How state capture stymied renewable energy ambitions

OVER the past year or so, Eskom, and in particular its outgoing CEO, Brian Molefe, have been very vocal in their opposition to the renewable energy programme. And a recent decision not to sign any further power purchase agreements with renewable energy providers threw investors, policymakers, analysts and the public into a state of confusion.

It took the National Treasury and the Department of Energy to remind Eskom and Molefe that the utility was not responsible for policy decisions, nor was it the final arbitrator of generation procurement.

At the same time, Molefe was a strong advocate of the nuclear new build programme, arguing that it was the least-cost option and most stable supply of baseload capacity for the country. But he failed to put numbers on the table.

Not surprisingly, it was recently revealed that the advisory committee convened by Energy Minister Tina Joemat-Pettersson had advised her against pursuing the 9.6GW nuclear new build programme.

Instead, the committee suggested that by removing the artificial constraints imposed on renewable energy in the Integrated Resource Plan, as well as the inflated costs assumed for renewable energy technologies, the least-cost option for the country would be a mix of solar photovoltaics, wind and flexible gas.

Since Molefe came on board as CEO of Eskom, it became clear that there was a concerted effort to achieve two things.

The first was to undermine the renewable energy independent power producer procurement programme, which began with statements questioning the costs of renewables, their intermittency and contribution to stabilising current supply. This culminated in Eskom’s refusal to sign new power purchase agreements.

The second was to advocate for the nuclear energy programme, in its full 9.6GW glory, arguing that not only were the R1-trillion estimations — which experts have based on international experience — inflated, but also that there were numerous financiers willing to take the risk and that the programme did not need to be funded through the fiscus — whatever the cost might be.

This contradicted the sentiment of investors, financiers and economists who took part in a technical workshop on the economics of nuclear energy hosted by the World Wide Fund for Nature South Africa this year.

Saliem Fakir

These experts suggested that private capital in particular would not take the risk associated with an investment on this scale and that a mix of vendor and development finance would be the only source of funding.

This in itself raised a host of

Ellen Davies

risks that need to be properly interrogated.

When Molefe got tired of speaking at public events or on Twitter, he got his group executive of generation, Matshela Koko, to take up the baton. What the Molefe-Koko tag team were doing was creating the policy uncertainty needed to drive renewable energy investors away and undermine the future of the programme. They were pushing nuclear in the absence of any objective facts.

The public protector’s report on state capture raises some real red flags, especially so when the report notes that in light of “the extensive financial analysis conducted, it appears that the sole purpose of awarding contracts to Tegeta to supply Arnot power station was made solely for the purposes of funding Tegeta and enabling Tegeta to purchase all shares in OCH [Optimum Coal Holdings]”. Tegeta is the Gupta-owned company that Eskom paid R656-million in advance for the supply of coal to its Arnot power station.

What this suggests is that decisions at Eskom under Molefe’s tenure have not been based on reason, prudence or what is best for the country, but on the promotion of a few vested interests. Importantly, it must be noted that the report not only raises questions about Eskom’s departing CEO, but also about the Eskom board.

And it sets off some serious alarm bells about the proposed nuclear build.

The Tegeta example shows clearly what happens with vested procurement decisions: prudence flies out the window and consumers pay the price.

The public protector’s report highlights the real danger that collusive behaviour and poor governance at a utility like Eskom pose to the public interest. It highlights the need to thoroughly interrogate the nuclear new build programme, including why Molefe was its greatest advocate.

Saliem Fakir and Ellen Davies work for WWF SA

They were pushing nuclear in the absence of objective facts