/ 22 January 2020

Eskom: South Africa can learn from Australia’s mistakes before it too burns

On average the quality of coal Eskom is buying from the 16 contracted companies is 20.45 gigajoules per kilogram — with an average cost of R409 per tonne.
The coal industry, which is a big polluter in South Africa, is facing major threats with investors pulling out of the country. (Paul Botes/M&G)

South Africa and Australia have a few things in common when it comes to energy policy, in particular an excessive reliance on coal. 

In Australia, Big Coal is bolstered by Rupert Murdoch’s News Corp that has a visceral hatred of environmental politics and controls most of the major newspapers. Australia today is paying the price in massive fires. Astonishingly, the climate change denying politicians are trying to blame the Greens, who have never controlled government at any level, for preventing fuel-reduction burns. This is not only not true but not even Greens policy. I know this because I lived in Australia for nine years and became involved in Green politics, running for state government and city council as well as managing campaigns and working on policy.

So back to South Africa: What are we getting wrong?

Though we nominally support moves against climate change, the government has so far done all it can to protect coal. We have some of the biggest new coal power plants in the world and there are numerous road blocks to significant increases in renewable energy — although President Cyril Ramaphosa is signalling a change in policy.

It is against this backdrop that I question the government’s Eskom restructuring plan, which aims to split the company into three entities: generation, transmission and distribution.

Well, guess what. The research has already been done. Australia up to the 1990s had a state-government-owned electricity system. Then, in the neoliberal spirit of the times, the system was privatised and split not three but four ways: generation, transmission, distribution and retail. One of the consequences is that the power grid ceased to be maintained because there weren’t adequate pressures on the grid operators to do so. The result today: the network is failing and there is overwhelming public support for renationalisation.

Eskom’s problems are many and deep. The most obvious are:

l A failure to diversify away from coal, a sunset technology not only because of climate change but the pollution it causes through the emission of toxic pollutants such as heavy metals;

l A huge crisis in municipal debt. Many are so far behind in paying Eskom that they have no way of recovering;

l Unsustainable payroll. It is estimated that Eskom has as many as 30 000 more employees than it can afford; and

l An inability to manage large generator projects. Not only is Eskom investing in enormous coal plants at the worst possible time to do so, but they have had cost overruns and are not operating reliably;

Which, exactly, of these problems does the proposed restructuring solve?

None of them.

All the proposed restructuring will do is rerun the failed Australian experiment.

One thing Australia has done well is to promote small-scale roooftop solar power. By this I mean electricity generation, not solar hot water. In South Africa, by contrast, many municipalities do not allow households or businesses to feed power into the grid.

One part of the problem is the markup on Eskom charges, a major source of municipal income. Another part of the problem is that local transformers may need modification to accept local power inputs. Both of these problems are fixable; municipalities can charge a grid-connect fee that compensates them from loss of Eskom markup and national government can fund upgrades of transformers as part of an Eskom recovery plan.

Back to the Eskom turnaround plan. I propose a very different restructuring that does actually solve some real problems. Once the obstacles to rooftop solar are removed, Eskom can split off one or more entities to cover the following additions to their existing role: 

l Home solar — either paid up front or repaid through savings in electricity

l RDP solar – government subsdised solar panels on RDP houses to replace the free electricity allowance for the poor; and

l Public institution solar – institutions such as schools and universities install rooftop solar funded by a combination of donations, a government subsidy and investing endowment funds, depending on the institution’s wealth.

Redeploying a substantial fraction of Eskom’s workforce should make it possible to roll out solar on a big enough scale to reduce the chances of load-shedding. It addresses diversifying from coal, the unsustainable payroll and avoids needing large projects to avoid load-shedding.

Although solar power is notoriously intermittent, Eskom has substantial storage capacity in the form of pumped storage: hydro dams that generate electricity by water falling through turbines and store energy by pumping the water back uphill.

We have all the pieces in place for a solution except the political will to stand up to the coal lobby. Australia had the same problem. Do we also want a large part of our country to go up in flames before we get the message?

The Eskom restructuring points of this article first appeared on greenpolicyza.blogspot.com/2019/03/eskom-restructure-or-destructure.html.

Philip Machanick is an associate professor of computer science at Rhodes University