/ 23 March 2018

Green power is still up in the air

Coal heads prevail: Unions agree the move to greener energy is necessary but want this process to keep workers in mind.
Coal heads prevail: Unions agree the move to greener energy is necessary but want this process to keep workers in mind.

New independent green power projects continue to face significant headwinds from parties with competing interests, despite support for renewable energy in government policy.

Eskom has entered into 64 power purchase agreements with independent power producers (IPPs) for 4 000 megawatts (MW) but some parties will next week argue in court that further agreements should not be signed because the power is not needed, is not affordable and will lead to job losses.

Projects already in rounds 3.5, four and five of the Renewable Energy Independent Power Producers Programme have been for waiting for the energy minister’s signature for two years. Then this month, just when it appeared the new minister, Jeff Radebe, would put pen to paper, an urgent court interdict stopped him in his tracks.

Brought by the National Union of Metalworkers of South Africa (Numsa) and the nonprofit organisation Transform RSA (see “Little-known nonprofit is picking up the tab”), they joined a case already initiated by the Coal Transportation Forum (CTF) against Eskom, the energy minister, the South African National Energy Regulator (Nersa) and the IPPs in question.

The matter is set to be heard on Tuesday, March 27.

The CTF was not able to provide comment on the recent developments but in its founding affidavit the organisation said the renewables programme would reduce the demand for coal by up to 10-million tonnes a year in 2021, which would result in mines being shut down and more than one million permanent jobs lost.

It claims no participation process was followed and Eskom is trading recklessly by signing agreements “when they are fully aware they will be downgraded by ratings agencies if they continue to sign IPPs at this current pace and cost”, especially when paired with Nersa’s low tariff increase determinations.

Numsa national treasurer Mphumzi Maqungo said the union decided to join the case when it heard the minister was intending to sign the agreements after the CTF had already started a legal process.

“We realised then there is something wrong. You can’t undermine — this matter was set aside — and abuse your office,” he said. “Even if we lose, we would rather fight for our members than [standy by as] people abuse office and power. We have that obligation toward our members.”

In responding papers, Eskom said the relief sought by CTF was “odd and bad in law”, because it sought to circumvent Eskom’s legislative ambit and belatedly attempted to review decisions made by the national energy minister, without any legal basis.

The renewables lobby also believes the CTF case is weak.

“The coal transporters’ argument provides no substantive reason why the signings should not go ahead,” said Davin Chown, the chairperson of the South African Photovoltaic Industry Association. “Our view is that the basis on which the forum has brought this case seems to have very little in the way of a well-thought-out and well-constructed basis.”

Mark Pickering, the chairperson of the South African Wind and Energy Association (Sawea), which is co-ordinating the legal action on behalf of all the renewable IPPs, said it too did not think the CTF had a case.

But Doug Kuni, an independent energy consultant, said the unions had one point. “When you are in a power surplus situation, why would you buy more power. Let’s assume we get to 2020 [when these renewables come on stream] and the surplus has not been used. You will have to shut down or mothball some coal power stations,” he said.

At this stage, there were plans to start mothballing stations from 2025, he said. “There is still life in those stations. In many cases they spent a fortune to refurbish them to get the extra life out of them.”

Kuni said Eskom continued to suffer from the major mistake of embarking on the Medupi and Kusile power stations, which are both still incurring massive time and cost overruns.

“The problems the renewables are facing is not about what’s legal and what is not. It’s about too many parties working in silos. The department of energy is doing its own thing, Eskom is doing its own thing. So is the department of public enterprises and so is the national treasury,” Kuni said.

Chown said the industry was happy to meet the parties about the procedural issues and resolve them outside of court.

“Under the CTF application, only industry responded. Now the government has recognised an onus for it to respond. It is up to government now to respond to this. The rationale for the delay is that everyone needs to heard out,” he said.

But it’s not certain that this would clear the way for these projects. Trade union federation Cosatu had already lodged a section 77 notice with National Economic Development and Labour Council, in terms of the Labour Relations Act, about the renewable energy programme. This is intended to bring disputing parties together in order to find resolution and to try to prevent any consequent protests.

Cosatu spokesperson Sizwe Pamla said the parties had reached a deadlock in this forum but would try again at the jobs summit announced by President Cyril Ramaphosa, before seeking tostrike. Cosatu recognised the need to transition to a low-carbon economy but, like Numsa, insisted the transition must be just.

Sawea’s chief executive, Brenda Martin, said social and labour plans, required by law, should protect communities where the coal industry dwindled. The renewables industry recognised a need to assist in a just transition, she said.

But Kuni said renewables faced a bigger problem — Eskom. Two years ago, under the leadership of Brian Dames and head of generation Matshela Koko, Eskom stopped issuing budget quotes for these projects against the wishes of the minister and in contravention of its licensing conditions.

Although Kuni criticised Koko (who resigned last month) for his hand in running Eskom “into the ground”, he said the only thing Koko had got right was that the utility could not afford to take on more renewable projects.

The financial effect of signing on the projects would only be felt in 2020 when they came on stream “and the issue really is, will Eskom be out of the woods by then?” Kuni said.

Although the cost of purchasing power from these projects could be passed on to the consumer, Kuni said there were other costs associated with putting more renewable energy into the grid that required stabilisation.

“Somebody has to pay to regulate the grid and that is Eskom. I’m not anti-renewables but the renewables guys don’t want the business of worrying about electricity. Quite simply, Eskom cannot work out how to use this electricity and keep this system and itself cash-positive.”

The only real solution would be if the economy grew and the excess power capacity was used up, Kuni said.

Chown said that, since the delays began, the matter had come a long way, and the industry had even renegotiated contracts to deliver more value at the state’s request. The further delays were not a surprise, he said, but “we are just relieved now there is a final date”.

Little-known nonprofit is picking up the tab

The National Union of Metal Workers of South Africa (Numsa) and a nonprofit organisation, Transform RSA, jointly interdicted the minister of energy from signing off on renewable projects last week.

The costs application brought by the two will be paid for by Transform RSA, but the agenda and the funding of the organisation has been called into question.

Transform RSA registered in 2016 and, according to its social media accounts, is a concerned civil society organisation that tackles critical issues affecting South Africa’s economy.

In January this year, Transform RSA sent a legal letter to the ANC’s national executive committee that served as “an urgent warning” against any plans to remove former president Jacob Zuma from office.

Early last year, Transform RSA also tried to join a court action to prevent the removal of Shaun Abrahams as head of the National Prosecuting Authority.

Numsa denied there was anything untoward in its association with Transform RSA.

“We are not in alliance with Transform RSA. We merely share a common interest on this matter in court and, as you know, when parties with the same interests approach the court for relief, they have to work together,” the union said.

Numsa treasurer Mphumzi Maqungo said the union had always been consistent in its view that Zuma’s administration was in a mess.

But Maqungo also said that just because he had been replaced by Cyril Ramaphosa did not mean the union would keep quiet about issues it believed to be incorrect.

“Today, it’s not honestly about Cyril; it’s about anyone who will do anything that is to the detriment of our members,” he said.

Adil Nchabeleng, the president of Transform RSA and a regular commentator on the former Gupta television channel ANN7, did not respond to requests for comment but in other media interviews he denied he organisation was a Gupta front and said he had never even met the family. — Lisa Steyn