer or non-utility generator is an entity which is not a public utility, but which owns facilities to generate electric power for sale to utilities and end users.
South Africa had blackouts year in and year out mainly because of the interference of politicians in the scientific decisions of Eskom.
We appeal as the NUM that politicians must leave scientific decisions to scientists. The NUM agrees that there should be a reduction in greenhouse gases (GHG) and strengthened efforts to introduce renewable energy, but this should not result in retrenchments.
We have identified the following impact to South Africa due to the introduction of IPPs:
There is going to be major retrenchments to our members in the energy and mining sector.
IPPs are not labour intensive.
They are more expensive than coal.
There is no social labour plan associated with the decision to introduce IPPs.
The whole supply chain in the coal industry will be affected.
It will affect the public in that they will have to pay more for electricity directly and indirectly.
We have therefore concluded that we will have a national march that will begin as soon as possible to protest against the inclusion of IPPs to the national grid. The action will include mass action and educating the public on the real impact of the IPPs on the price of electricity.
The inclusion of IPPs means that Eskom must pay more for the commodity that we can produce at cheaper prices. If Eskom agrees, the long-term impact of this might result in Eskom being bankrupt and being sold to the highest bidder.
The NUM wishes to sensitise the government to the fact that closure of power stations will cost South Africa approximately 30000 jobs. While we are mindful of the need to deal with climate change, IPPs cannot be implemented at the expense of massive job losses. Those coming up with the IPPs must compete with Eskom, and not to put that into Eskom’s national grid.
We have warned the government and Eskom that the costs of IPPs will cripple Eskom’s balance sheet.
The IPPs also present a clear risk of privatising profits while socialising costs of renewable IPPs.
On the current state of load shedding:
With only 27305MW from the installed 44000MW, Eskom is failing to meet demand of 30033 due to plant breakdown. The current phase of load shedding is a diversion from the real issue troubling Eskom.
Its purpose is to undermine the workers, collapse the economy and ultimately dislodge the ANC from governance while co-opting certain leaders through lucrative business deals.
The reports NUM received from workers on the ground is that money meant for maintenance of the plant is held back and prioritised for frivolous projects that are lined up to ensure that unbundling is initiated smoothly.
The reports also confirm that the new units at Matimba and Kusile have also broken down due to defective equipment that was installed, undermining engineering diagnoses and basically poor workmanship.
The NUM released a statement in December 2018 detailing the performances of the generating plants. We still demand the resignation of the current board who failed to develop a turnaround strategy by developing a new business model.
Let us bring back Eskom staff morale and confidence. Let the president retire the entire board and the chief executive officer and start from scratch.
Secondly, the involvement of politicians in the management of the utility is the basis of poor performance and planning, favouritism and corruption. Management should be left to managers and politics should be for politicians. The board must account to the stakeholder, which is represented by the minister, while management accounts to the board.
The board must be reflective of all sectors of the society that benefits from Eskom, inclusive of trade unions and society. The current board must be replaced for undermining their fiduciary duties as mandated by the Eskom Act of 2001.
* Chilwane is the media officer at the National Union of Mineworkers.
Should government continue to dominate energy supply as is proposed in the government’s latest declared plans? Will this make it at all possible for the electricity industry to develop, in as short a time as possible, to serve the best interests of all South Africans?
The fatal flaw that lurks in government’s plans and predicts failure is that no mention is made of open competition in the generation and supply of electricity.
All developed economies, and many developing ones, have introduced, or are in the process of introducing, competition in their energy industries. In South Africa, government reports outlining development plans through to 2050 seem to have suggested that the government should continue with Eskom as a state-owned, vertically integrated monopoly in perpetuity. No sound economic or socio-economic justification supports this approach.
A far superior electricity environment would allow for independent power producers (IPPs) to compete with Eskom for the business of consumers. Even more important would be the establishment of an electricity market in which independent companies compete in the supply of electricity. The problem faced by government would be how best to introduce efficient, private generation and distribution capacity into the energy mix. The 1998 White Paper adopted by government, but not implemented, set out the following goals that needed to be achieved to modernise the electricity sector:
Give customers the right to choose their electricity supplier.
