It is time for Eskom to switch on private sector initiatives

It is time to buck the dusky trend. The national energy provider, Eskom, is haemorrhaging money at an unsustainable rate and is nearly R400 billion in debt. Equipment is failing, power outages have become the norm, while its energy availability factor (EAF) has fallen by almost 30% in just over a decade.

Up to 13 July, South Africa had lost 48 days, or 1 152 hours, of electricity usage in 2022 alone, passing the 2021 record number of load-shedding hours. In 2021 Eskom shed 2 521 gigawatt hours (GWh) in electricity, while 2022 has already seen more than 3 000 GWh being shed.
In the prevailing darkness, this is a nightmarish scenario.

Corneels Schabort, an energy expert at the Faculty of Engineering of the North-West University (NWU), puts this loss in Eskom revenue in perspective. “Electricity production reduces by 168 GWh per week for each phase of load-shedding. Assuming a minimum selling price of electricity of 85c/kWh, the gross income loss for Eskom, which is only one small aspect, is R143 million per week per phase. So, if one considers the entire loss of 3 000 GWh, the unrealised income equates to R2,5 billion for the first seven months of 2022.

In the same period, Eskom had to spend almost three times that amount on diesel to keep the open cycle gas turbines (OCGTs) online.”
Recently, Eskom committed itself to bringing back original equipment manufacturers to oversee maintenance duties.

There is a renewed drive to recruit previous employees who either left Eskom or were forced to take early retirement packages. 
According to Schabort, these two solutions are steps in the right direction. Still, there is only one viable path to keep the lights on: “If I could offer one solution, it would be a plea to the Minister of Mineral Resources and Energy, Gwede Mantashe, to allow the private sector to play an increasingly bigger role in the electricity generating game.

There is nothing better for South Africa than a decentralised electricity environment.”

 Although President Cyril Ramaphosa has increased the threshold for private self-generation to 100 MW from the initial limit of 10 MW, the playing field is still tipped in favour of state-owned energy production.

Recently, the president hinted at creating another state-owned public utility service to compete with Eskom. These sentiments are supported by high-ranking government officials such as the Minister of Labour, Thulas Nxesi, who said he vehemently opposed privatising Eskom, as it would result in higher energy prices and inhibit all South Africans’ access to electricity.

 “Despite many shortcomings in the IRP 2019 document, one existing, agreed-upon remedy could easily be implemented, and that is ‘accelerating or bringing forward capacity proposed in the plan’ in the case of the ‘EAF deteriorating further’. Minister Gwede Mantashe can implement this mitigation found in the IRP 2019 document without lifting a finger. This action will unlock up to 15 000 MW of privately produced solar PV and wind power in as little as 18 months.”

Schabort says that this approach would make a genuine difference to South Africa’s energy conundrum, reducing the burden on Eskom’s failing infrastructure without costing the taxpayer a single cent.
“The solution to the load-shedding problem does not lie with Eskom.

Sitting back and waiting for Eskom to resolve the issue will accomplish nothing. Eskom is but one role player in the bigger picture. Our hope of ending load-shedding lies with the private sector or, more specifically, independent power producers (IPPs). They, of course, have a generating limit of 100 MW, but the question is: Why should there even be a limit?”
Electricity as a privately traded commodity and not exclusively state-owned and distributed?

 “As is the case in many countries, there will come a day when we will be able to decide where we want to buy our electricity. The energy landscape is moving towards privatisation. Eskom’s future divisions, namely generation, transmission and distribution, will still play a role in electricity supply in South Africa, but it is hoped that the electricity monopoly will make room for healthy competition, resulting in cheaper, sustainable electricity.

We do not need 100% privatisation. We need more role players and more competition.”
And nuclear energy? 
“I am  in favour of nuclear energy, but not in the South African context. Look at the two most recently built coal power plants, Medupi and Kusile. After 14 years, Medupi is still short of the flue gas desulphurisation units, and Kusile has two of its six units still under construction.

If Eskom could not finish these two power plants in more than 14 years, how can we trust them to complete a nuclear power plant? There has also been an exodus of expertise from Eskom to foreign markets.

Our engineers are highly sought after abroad, and if you want to build a nuclear power plant, you need experts to run and maintain that plant. It takes a minimum of 15 years to build a nuclear power plant, so if we start building a new nuclear plant today, by the time it produces its first kilowatt-hour, it will be 2037.”

 The louder the public outcry over load-shedding becomes, the more significant role players will have to listen to possible solutions. Maybe a public problem needs a private solution?


Corneels Schabort

Submitted on Wed, 07/27/2022 - 15:39