By prof. David Richard Walwyn, University of Pretoria
A month ago, South African citizens heard some hard truths about the state of the power supplier, Eskom, from the outgoing CEO, André de Ruyter.
In an interview that was broadcast on television, De Ruyter made accusations about the role of criminal gangs as well as politicians in corruption that cripples this utility. The interview led to his immediate departure – he was initially due to leave a few weeks later – as the ruling ANC verbally attacked him.
But in my opinion, South African citizens – especially the new electricity minister, Kgosientsho Ramokgopa – would be well advised to look more closely at what De Ruyter said, rather than trying to attack the messenger.
De Ruyter outlined four levels on which Eskom is destroyed.
Firstly, there is the issue of a lack of political support from the cabinet for a renewal strategy for Eskom that De Ruyter tried to implement. That plan included dealing with crime, the separation of the existing entity into three different companies (generation, transmission and distribution) and, over time, the decarbonisation of power generation. This effectively meant that coal-fired power stations would eventually be shut down and replaced with renewable energy storage capacity.
Secondly, De Ruyter outlined how Eskom continues to be infiltrated by systematic corruption involving private individuals and companies using public assets for personal gain. The pattern of state capture began in earnest under the presidency of Jacob Zuma, but these actors continued to hold powerful interests within the company, including contracts for coal, construction and maintenance. They are mainly rent seekers and get money for no added value.
Third, there is organized crime. These groups are distinguished from the agents of statehood. They control how money flows as well as the operations of various power stations. For example, Eskom lost control of Tutuka, one of the larger coal-fired power stations that should generate at least three GW (12% of total demand). Yet the availability of energy from the plant is now an eye-watering 12% of its capacity.
Finally, De Ruyter identified intentional malfunctioning and petty crime as a major threat. Anyone who can break the law does so without consequence.
Much of the resources and power needed to solve problems at all four levels is in the power minister’s or government’s control. He needs to get the cabinet behind a renewal strategy that is in line with the global energy transition, he needs to get the police to do their job competently, and he needs a powerful Eskom chief who has local legitimacy and support.
And he must act immediately.
The depth of the crisis
South Africa’s electricity supply crisis has never been more serious. This is clear from the data that Eskom publishes on its data portal.
Payload has now risen to 15% of total demand. This means that affected power consumers are without power for at least 5.5 hours for every 24 hour cycle:
As the figure shows, load shedding is increasing every month, with February this year being the worst to date.
(The data in the chart is based on actual dispatched generation versus expected demand, where the latter is obtained by Eskom from historical usage patterns.)
Just when South African citizens hoped the situation could improve, it worsened. In May last year, load shedding was 2% of total demand. At the time, they still had confidence in President Cyril Ramaphosa’s ability to resolve the crisis with his six-point action plan.
Since then, the country has endured a series of broken promises, heard explosive revelations from the De Ruyter interview and witnessed the further collapse of the coal fleet.
The longer the crisis lasts, the more Eskom’s energy market will shrink. By using the data from the last few years, it is possible to model what is happening to the demand for energy and what may happen in the future.
Around nine GW of Eskom’s customer base is untouchable – these customers are not affected by Eskom and are unlikely to obtain alternative supply. We also know that approximately nine GW of demand, which is mainly allocated to the Energy Intensive User Group, will be replaced by internal generation over the next two to three years.
Combined with the growing use of rooftop solar on residential and commercial buildings, my forecast, based on my modeling studies, is that the shifted demand will be 11 GW by March 2026, leaving a residual demand on the national grid at 14 GW, or about 40% of average demand in 2020.
If Eskom cannot sell the electricity it generates, operating costs will quickly exceed revenues. So the challenge is not only to rebuild generation, but also to retain high-value customers, who switch to solar power.
What will help?
All eyes are on the new Minister of Electricity. Does he have the skills, energy and political influence to solve the energy crisis? Or will his appointment further cloud an already disjointed portfolio?
Minister Ramokgopa must add three important tasks to his action programme. He needs to learn from the De Ruyter interview (and address the problems he identified), he needs to quickly unbundle Eskom and he needs to solve problems that are delaying the implementation of the renewable energy programme.
Minister Enoch Godongwana made it clear in his budget speech that the establishment of the National Transmission Company of South Africa is a priority. Although the national treasury will borrow R254 billion to keep Eskom alive, the funds can only be used to secure and expand the assets of the transmission company. The implications of this position are clear – sell the generation capacity to private investors and leave distribution to local authorities where possible.
One aspect of the De Ruyter interview that has been largely ignored is the issue of the renewable energy program and how it has been derailed despite its obvious benefits in terms of lower energy costs and minimal water use. As De Ruyter mentioned, if the program had stayed on track, South Africa would have avoided 98% of the 2022 load shedding.
In addition, the closure of several Eskom coal-fired water-cooled power stations will release billions of liters of water for use in domestic applications, savings that will become essential for a water-scarce country. The closure of these stations will also deal with the air quality problems and the ongoing breaches by Eskom of its emission permits.
It is now clear that nothing will save Eskom in its current state. It will join a list of state-owned entities that are becoming a fraction of their previous operating scale – the post office, the South African Airways (SAA) and the Passenger Rail Agency of South Africa (Prasa).
How far Eskom sinks will depend on how effective Minister Ramokgopa can be in his new position.
- David Richard Walwyn is a professor of technology management at the University of Pretoria.
Originally published on The Conversation
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