Cheap, accessible, and reliable electricity supply is an irreplaceable ingredient for economic growth

Cheap, accessible and reliable electricity supply is an irreplaceable ingredient for economic growth. We don’t need economists or engineers to recognise this fact.

In modern parlance, all of us have a “lived experience” of what power outages mean for households and for business consumption.

All of us have a view, sometimes sharp differences, regarding what President Cyril Ramaphosa’s administration should do or not do to solve the power crisis. Yet, we all want an economy that is on a job-creation path sustainably.

The fact that there isn’t a universal agreement on the way forward makes the whole issue sound like a frustrating puzzle. Our lived experiences of blackouts in the absence of consensus on the way forward only infuriates us even more. We feel we are being played.

So, let’s attempt to generate consensus on the facts to resolve the apparent puzzle. I suggest to make a contribution, by borrowing from the style of Socrates, asking questions which could hopefully lead us to truthful answers. Only the truth, as it is often said, can set us free.

What does a bankrupt Eskom mean to the state and citizens?

Eskom has R463.7 billion debt as of September last year. Government (read we, the taxpayers) is responsible for honouring Eskom’s debt repayments. Eskom took the debt, backed by government guarantees, to build new capacity to produce power, but this build programme was mishandled and we are yet to reap the fruits of the investment.

In the meantime we, through government, have to repay the debt on behalf of Eskom as the power utility is unable to on its own. If it was a private company, shareholders would most likely allow it to fold and cut their losses. But Eskom has a public duty to provide power and we have invested a lot in it to let it go.

So, what does a bankrupt Eskom mean to South Africa and citizens? In answering this question, bear in mind that since its establishment in the 1920s Eskom had two intertwined public responsibilities – to provide cheap and reliable power to industrialise South Africa and for household consumption.

. What will the cost of building renewable energy capacity be – including battery capacity – for “just transitioning” to renewables?

While the horrendous blackouts have justifiably made us angry, it doesn’t mean that rushed transition to renewables that doesn’t take into account the full costs and benefits will serve the country any better.

Eskom’s legacy problems, South Africa’s international commitments on the climate challenge, relentless lobbying by activists and a desperate private sector tired of the blackouts are some of the factors that have opened a policy space to increase investment in renewable energy.

But, while at it, let’s mind the costs involved. We have to consider the combined costs of expanding rapid renewable capacity (variable) while deliberately stalling the expansion of coal-fired powered generation (baseload).

While the latter has for a while been financing/subsidising the costs of the former, what will happen when the variable energy is close to being the dominant generator of power without it being baseload? It can be argued that, with sufficient battery storage capacity, renewable energy could transition from being variable to baseload.

To reach this stage, renewable energy will require gigantic batteries. What will be the cost of building such batteries for South Africa, bearing in mind the skyrocketing costs of the basket of minerals required to make batteries. And when will South Africa afford it?

It’s worth noting that South Africa’s Integrated Resource Plan – the blue print that is supposed to help us transition to renewables – says nothing about battery storage.

At what point, if at all, will renewable energy – plant capacity inclusive of storage – be able to provide baseload for South Africa?

An answer to this question should help us find the meeting point between reality and idealism. It’s a fact that we all want to live in a clean environment. It’s ideal.

But does the ideal meet the reality of what is required to get the desired results in terms of South Africa’s energy needs, technology development and available capital investment? Is there a case study with a comparable developmental trajectory as South Africa we can use as a guide?

Will there be an affordable alternative baseload suitable for South Africa’s economic strength in the face of a diminishing coal generation capacity?

In Europe and the US, affordable gas has become a baseload, as aged coal-fired power stations are retired. In Europe, gas is combined with old investments in nuclear. In South Africa, the procurement of nuclear power was legally thwarted due to public concerns related to governance, costs and environment.

At what point will South Africa be ready, in terms of costs and time, to invest in nuclear power in an acceptable manner? The other option to substitute diminished coal-sourced baseload capacity would be gas, of which South Africa doesn’t have ready-access.

Assuming we are able to somehow gain access to it – which we currently don’t – how long will it take and how much will it cost to invest in the infrastructure to make it available to the grid? At what point will South Africa be able to afford this?

. What kind of emergency power could be contracted for 20 years?

A group of South African engineers raised concerns about what was termed “emergency” power that government is seeking to procure from power ships. Some people make fun of the kind of “emergency” that lasts for 20 years.

But what if this long-term “emergency” is based on the unstated assumption that the ongoing process to diminish coal-sourced baseload will lead to the kind of vacuum that is inevitably leading us to a situation where we will have no option but require 20-year type of an “emergency” as baseload?

What is the comparative environmental impact of powerships, coal, gas, nuclear, wind and solar?

A recent report by news agency Bloomberg, noted that the production of solar systems and wind plants required the ratcheting up coal-fired power stations to run the necessary metallurgical processes. This obviously points to the uncomfortable irony – that what is considered dirty and unwanted (coal) is actually needed to produce the means to source and distribute renewable energy.

As is the case in other countries, powerships procurement in South Africa is already facing resistance on governance and environmental grounds. Nuclear faced the same in South Africa and remains the source of contention in Europe.

Environmentalists have recently protested the drilling of gas on the Durban coastline in KwaZulu-Natal. Wind and solar require large tracks of land to gain scale.

The Economist newspaper recently reported that timber mafias are roaming the forests of Ecuador in South America to find balsa wood used in wind-turbine blades. In some parts of Europe, environmentalist are concerned about the threat to bird life that wind turbines pose.

Both solar equipment and wind turbines require a variety of minerals that need mining to be ramped up. Yes, around world and in South Africa, environmentalists are fundamentally opposed to mining.

Surely, there has to be a calculation of costs and benefits of all the energy options.

This opinion piece was published in the City Press: https://www.news24.com/citypress/business/energy-puzzle-for-south-africa-20210701