Introduce competition into the industry, especially the generating sector.
Permit open, non-discriminatory access to the transmission system.
Encourage private sector participation in the industry.But when those laudable goals are compared with what has transpired during the past 20 years, we find that:
Customers still have no choice of electricity supplier and there appears to be no intention to give consumers that choice.
Competition has not been introduced into the industry (producers of alternative energy are suppliers to Eskom and not competitors).
Open, non-discriminatory access to the transmission system is not available. If it was, IPPs would be selling electricity across the transmission system directly to large energy users or into the energy market.
Private sector participation in the industry has been actively discouraged and not encouraged as envisaged in 1998.
If government welcomed the participation of private firms in all aspects of the electricity business, it could rapidly create the environment necessary for the development of a market for electricity. There is no reason for government to incur further liabilities or burden taxpayers in order to increase the capacity of the electricity supply system. The generation of additional electricity can be financed by private firms who could also build and operate the new generation plants. The private sector would do this with alacrity if they were confident that government was intent on encouraging the development of a fully functioning market for electricity. Such a market would provide competition in every possible part of the system, price electricity according to demand and supply, increase the efficiency with which generated electricity is utilised by differential pricing between high and low demand hours, and provide consumers with a choice between competitive suppliers.
Most importantly, the generating companies investing their own money in new generating plants, with no guarantees from government except open access to the electricity transmission system and market, would decide what kind of generating plant to build, and not government planners. Cost overruns of whatever nature would be absorbed by the plant owners and the selling prices of the electricity they sell would be determined, in the final analysis, by consumers and not by regulatory officials.
An electricity market with these characteristics would require substantial changes to be made to the entire current structure of the electricity system. Government’s role in the changes to the structure should consist primarily of reconstituting the various parts of Eskom to fit into a competitive electricity market and to clear the way for competitors to provide the additional electricity required by a growing South African economy.
Government should set general rules applicable to anyone entering the industry and should not attempt to dictate a comprehensive plan that purports to take into consideration all the factors that may affect the industry in the future. The livelihood of every single person in the country depends on the development of the most efficient and lowest cost electricity supply system.
South Africa’s outdated power model, where one single entity is responsible for all the generation, transmission, and a large part of the distribution, has been abandoned in every commercially competitive country worldwide.
The South African government needs to take urgent steps to unbundle Eskom and allow private competitors to enter the market to secure our energy future.
If it does not, the very dim light at the end of our tunnel could very well be extinguished altogether and leave us all in darkness.
* Jasson Urbach is a director at the Free Market Foundation.
IPP FACT BOX
An Independent power producer is an entity which is not a public electric utility, but which owns and or operates facilities to generate electric power for sale to a utility, central government buyer and end users. IPP’s may also be privately-held facilities such as rural solar or wind energy producers, and non-energy industrial concerns generating electric power for on-site use and which may also be capable of feeding excess energy into the distribution or transmission grid system.
RENEWABLE IPP PROCUREMENT PROGRAMME
South Africa has a high level of renewable energy potential and in line with the national commitment to transition to a low-carbon economy, 17800MW of the 2030 target (according to the IRP 2010) of newly generated power to be developed are expected to be from renewable energy sources - with 5000MW to be operational in 2019 and a further 2000MW (combined 7000 MW) operational by 2020. The REIPP programme is not only contributing to alleviating the electrical energy shortfall in South Africa, but has been designed so as to also contribute towards socio-economic and environmentally sustainable growth, and to start and stimulate the renewable industry in South Africa In terms of this IPP Procurement Programme, the following technologies shall be considered as qualifying technologies for selection under this IPP Procurement Programme:
1 Onshore wind
2 Concentrated solar thermal
3 Solar photovoltaic
4 Biomass solid
6 Landfill gas
7 Small hydro
(Department of Energy)
** The views expressed here are not necessarily those of Independent Media.
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