The findings of an independent assessment of the state of Eskom commissioned by Finance Minister Enoch Godongwana and disclosed to Parliament in his Budget speech in February were a devastating indictment of a failing state-owned utility on the brink of implosion, saysthe writer. Picture: Henk Kruger/Independent Newspapers
It wasn’t an April Fool’s prank. Nor was it to placate the Greek pagan goddess of fertility and rebirth, Aestre, on which the contemporary feast of Easter was historically adopted.
Alas for millions of South African households, businesses and local authorities, Eskom’s electricity tariff hike effective from April 1 till March 31 next year for direct customers, and July 1 this year to June 30 next year for municipalities, is neither an act of rebirth of a beleaguered and seemingly impotent utility, nor any reason for a last gasp of seasonal joy as the country sleepwalks into a defining general election on May 29 and into the vagaries of a southern hemisphere winter increasingly tempered by the ravages of climate change.
Whether it was a political calculation to sneak in the tariff rises under the cover of the Easter break is immaterial. To be fair, Eskom applied to the National Energy Regulator of
South Africa (Nersa) last October for approval to increase retail and municipality electricity tariffs, which the regulator duly obliged last December.
South Africans should not be under the illusion that this is a one-off hike.
If Eskom has its way, this is just the beginning of an upward electricity pricing trajectory potentially for the next three years.
After all, Eskom has confirmed that it “is considering a tariff restructuring submission to Nersa for implementation in 2025/26”.
On Wednesday, President Cyril Ramaphosa’s Electricity Czar, Dr Kgosientsho Ramokgopa, the Minister in the Presidency responsible for Electricity, was on a charm offensive hosting an “Outreach Engagement” with business stakeholders in the Eastern Cape, aimed at identifying “areas of collaboration and partnership between the Ministry and businesses to drive innovation and sustainable solutions to minimise the impact of load shedding and facilitate investments and growth in the energy sector”.
The government’s March 2024 Update of its Energy Action Plan (EAP) aimed at ending load shedding and achieving energy security, at first sight oozes megawatts of positive energy, but in the same breath is still mired in the rhetoric of aspiration.
Only two of the 10 key priorities under the EAP over the next six months are directly linked to generating much-needed “additional dispatchable power” in the short term under the Load Shedding Reduction Programme and presumably involving independent power producer (IPP) bidders from the solar wind, gas and battery storage cohorts.
The optimism of the EAP is breathtaking: “These actions will ensure the complete implementation of the Energy Action Plan as set out by President Ramaphosa in July 2022, significantly reducing the severity of load shedding in the short term and ensuring energy security in the long term.”
The EAP’s projections for MWs coming on to the National Grid are 7 145 MW in 2025, peaking at 8 608 MW in 2026 and thereafter on a steady downward trend to 1 370 MW in 2030 – not enough to kick-start a stagnant economy teetering on a stubbornly subdued growth trajectory for the next few years.
A more independent assessment of the state of Eskom came last September from a five-partner consortium led by VGBE – all world leaders in the operation and maintenance of coal fired power plants, which comprise most of Eskom’s power generating mix.
The assessment, which was commissioned by Finance Minister Enoch Godongwana and disclosed to Parliament in his National Budget speech in February, was conducted as part of conditions attached to the Treasury’s R254 billion debt bail out for Eskom.
The assessment is a devastating indictment of a failing state-owned utility on the brink of implosion, institutionally mismanaged, poorly maintained with obsolete technology which costs a fortune to maintain, low staff morale and in urgent need of modernisation, accountability and targeted investment.
But the consortium remains confident that Eskom as a going concern utility is “salvageable” but with a cornucopia of costly and structural caveats including funding needed for its medium-to-long term modernisation and viability, and the risk that critical network infrastructure will not meet the requirements for system stability and supply reliability.
Both Godongwana and the consortium champion the expansion of renewable energy as a core component of the EAP, albeit the future connection of planned renewable energy generation projects to the grid is a major challenge.
The latest data from the International Renewable Energy Agency (Irena’s) Renewable Capacity Statistics 2024 released in March, is disconcertingly revealing in how far back South Africa and the continent lag other continents in their renewable energy strategy and playbook.
While South Africa had the largest renewable energy capacity on the continent of 10 623 MW in 2023, marginally higher than the 10 505 MW in 2022 – compared with Egypt’s 6 709 MW in 2023 – Africa’s total capacity of 62 107 MW generated in 2023 pales into insignificance compared with the global figure of 3 869 705 MW, of which Asia accounted for 1 961 099 MW (of which China alone accounted for 1 453 701 MW), Europe for 786 788 MW, North America for 529 922 MW and South America for 289 173 MW.
The saving grace is that Africa trumped the Middle East’s 35 542 MW, although the amount of investment directed towards renewables in the wake of COP28 in Dubai especially by Saudi Arabia and the UAE suggest that the figures will change dramatically over the next few years as these countries prepare for a future without oil.
Given the advantage of Africa’s favourable renewables weather conditions, solar, wind, wave, bioenergy, solid fuels, together with hydropower including renewable hydropower, there are huge renewables opportunities, but the lost opportunity costs are piling up because of structural gaps, especially lack of investment, fragmented government policy, ideological opposition to greater private sector involvement through IPPs, and widening gaps of the various enabling metrics.
South Africa, according to Irena, generated a capacity of 6 164MW of solar power in 2023, the highest in Africa, but still way behind the 17 077 MW and 11 293 MW for peer economies such as Vietnam and Türkiye.
The renewable energy share of electricity capacity in South Africa of 17% in 2023 – up from 16.8% in 2022 – suggests the uphill task for Ramaphosa’s EAP especially if Pretoria envisages a greater renewables capacity in the energy mix.
In its Tracking COP28 Outcomes brief in March, Irena notes that in many developing countries, renewable project developers face very high capital costs, and cost of finance of up to five times higher than for developed countries, owing to both real and perceived risks including exaggerated perceptions of country risk by rating agencies.
* Parker is an economist and writer based in London
Cape Times