Private energy sector will empower future
No other set of policies will be as important for SA’s ability to raise future incomes, output and employment and to compete globally as taking the right path for delivering energy.
However, following the tempting money trail open to a few potential beneficiaries of energy procurement, as currently practised, is much more likely to predict the future of energy production and consumption than any objective analysis.
Yet even the most objectively determined plans for energy are unlikely to be good enough for a highly unpredictable energy future. The best the government and its agencies — Eskom and the municipalities — could do would be to get out of the energy business as soon as possible and on the best possible terms.
The reason for getting out is that the future of energy is impossible to predict with any degree of confidence. Therefore the decisions made in this regard by a government monopoly would most likely be the wrong ones, from which the economy would suffer permanent damage.
The lowest-cost methods of delivering energy in the future cannot be known. The best way forward for energy production and consumption will be discovered in the global market place through constant experimentation by owners and managers with their open capital at risk.
The winners may be rewarded handsomely and losers will be punished severely. The cheapest energy may be delivered off-grid by converting sunlight into energy everywhere the sun shines and storing it in low-cost batteries or other devices.
So, creating large capital-intensive generating plants using inputs of coal, uranium or gas is obsolete.
Fifty years ago, such plants, supported by monopoly powers, were arguably the right way forward. They delivered satisfactory outcomes in the form of globally competitive electricity prices for SA until recently. But they are surely not the way forward today given the risks technology poses. And especially since Eskom itself has come close to bottom of its class in efficiency criteria, as judged by a recent study commissioned by the Intensive Electricity Users Group in SA.
A true marketplace for energy production and consumption is urgently needed to determine the future of energy in SA. Only a marketplace will be able to manage the risks of making the wrong choices — and end up with the right ones.
There is little time to be lost if the South African taxpayer is to recover its investment in, and debt guarantees provided for, Eskom. If its plant and equipment were to be privatised soon, they might well fetch a price that would pay off its debts and avoid subsequent white elephants.
This would also open up a competitive market for electricity where different owners of generating capacity could compete for customers through a privately owned grid.
ONLY A MARKETPLACE WILL BE ABLE TO MANAGE THE RISKS OF MAKING THE WRONG CHOICES — AND END UP WITH THE RIGHT ONES
All the Eskom plants would be kept running at a realistic market-determined asking price by a variety of skilled and properly incentivised operators. Permitting an energy marketplace is the only path for SA if it is to manage the large risks of making the wrong choices in a top-down, monopoly-determined process, as is the current plan.
Lower electricity prices and the lower costs of entering the generating business may keep alternative generators and new technologies at bay long enough for SA to get enough of its money back from its privatisation process to pay off the Eskom debt and benefit from cheaper electricity.