A good plan, but still too Eskom heavy

Nigeria is famous as a country with abundant oil, but no fuel. Now add South Africa as a country rich in coal, but poor in power.

So bad has the energy crisis become that Eskom has been running with a quarter of its capacity out of service. Effectively, one of every four power plants is standing idle.

If one cylinder in a four-cylinder car fails, the driver pulls over and seeks help. That’s what Eskom did last week. It cut power to the mines and other major electricity users, in essence shutting down the engine of the economy.

Bringing the entire mining industry to a standstill by starving it of power is believed to be unprecedented in South Africa. Chamber of Mines CEO Mzolisi Diliza estimates the total cost to the economy at R1,8-billion a day for the duration of the shutdown.

Eskom’s entire network was imperilled because capacity was critically low relative to demand. In the first four days of last week it planned to hold back 3 600MW of 39 000MW while it carried out maintenance in readiness for winter.

But each day unplanned outages of between 4 800MW and 5 600MW swelled the shortfall, bringing the total unavailable capacity on Wednesday to just under 10 000MW. Demand last Wednesday was 33 000MW, available capacity just 29 000. This does not augur well for winter, when demand is likely to top 38 000MW. We have a mountain to climb.

But there is one upside: South Africa has a new energy policy with a generally more rational approach to electricity provision. It is detailed in a 19-page document, ‘National response to South Africa’s electricity shortage”, released on Tuesday this week.

The new policy is frank on a key point. Prices are about half of what they should be, considered against the replacement value of a plant. Electricity prices elsewhere in the world have been moving up as new plants are being built, but not here.

The regulator’s current approved tariff of 22c/kWh is well below the long-term average cost, says the policy document. ‘Electricity prices will need to move in the direction of the long-term cost to be cost-reflective. In order not to adversely affect poor households, the tariff will have to be pro-poor and discourage wasteful consumption,” it says.

It wants urgently to establish a reserve margin of 3 000MW, deemed necessary to give Eskom sufficient ‘breathing space”.

New capacity, in the form of de-mothballed stations, two open-gas turbines and co-generation with business, will add 2 400MW to total capacity by end-2009.

Government has been jolted into energy-efficient mode. It wants to save 750MW by banning incandescent light bulbs and 650MW by encouraging the switch to solar water geysers.

It also sees big savings from smart meters using wireless technologies which allow both electricity suppliers and users to interact remotely with meters. Domestic users could switch on their geysers by phone before going home.

The new energy master plan argues that potential reductions of 3 200MW can result from using smart meters — 2 100 from geysers, 240 from washing machines, 120 from pool pumps and 730 from other appliances.

South Africans will also be encouraged to switch to LPG for cooking, saving 500MW.

A key aspect of the plan will be rationing with price disincentives, quotas and the threat of cut-offs for serial offenders. High electricity users should not expect the mere 14% increase agreed by the regulator, but something closer to 30%.

By seeking to price electricity correctly and deter or outlaw energy inefficiency, the plan represents a break with the past.

But it still falls short. Even though it carries the government’s stamp on it, it appears to be the work of the utility. Renewable energy is mentioned in just one paragraph, with Eskom still enshrined as the country’s monopoly supplier — even though there is now overwhelming evidence that it is not up to the job.

Truly smart meters allow users to sell energy to the grid, through net metering coupled with guaranteed feed-in tariffs or similar mechanisms. Environmentalists and energy specialists had hoped these would be implemented this year, following the trend of 60 other countries, in a move to promote diversity of energy sources.

Eskom is even said to be seeking a monopoly over the provision of renewable energy. Significantly, the energy plan calls for just 500MW in co-generation by the end of next year — while proposals from interested parties have already topped 5 000MW.

German households already supply the equivalent of Koeberg’s output into their grid using solar PV. How many South Africans would do the same if freed from Eskom’s dead hand?

The document is also silent on the need for cheaper off-peak tariffs. Industry pays half for night-time electricity.

How many households would turn appliances on after 8pm if a cheaper tariff kicked in at that time? How many would charge up batteries at night to prepare for tomorrow’s ‘load shedding” if a cheaper rate applied?

A reading of this plan, though, suggests that Eskom, and its partner, the department of minerals and energy, would prefer to use smart meters to switch appliances on for consumers. That is how it has always been. Eskom provides.

It would be some compensation if the regulator were up to the task, which has just fought a foolish battle to hold Eskom’s price increases to just 14%, when it should have been obvious that flexible tariffs are needed to spur energy efficiency, not the one-size-fits-all approach of yesteryear.

There were hopes that the regulator would manage feed-in tariffs to begin freeing up energy options. But it apparently favours the status quo, meaning that Eskom will continue to play Great Provider.

The solution is to put alternative energy provision under the Central Energy Fund (CEF), which has built expertise and embraced new ways of thinking, including renewables and promoting energy efficiency.

Prices should not be set at Eskom’s avoided cost or according to some other quaint notion. The little green energy available in South Africa sells at a premium of up to 40%. The CEF could determine fair prices based on a basket of countries and buy power for the grid based on best practice elsewhere.

In short order, South Africa could have a dynamic new sector which creates jobs and develops technology and expertise. The only real limitation would be people’s creativity.

Best of all, this would free up Eskom to take on major challenges such as keeping its coal dry.

Alec in Wonderland

Public Enterprises Minister Alec Erwin has the reputation, even among his government colleagues, of being a head-in-the-clouds, grand-scheme junkie who makes only glancing contact with the real world.

Erwin himself fessed up to his past delusions at a media conference last week, called after power cuts had shut down the mining industry.

Apologising for ‘wrong timing” in the power station construction programme, he confided: ‘The government’s relative success in managing power outages last winter may have lulled us into a false sense of comfort.”

The latest blackouts are not the first to jolt him back to reality. In March last year he told a University of Pretoria function:’All of us have recently experienced the almost soul-searing shock that Eskom is not absolutely infallible.”

The following is a random selection of statements over the past four years, beamed down from planet Erwin:

• ‘You cannot find as reliable and as long-term an electricity contract in the world today as Eskom can give you.” (February 2006, in an interview with the Mail &Guardian)
• ‘I am confident that South Africa as a whole will not be plunged into darkness.” (January 2007, in a statement to Reuters)
• ‘One of South Africa’s economic and industrial strengths is the quantity and efficiency of its electricity supplies.” (August 2005, speaking at a PBMR suppliers’ conference)
• ‘Although timelines in respect of implementation of the [Eskom] build programmes are tight, we are satisfied with the progress to date.” (Budget speech, May 2007)
• ‘What no one predicted a few years ago was that we would be caught napping by our own economic success. Fortunately we are well placed to respond to this lapse.” (March 2006, opinion article for Bua News Online)
• ‘Pressure on energy systems is a reality at present and we have the resources to change this. We are doing this, but with the care and professionalism needed.” (March 2006, after the Koeberg power station shutdown)
• ‘We are at the leading edge of the [pebble bed modular reactor] technology … we would have been just plain foolish not to do it.” (February 2006, asked by the M&G why he was splashing out on the PBMR instead of short-term power needs)
• ‘To have a well-functioning [power system] is a hell of an important asset. There is a tremendous lay person misunderstanding of the sophistication of this economy.” (July 2005, in an interview with the M&G)
• ‘There is no national energy crisis … the reserve margin is lower than we would like, but this situation is not uncommon in the world today.” (March 2006 in Parliament, after power cuts in the Western Cape).

— Drew Forrest