Eskom procrastination on renewable energy a worry
WE, AS CITIZENS of South Africa, are dealing with many issues that undermine the premise that a state-owned entity (SOE) should act in our best interests. In particular, all of us should be concerned about the regressive moves made by Eskom towards renewable energy, as future sources of electricity affect all of us.
Eskom is owned by the state, and the state also runs the renewable energy independent power producers programme (REI4P). In July 2016, Eskom defied state policy by refusing to sign outstanding power purchase agreements (PPAs) with a number of preferred bidders in the REI4P. Essentially this is a situation that should never have occurred, as Eskom should follow instructions from the state. It is now eleven months later and there is still no resolution to this situation. This indicates a serious failure in governance, one which does not seem to have an end in sight.
On Tuesday, June 20, the Department of Energy (DoE) and Eskom were to give an “update” on the signing of these PPAs.
The presentation was delivered by a DoE representative, and while Eskom officials were present, they were noticeably silent. The conclusion was essentially a list of further steps to delay giving any real clarity as to when these agreements will actually be signed. To an outsider this must seem confusing, but for those who watch the energy space closely, it is incredibly frustrating.
To get a better picture of what is actually going on, one must consider the background context and read between the lines of what information is given to the public, and how this information is packaged.
The REI4P has received more than R250.6 billion in investment since 2010 and has been recognised globally as highly successful. Through a series of competitive bidding rounds, wind and solar have now become the cheapest form of new-build electricity generation in the country. This trend is occurring across the world, and is a huge step in moving toward cleaner forms of energy generation.
The economics of renewables have now become a driver in a transition away from fossil fuels. This is good for the environment and good for society. However, it is not good for those with vested interests in coal as an energy generation source. Eskom happens to rely on burning coal to produce electricity as its current core business. However, even the die hards at Eskom seem to recognise that coal is an industry in decline, and their sights are now on nuclear.
As we know from the High Court verdict in April this year, the entire nuclear procurement process to date has been underhand and secretive, resulting in it being deemed “unlawful and unconstitutional”. Nuclear will also be incredibly expensive, as work by energy research institutions has shown, despite claims from the nuclear lobby to the contrary.
Eskom essentially has a monopoly on large scale electricity supply in South Africa, and consequently the REI4P has no other option at present but to have Eskom as the sole buyer of electricity from independent power producers (IPPs).
In this context, it appears that Eskom is trying to protect its current cash-cow in coal and future nuclear ambitions by refusing to sign the outstanding renewable PPAs. These seemingly endless stalling tactics appear to be an effort to test the patience of investors until they eventually give up on the renewable energy projects. Essentially these renewables have become a real threat to the coal and nuclear industry, and Eskom are apparently doing what they can to kill the competition.
However, as a state-owned utility, that is mandated to supply a basic service, Eskom should not be attempting to sabotage a rising technology. Conversely, Eskom should be making the best energy choices for the nation, but as we know from the State of Capture report and the Denton Report, some high ranking Eskom officials appear to have been more interested in feathering their own nests.
One problem is that despite being an SOE, Eskom also aims to function as a company in the sense of trying to make a profit (despite having a net debt of about R320bn at present). This reinforces the arguments that many players in the energy sector have been making for years: that Eskom must be fundamentally restructured to avoid these conflicts of interest between service provision and attempts at profit generation.
It is unacceptable that Eskom should be allowed to continue to undermine the renewable energy industry, but based on the 20th June session, it appears that the DoE may be following their lead.
The presentation was delivered in such a manner as to sow doubt about any important facts and figures while not answering any direct or critical questions.
Even the chairperson of the meeting, twice, had to make a plea for a “simple” answer to the fundamental question of “When will these agreements be signed?” Of course, this issue was tiptoed around until the meeting drew to a close.
Many of the supposed justifications revolve around Eskom’s “hardship” and precarious financial position. Despite what might be trotted out, this situation is as a result of years of mismanagement and corruption at Eskom, and is not due to recent introduction of the IPPs.
Energy planning is complicated. It involves systems thinking with attention to the subtlety and nuance. It involves lots of mathematics, variables, measurement units and technical jargon. These are not the preserve of the general public, so it is easy for a good orator to spin a story to support a particular agenda by selective use of statistics.
Energy planning has also, unfortunately, become highly political, and is subject to patronage practices and the seeking of rents by various individuals through the SOEs.
Evidently this has been going on for years, but it has become more visible in recent times since the influence of the Gupta family and others has been brought to light in the mainstream media.
So what we end up with, as witnessed in Parliament on the June 20 is the deliberate obfuscation of an already complicated topic, which seems to serve the purpose of letting those behind the scenes buy more time to plan their next move.
If, after eleven months, the best offering that we get from the DoE is a list of items that should have been cleared up ages ago, then there is real reason for concern. Or anger. As one of the MPs said in the meeting, this is “absolute rubbish”.
If you live in South Africa, this affects you. Energy choices affect all of us. While these delays in signing the PPAs may seem minor in comparison to other issues we are facing as a country, they are an indication of a common theme: governance structures that protect the vested interests and ambitions of a minority at the expensive of the majority.
If this bothers you, then you can make your voice heard. You can contact representatives at Eskom and DoE: the relevant details are on the respective websites. Alternatively, talk with local government officials and ward councillors about the broader issue of progressive governance.
If you have ideas for how to bring about positive change in how the state conducts planning, then contact organisations or academics in the appropriate field. Share these concerns on social media so that there can be input and debate from a wider audience.
We, as the public, must work together on how we can collectively force a change in this short-sighted, self-serving form of energy governance, to one that is progressive, and best serves our people and the environment. For if we do not do this, evidence shows that the incumbency will put it off for as long as possible, if not indefinitely. Richard Halsey is a member of the Policy Team, at Project 90 by 2030. Visit their website at www.90by2030.org.za
Energy planning is complicated. It involves systems thinking with attention to subtlety and nuance, says the author.