Economics of renewable energy in SA

THERE are controversies and contradictions around energy in South Africa, to a point where the modus operandi of supplying electricity has been politicised at the expense of citizens.

The energy sector is characterised by skewed distribution, corruption, maintenance inefficiencies, high prices and periods of darkness resulting in low production which, in turn, contribute to the poor performance of the economy.

The heart of an urban and industrial economy lies in the functionality of the energy sector. It ignites effective and faster production, consumption and, most importantly, information dissemination. For an economy to grow it is imperative the energy sector becomes the apex of its priorities.

The stance on the energy debate is the phasing in of renewables into the economy as the main supplier. This means the 70:30 ratio between Eskom and independent power producers should be adjusted to bring the new technology intended to improve the country’s energy.

Coal supplies 77% to electricity production and employed 86 919 people last year, contributing 19% to the mining industry. South Africa is the fifth-largest coal supplier in the world, with reserves of an estimated 66.7 billion tons – a lifeline of 200 years.

Despite the utopian outlook of coal supply, the sector has been dominated by oligopolies wherein 79.6% of the country’s coal production is derived from six companies and only 26.1% is from four black-owned companies.

The oligopolistic nature of coal supply with Eskom being a monopoly utility supplying 70% of energy has realised a hefty coal bill contributing significantly towards the entity’s R450 billion debt.

Another bone of contention is the issue of sustainability. Despite the estimated 200-year lifeline, the population grows each year, making it difficult for economies, particularly at the periphery, to attain electricity. This poses a desperate need for a forward-thinking strategy to energy sustainability.

South Africa is the 12th most attractive investment for renewable energy. Independent power producers have attracted investment of R201.8bn where only 24% are foreign investors.

The growing industry has induced small to medium-business participation creating the opportunities to realise 5 million jobs. This is a clear indication of the economic opportunities and appetite renewable energy posits.

The sector provides a more reliable alternative to electricity supply. The configuration of energy, given that it solely relies on a single entity, has left the economic conditions in crises.

Albeit a hefty upfront payment, renewable energy suggests a cost-effective and reliable electricity supply with low maintenance, low reliance on foreign energy sources with the sole intention to turn around the economy.

The political controversy around alternatives is weakened sovereignty and risks of exploitation. In contrast, there’s an implied weakened sovereignty if 79.6% of supply to produce electricity relies on only six companies.

Phasing in of renewable energy will force the oligopolies to downsize. This will curb the high risk of policy influence maintaining the status quo, low accountability on Eskom and political inconsistencies.

The proposed economic strategy approach by the minister of finance is focused on an inclusive economy and opening barriers for new economic participants. Policy positions on energy must review the 70:30 distribution and renewable energy must take centre stage to align with the approach.