Can Radebe flip the light switch?

NEWS ANALYSIS

The energy industry and civil society have welcomed Jeff Radebe’s appointment to the ministry, despite being an “unknown quantity” in the field.

But one thing counting in his favour is that he is not David Mahlobo. The appointment of the erstwhile minister in October — a staunch Jacob Zuma supporter and former boss of state security — sparked fears that he was put there to force through a nuclear procurement deal.

Mahlobo was the last of three ministers in the portfolio in less than a year, which created a great deal of uncertainty.

Other key portfolios have seen replacements, most notably the ministry of finance, where Nhlanhla Nene replaced Malusi Gigaba, and public enterprises, where Pravin Gordhan replaced Lynne Brown. All their predecessors were viewed as “hostile” to the changes taking place in the energy industry, and particularly to renewable energy.

“Now all three have changed and it’s got to be a much better world,” a renewable energy expert who did not want to be named said.

Although the energy department is not one of the largest, it holds sway over critical policy and regulation issues, which cover a range of things, such as determining fuel prices and the future plans for electricity generation, which are set out in the integrated resource plan (IRP).

Radebe will have to work closely with Nene, as the treasury must monitor the financial implications of the country’s energy choices, especially their contingent liabilities for the fiscus, and with Gordhan, who is now in charge of Eskom, the country’s major and financially distressed electricity supplier.

Despite being new to energy, Radebe is the longest-serving Cabinet minister. His career includes a stint as public enterprises minister between 1999 and 2004, which arguably gives him some historical knowledge of Eskom and the electricity market.

One of his first tasks will be the finalisation of the remaining power purchase agreements under the government’s renewable energy independent power producer procurement programme, which stalled after Eskom dragged its feet over signing them.

Brenda Martin, the chief executive of the South African Wind Energy Association, has urged all three ministers to finalise the agreements before the end of March 2018, when key legal documents will expire.

“The need for swift conclusion of the long-delayed PPAs [power purchase agreements] is particularly critical for the many South Africans whose jobs are at risk in a sector which has endured extended uncertainty,” Martin said in a statement.

Radebe will also have to finalise the long-delayed and highly contested updated IRP. The most recent draft, published in 2016, provided two separate scenarios for nuclear power, with procurement taking place sometime in the future.

More recent research by Eskom showed that nuclear would not be required until 2050 in what it termed an optimum plan, or least-cost scenario, according to a report by EE Publishers.

“We don’t know what his [Radebe’s] view on the energy mix is but we have to assume that, unlike his predecessor, he agrees with the NDP [National Development Plan],” said Gavin Davis, the Democratic Alliance’s energy spokesperson.

Davis said he hoped Radebe will also be more amenable to considering credible research done by the likes of Eskom, showing there is no place for nuclear in a least-cost energy mix.

Radebe’s appointment signals a welcome move forwards and an end to the lack of clarity that has plagued the sector, said Davin Chown, the chairperson of the South African Photovoltaic Industry Association.

Although the IRP is still in limbo, based on the consultations held on the document, it is clear what choices have to be made if the government approaches energy planning with transparency and rationality, said Chown. Globally, a transition is taking place to decentralised and renewable power generation and the government needs to find ways to manage it, he said. He hopes Radebe’s depth of government knowledge will ensure sound policies are implemented.

Radebe’s tasks go well beyond the IRP and the renewable energy programme. The key challenges facing him are outlined in a paper recently published by the National Planning Commission.

It calls for nuclear procurement to be “transparently considered based on cost, including the real risk of time and cost overruns, as well as affordability both for electricity consumers and the fiscus”. This must be done within an energy planning and governance framework that is transparent and thorough, the commission said.

“The process of updating and publishing strategic energy plans should be as participatory as possible to promote transparency, quality and comprehensiveness, and to gain trust from all stakeholders,” it said.

The commission also argues for the need to decide on the end state of the electricity sector itself, by, among other things, separating Eskom’s “operations, planning, power procurement, purchasing and contracting functions into an independent institution entirely”.

It recommends a shift away from investments in massive energy projects, such as Eskom’s Medupi and Kusile power stations, to smaller, modular projects.

The commission also highlights the need to reconsider the opportunities presented by natural gas, as a transitional fuel to a low-carbon economy.

It highlights the need to deal with the liquid fuels sector, including the upgrading of existing fuel refineries and a final decision on the need for new refinery capacity, as well as the management of strategic fuel stocks.

But Radebe’s work in this respect will be complicated by the state of some of the key entities reporting to his department. He has to deal with the unresolved investigation into the 2015 fire sale of the country’s strategic fuel supplies, approved by former minister Tina Joemat-Pettersson, but done without going to tender or getting the necessary approval from the treasury.

Radebe must tackle the precarious future of state oil firm PetroSA, which is housed in the Central Energy Fund. The auditor general has questioned whether it is a going concern.

“These are big decisions for the country and they have got to be taken with an appropriate amount of consideration and stakeholder engagement,” the industry expert said.

The energy sector needs a champion who can bring role players together to decide on what must be done, to bring in investment in a way that delivers on the social and economic development outcomes the country wants, he added.

With the appointment of Radebe, Nene and Gordhan, “this is the moment, finally, when it is possible to have that conversation”.