South Africa is set to experience the longest period of power cuts since the crisis began in 2007, with Eskom stating that stage six power cuts will last indefinitely. This means most of the country will have no electricity for six hours a day, with around half of Eskom’s coal-powered generation capacity being offline due to breakdowns. Worsening blackouts have caused businesses to develop plans for dealing with the chance of grid collapse, whilst ministers have given assurances that the situation will improve in 18 months’ time, which experts suggest is unconvincing. The government is looking to give concessions to private firms to run the plants in order to incentivise profitable operations.
Why you will be cold this winter
By Jonathan Katzenellenbogen*
A few days ago Eskom told us that stage six power cuts were to last indefinitely.
This means we are about to experience the longest period of power cuts since these began in 2007. While in stage six, most of the country will have no electricity for six hours a day and we could be very cold through the coming winter.
According to Eskom’s latest system update, about half of its coal-powered generation capacity is offline due to breakdowns, and only about 12 percent is due to planned maintenance. That is overwhelming evidence that Eskom has been delaying maintenance and is unable to run its own power stations.
Worsening blackouts are the reason businesses are fast developing plans to deal with the still probably remote, but rising chance, of grid collapse. They have lost confidence in the ANC’s ability to fix the problem and are now making plans.
Ministers have given us assurances that things will be better in about 18 months’ time, but that is unconvincing. We had a State of Emergency to deal with the crisis, which was later dropped. We have a National Energy Crisis Committee, NECOM, and four ministers whose authority impinges in some way on the electricity crisis, yet the signs are that we are adrift without a workable plan.
A Minister of Electricity, Kgosientsho Ramokgopa, was appointed a few weeks ago. Gwede Mantashe is Minister of Energy, Pravin Gordhan is Minister of Public Enterprises. They seem unable to speak with one voice and come up with a plan. And then there is the Minister of Finance, Enoch Godongwana, who controls the extent to which Eskom is bailed out. It all makes for the perfect storm of lack of coordination and delay.
Experts Chris Yelland and Professor Hartmut Winkler from the University of Johannesburg say that we are likely to be in the same mess for the next five to ten years, due to Eskom’s declining generation capacity. Others are predicting a decade without enough power, at the least.
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There are certain basic constraints. The coal-fired power station fleet is old and badly maintained. It is offline for extended periods. That means there is no margin when the nuclear power station is down for maintenance. Then there is insufficient transmission capacity to take the power generated by renewables from the Northern and Western Cape to where it is mostly needed, in Gauteng. There are no plans for large-scale new power stations, so the additional capacity will be coming from renewables, and will be insufficient to fill the gap.
And then there is the binding constraint that the government wants political control over Eskom management. That results in a lot more discussion, planning, infighting, and delay in government taking basic decisions.
That is why the Energy Intensive Users Group, which is made up of companies running mines and smelters, has yet to have its proposal fully considered. The Group’s CEO, Fanele Mondi, told the Sunday Times that the group had to co-ordinate its maintenance schedules with those of Eskom to help in reducing demand while power stations are off-line. But, he says, Eskom and the government have still to come to the party. Government departments have their own time frame and priorities, and fail to coordinate on key matters, he points out.
The long build-up to the blackout crisis and the fumbling around since is a demonstration of the state’s inherent lack of agility, and its inability to reach decisions and implement them.
Despite the emergency, why has there been no national plan to buy the surplus generated from rooftop solar panels? The only city that has a plan to buy rooftop solar is Cape Town. In Vietnam the investment in rooftop solar helped the country get through its power crisis, until bigger sources came online.
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There has been no boss at Eskom since André de Ruyter left with immediate effect at the end of February. The Minister of Electricity has been on a tour of power plants – a job that should rather be done by the boss of Eskom and the engineering staff. The Eskom board is now considering a list of five candidates. It is not a job for those wanting a free hand, as the new boss will have to accept political orders from four ministers.
The scope of the new Eskom boss will be highly constrained by the conditions of the debt relief package imposed by the Treasury. There is little scope for any big and ambitious plans. All capital expenditure is restricted to investment in distribution and transmission, and no investment is allowed in new generation capacity.
One positive aspect of the debt relief conditions is that the Treasury will require that Eskom uses private contractors to maintain the fleet of coal-fired power stations, which accounts for 80 percent of generating capacity.
The National Treasury has contracted an independent international power consortium group to review all Eskom’s coal-fired power stations and to advise the government on the improvements that are required. Once the National Energy Crisis Committee has seen the review and approval has been given, the Minister of Finance will give the go-ahead for work in the next financial year.
The next step under the debt relief plan will be for the government to give concessions to private firms to run the plants. Given the number of hurdles that this plan has to get over, it is unlikely we will see this happen in the next few months.
Granting concessions to the private sector to run power stations is fundamentally a good idea. It could give an incentive to private firms to effectively and profitably run these operations. It is the last hope for state-owned power generation.
Will they do a better job than Eskom? With an ANC government in power, the answer has to be, ‘it all depends.’
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Concessioning holds out immense potential, but as with many government contracts, an enormous amount can go terribly wrong. Crucially it will depend on the selection of the private contractors and the power generation levels they are required to maintain. Will those concessions be run by friends of the politicians?
At some stage there must be heavy new investment in new baseload capacity, which will have to be either nuclear, gas, or coal. Eskom will not have the balance sheet to carry this out for many years. In view of state failure, the private sector should go ahead with this, but the government resists.
As with other state-owned enterprises, Eskom and energy policy is tied to the vested interests that lie at the heart of ANC power. This prevents serious reform from taking place. The nexus of union and patronage interests make it crucial for the ANC to keep the bulk of power generation in state hands.
And that is why you will be cold this winter and probably for many to come if you do not have your own large installation of solar panels.
*Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist. His articles have appeared on DefenceWeb, Politicsweb, as well as in a number of overseas publications. Jonathan has also worked on Business Day and as a TV and radio reporter and newsreader.
This article was first published by Daily Friend and is republished with permission
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