The government is blocking itself from implementing the drastic measures that are required deal with the energy crisis, and we are paying with every minute of power cuts.

On January 23 President Cyril Ramaphosa made an important statement regarding load-shedding. In his weekly blog “From the Desk of the President”, he wrote that the electricity generation crisis was a consequence of government’s miscalculations over the years. “As a country we are now paying the price of these miscalculations,” he added.

His point was his administration shouldn’t have to shoulder all the blame for the blackouts, which he described as a “perfect storm”. The miscalculations, he wrote, were a lack of investment in new generation capacity; poor plant maintenance; corruption and criminality; sabotage of infrastructure; rising municipal debt; and lack of suitable skills at Eskom. In other words, he was merely repeating what most of us already know.

Upon reflection, I asked myself: “Is his administration not carrying on with the miscalculation he was referring to?” To be sure, corruption, sabotage, rising municipal debt and lack of skills at Eskom cannot be described as “miscalculation”. They are a combination of incompetence, poor governance standards and breakdown of the rule of law.

So, only two things from Ramaphosa’s list can be accurately termed miscalculations: the lack of planned maintenance and investment in generation capacity.

The latter can be illustrated in the following terms. In 1994, at the dawn of democracy in SA when fewer people had electricity, Eskom had total installed capacity of 37,940MW. By 2022, when almost the entire country was connected to the grid, installed capacity was 47,145MW. That means in almost three decades nominal capacity grew by a net 9,205MW. During that period demand for power soared as the democratic government’s policy was to ensure universal access to electricity by 2000. In addition, it demanded that prices drop by 15%.

So, there was a basic miscalculation in policy design: growth in electricity demand to households and business didn’t match investment in new generation capacity. That miscalculation was a consequence of ignoring repeated warnings from Eskom that the increase in demand necessitated investment in new generation capacity.

Eskom had made the right calculations in the late 1990s and communicated those to the government. In fact, it had been Eskom’s policy since its establishment in 1923 that there be adequate excess capacity relative to demand so that if any power station failed consumers wouldn’t even know about it.

The government didn’t heed Eskom’s cry and then-president Thabo Mbeki humbled himself and apologised, saying, “Eskom was right, government was wrong.” Building the Kusile and Medupi power stations failed to ensure net growth in generation capacity because by that time some of the old plants were being retired and the efficiencies of others had declined.

Regardless of the new Medupi and Kusile plants, which in any event aren’t fully functional, SA requires new baseload capacity of between 4,000MW and 6,000MW. Eskom describes this additional baseload requirement as “urgent”, though its departing CEO André de Ruyter has said the company can’t provide for the shortfall.

COO Jan Oberholzer has said that until the additional capacity is installed to enable the company to undertake effective maintenance, plant performance cannot be expected to improve. Even if the additional authorised procurement of renewable power from independent power producers is taken into account, Eskom still estimates there will be a shortfall.

With an average load factor of 30%, renewable IPPs will have to install between 13,000MW and 20,000MW, of which there is currently about 6,000MW of capacity. Yet even if all the 20,0000MW were installed, the vagaries of unpredictable weather might still render the 30% load factor doubtful.

That means the strategies being pursued, including not giving Eskom clear policy directive to procure new baseload power, reveal continued miscalculation on the part of government. Eskom’s debt levels aren’t helpful either.

Compounding matters is De Ruyter’s apparent swallowing — hook, line and sinker — of the idea that baseload is no longer as important as it used to be. Eskom engineers still believe in the importance of baseload power. And they are right.

If we are planning for a fast-industrialising economy that is lifting people out of poverty and unemployment, a stable and cheap supply of electricity would be the priority. That requires higher levels of baseload and supplementary variable energy.

Current crisis mitigation plans are supposedly targeted at the bare minimum of ending load-shedding in the short term, rather than considering the long-term necessity to strongly reverse the de-industrialisation SA is experiencing. The dependable source of baseload has for years been provided by coal-fired power stations, now being decommissioned because, we are told, it would be expensive to retrofit them with modern technology.

Compared to the damaging costs the country is incurring every minute through load-shedding, it is plainly illogical not to raise money to buy new equipment to retrofit the old plants and prolong their lives. That failure amounts to another ongoing miscalculation on the part of government.

The government once asked Eskom to consider the possibility of selling old plants to private operators, but the utility shot down the idea. In its 2022 annual report management said Eskom wouldn’t be able to sell the plants for three reasons: investors would consider them stranded assets; a huge amount of capital expenditure would be required to retrofit the plants in compliance with minimum emission standards; and poor operational performance would be a deterrent to long-term investors.

Eskom further said such disposals would require a severe discount on the book value of the assets and higher-than-cost power purchase agreements, which could lead to higher tariffs and thus worsen Eskom’s financial position.

The utility concluded that selling the plants could provide short-term liquidity but would not resolve its financial problems. The analysis was based on what was termed an “internal study” conducted by experts. It’s not clear which investors were surveyed.

Moreover, De Ruyter doesn’t think it’s viable to build a coal-fired power station because it would take 12 years. Of course, his benchmark is Kusile and Medupi, which are hardly examples of sound project management by his predecessors.

China, which is constructing coal-fired plants fitted with the latest emissions reduction technology, can build a 4,000MW plant in three to four years. Retrofitting old plants with updated technology instead of tinkering with fruitless and expensive shortcut maintenance might be even quicker.

China is building power plants and rapidly expanding investment in renewables. As a Brics member it won’t refuse to build a power station in SA while continuing to sell us solar panels and wind turbines, especially in light of the race for global influence.

As matters stand, the government is blocking itself from implementing the drastic measures that are required deal with the energy crisis. That amounts to ongoing miscalculation, the price of which we will continue to pay with every minute of power cuts.

And there’s more to the miscalculation: the ongoing load-shedding coincided with the just energy transition policy adopted by government. Unlike the rest of the world, which is debating and formulating such policies under bright lights, our debates are conducted in the dark. This adds to the pressure to abandon Eskom’s ageing plants because, somehow, the transition to renewables would end blackouts.

The decommissioning of some of the plants was planned in the hope that Medupi and Kusile would function properly. That assumption has proven wrong and requires a change of policy. The rush to decommission old plants means SA’s transition isn’t driven by adequate planning and execution towards decarbonisation.

Instead, the crisis has provided a perfect template to sell the dream of an easy solution based on plugging in renewable energy sources. Load-shedding should never have been a factor in the just transition policies; ideally, they should be pursued while energy supply is constant, reliable and cheap.

Renewables will be an important part of the energy mix in the long run, but to deprive Eskom’s old plants of retrofitting to help us end load-shedding is a tragedy. Even with renewables in full swing in future, a good energy security policy would dictate that the power stations are kept in good condition for, literally, the rainy days.

The continued failure to deal with the energy issue pragmatically means load-shedding will be a permanent feature in SA. In the next few years a successor to Ramaphosa may well have this to say about it: “We are paying the price for years of miscalculation.”

This opinion piece was published in Business Day: https://www.businesslive.co.za/bd/opinion/2023-02-16-vuslat-bayoglu-load-shedding-and-the-cost-of-ongoing-miscalculations/?utm_term=Autofeed&utm_medium=Social&utm_source=Twitter#Echobox=1676517988