As new Eskom Chief Executive Andre de Ruyter takes the reins, the ailing power utility has been plunged into a fresh spate of load shedding, during a time when demand should be low, and South Africans were expecting a period of respite.
Last year, Greenpeace Africa released a report outlining possible options that could stop Eskom’s death spiral. Numerous other proposals were put on the table, and finally Minister Pravin Gordhan provided a roadmap – the Special Paper on Eskom, released at the end of 2019.
Almost surprisingly, the heated conversations around what to do with the dysfunctional power utility seemed to have finally resulted in some form of direction. It was no coincidence that the Minister’s approach was called a ‘roadmap’ - it is, in fact, a tale of two routes. One route that begins to transform the power utility and another that continues to meander and perpetuates the current status quo.
It is safe to say that the desperate state that plagues South African state-owned enterprises is epitomised by the condition of Eskom.
This ‘roadmap’, in fact, was not so brand new after all - it read a lot like an updated version of the 1998 Energy White Paper. But there is something to be said for government following up on existing policy and actually trying to implement it. It does still present a new approach and it indicates a shift in Eskom and government’s approach to Eskom and its role in the Electricity Supply Industry (ESI).
Now, as De Ruyter takes the reins, we reminded anew of the significance of the Special Paper.
The more transformational route offered by the roadmap means that Eskom’s days as a vertically integrated monopoly are numbered, and increasingly there is the realisation that Eskom can no longer be both player and referee in the system.
There is an electricity supply industry, and Eskom is just one player in the system. Comments by the Minister and the details of the special paper indicate that the business model which Eskom is based on is now no longer a given and is subject to reform. Similarly, comments and contents of prior Treasury paper and those from the minister of finance and the president indicate a clear recognition that the need for change at Eskom is urgent.
The roadmap articulated problems that Eskom is facing, but uniquely, doesn’t look at Eskom’s issues as just solely operational or managerial – it tries to respond to those challenges in a much more interconnected way than previously.
This again showed a shift in how the government is dealing with the Eskom issue. For one thing, the public can now see that intergovernmental and/or inter-ministerial clusters are beginning to talk to one another.
A prime example is that the Minister of Public Enterprises made it clear what aspect he will speak to, and what other aspects of the package are in the ambit of the finance minister in terms of the debt concerns. It would seem that the days of Ministers speaking on one another’s functions are numbered.
It is refreshing and a vindication for many stakeholders that the government is looking to leverage the co-benefits of renewable energy, not only in dealing with the capacity supply shortfall that South Africa is experiencing, but also as a measure to address the skills shortage - and to further enhance at a local, “affected” level, the Just Transition. The importance of both these cannot be overstated.
Now for the bad news
The second, meandering route taken by the roadmap is much more concerning. This route leads to a continuation of Eskom’s - literally - deadly reliance on coal in the country, and does nothing to try to stop the premature deaths caused by the utility’s air pollution coming from coal.
In this roadmap, despite the fact that South Africa has a severe air pollution crisis - it hosts the fourth-worst nitrogen dioxide hotspot in the world, and the second worst sulphur dioxide pollution hotspot in the world - the considerations related to Eskom’s compliance with the relatively weak Minimum Emission Standards (MES) are still seen as secondary, and while the Minister does see Eskom complying, it is viewed as outside the realm of affordability.
When it comes to generation of electricity the government is sinking a lot of capital and taxpayer revenue into keeping Eskom afloat and the bottomless pit of state-owned fossil generation will start to devour our pensions and savings. Leaving us poorer, in the dark and unable to breathe.
Eskom has inflated the costs of compliance with the Minimum Emission Standards and compliance should be non-negotiable given the premature deaths and ongoing health impacts from Eskom’s pollution. This is an area that must be strengthened if Eskom is to be able to complete a turnaround strategy. The National Air Quality Officer must have no option other than to reject the postponements from complying to the MES that Eskom has applied for.
It would be a mistake to reform Eskom, but still retain structures within the utility. In reality, Eskom needs to consolidate and proactively focus on the transmission of electricity, and the roadmap does focus on this.
Eskom must relinquish total control of generation, transforming its generation from coal to renewable energy, and then systematically relieve itself of duties that involve the distribution of electricity, even though the paper is silent on this.
Generation of electricity remains a key opportunity for the private sector to invest in South Africa’s future and help get us out of the gargantuan debt that we are faced with. In the 21st century there is a key role for the residential sector to play through embedded generation technologies (specifically rooftop solar power). If the aim is to truly diversify the electricity supply mix, then Eskom and the Department of Minerals and Energy must start thinking more strategically and truly facilitate the entry of new and additional power producers, who compete with each other depending on technology, dispatchable power and price.
When it comes to distribution, it seems wisest to let the municipalities do their job: get the capacity and roll out area-specific distribution programmes. Of course, this will have to come with an immediate debt relief package. Eskom is far too big and far too removed to understand what happens in reality on the ground when it comes to distribution.
The true national asset
South Africa’s truly national asset is not the ailing generation fleet, nor is it the asset base in distribution; South Africa’s national asset is the transmission grid. In most, if not all the briefings that Eskom has presented, Eskom communicates that its biggest expenditure is generation - the production of electricity.
Eskom also communicates that it needs to find a way to better draw value from the transmission of electricity, as in past years it has not considered this adequately. When considering the above, one can conclude that Eskom needs to be the buyer and seller of electricity, not the wholesale producer and distributor. After all, with the increasing pressure of renewable energy disruptive technologies as well as increased behavioural and technological efficiencies, any further attempt to capture any exorbitant value from generation will be futile exercise by the government.
Times have changed. Eskom needs to stay relevant, and the government is thinking like a well-informed, digitally-wired, reasonable person in the 21st century. There is no reason to keep the status quo when the very thing keeping South Africa back from progressing is the very dirty monolithic utility status quo.
Though the roadmap was encouraging, it is clear that if we are not careful, this paper can go the way of most good policy instruments: it could be rendered unimplementable due to lack of leadership. The truth of the matter is that Eskom paper was long overdue and if it is to have any real impact, then its implementation will be the real test.
* Happy Khambule is Senior Political Advisor for Greenpeace Africa, official party delegate to the UNFCCC and a director of Mansa Advisory, as well as a former board member of Fossil Free South Africa. Views expressed are his own.