Blackouts: West Pretoria power station. The country has experienced load-shedding for years, largely as a result of plants breaking down. Photo: Gustav Butlex
In 1998, the government published an energy white paper, which said: “Although growth in electricity demand is only projected to exceed generation capacity by 2007, long capacity expansion lead times require strategies to be in place in the mid-term, in order to meet the needs of the growing economy.”
The government instructed Eskom not to start planning to build new capacity because it wanted to invite independent power producers (IPPs) to provide the capital and skills. The IPPs did not materialise because the cost of electricity in South Africa was too low for companies to make a profit.
The rest is history. In a panic, and without the lead times of up to six years that are required to plan for such large projects, Eskom decided to build two of the largest power stations in the world at the same time. There were inadequate skills to manage the two mega projects.
Former Eskom chief executive Jacob Maroga told Power FM: “It had been about 20 years since Eskom had built anything. The internal capacity to manage complex engineering projects was no longer available.”
There was also no funding plan for the Eskom capital expenditure programme, which has since cost about R700-billion. Construction at Medupi and Kusile started in 2007 and 2008, respectively.
As predicted, the power blackouts started in 2007. Fifteen years later, more than three weeks after the start of stage six power blackouts and during the worst ever power crisis, President Cyril Ramaphosa has gone to ground and delayed announcing an emergency plan. By all accounts, the government has gone back to the failed 1998 playbook and again pinned all its hopes on an improbable private sector investment windfall to bring an end to power blackouts.
The private sector, which has a vested interest in the failure of Eskom, has sold the government a fairy tale that a Wild West model of capitalism for renewable IPPs that has no regulations can deliver the energy to close a so-called capacity shortfall.
In a two-page statement, the National Planning Commission (NPC) said the solution to the crisis is to commission 10 000 megawatts (MW) of new generation capacity and 5 000 MW of battery storage. “Solar and wind projects can be built rapidly within two or three years. For this to happen, the declaration of an energy emergency is required to override some of the red tape that is preventing the acceleration of delivery of new capacity.”
The statement aligned with Eskom’s propaganda, which seeks to deflect public attention from its incompetence — the unprecedented plant breakdowns — by always refering to the need to connect 4 000MW to 6 000MW of new capacity to end the power blackouts.
But, as Maroga told eNCA in another interview, Eskom has more than enough capacity. When he left the company in 2009, there was installed capacity of 40 000MW. There is now 46 000MW and 6 000MW of renewable energy, while demand is lower than it was in 2009. The problem is the performance of the current fleet, which is regularly 40% down for various reasons.
“If you want to end load-shedding you must focus on making sure that there is consistent performance of the current fleet. That does not need to take 24 months.” But Eskom’s leadership has shown no interest in addressing the immediate issue.
Since 2010, the Renewable Energy Independent Power Producer Programme has attracted investments of R210-billion over four bid windows. The NPC proposal seeks to connect 10 000MW to the grid in two years — 1.7 times more than the 6 000MW that was achieved in 12 years. It is impossible to go through numerous processes — requests for proposals, auctions, selection of bidders, environmental approvals, financial closure, acquiring land and Eskom making the upgrades to enable connections to the grid — in two years without corruption.
If the impossible does happen, South Africa will only get about 3 000MW of energy after considering capacity factors of intermittent sources of renewable energy. This would be too little, too late to address the energy crisis.
In March last year, the government announced 11 preferred bidders who would invest R45-billion to generate capacity of 2 000MW in terms of an emergency procurement plan. But it has only closed three transactions with a capacity of 150MW.
In October last year, the government announced 25 preferred bidders who would invest R50-billion to generate 2 583MW under bid window 5.
But the bid window has almost collapsed. The IPP office has extended the deadlines to achieve financial closure from end April to the end of July for 14 projects and end September for the remaining 11 projects. A sixth bid window that was supposed to reach financial closure in April 2023 could also be affected.
There have been dramatic changes in the global economy that have affected the viability of all the bids, which were competitive and submitted very low tariffs. Inflation in many advanced countries has reached the highest levels in four decades as a result of a double shock of supply chain issues that emerged last year and the Russian invasion of Ukraine on 24 February.
This has resulted in soaring and volatile input costs. Rising interest rates in most countries have pushed up financing costs.
And advanced economies have their own energy crises to worry about. RMB, a local bank that has provided financing of R15.3-billion to the renewables sector, will not be participating in the sixth bid window, its incoming chief executive, Emrie Brown, told the Financial Mail.
The private sector will always bite the hand that feeds it and demand higher prices and subsidies. The government cannot make the same mistake twice.
Like other countries, it must reclaim control of the energy sector so that it does not have to rely on the costly, slow and complicated processes of rolling out IPPs and the endless blackmail by the private sector, which threatens to collapse the system each time it does not get its way.
The fastest way to end the power crisis is to address the immediate issue of plant breakdowns and make the investments to increase capacity. There is no reason the South African Reserve Bank or the Public Investment Corporation cannot provide the financing on favourable terms.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.
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