Eskom must lead the energy shift

At the time of a cold winter and the Covid-19 pandemic, loadshedding has started. To suggest that Eskom can, and must, play a role in shaping the country’s energy future as it moves away from coal sounds ludicrous, but this is exactly what the situation demands — and what a report, Eskom Transformed: Achieving a Just Energy Transition for South Africa, argues. 

The contents of the report, to be released later this month, reflect the work of three research organisations — the Alternative Information and Development Centre in Cape Town, Trade Unions for Energy Democracy in New York and the Transnational Institute in Amsterdam. They have worked closely with some of the trade unions organising workers at Eskom — the National Union of Mineworkers and the National Union of Metalworkers of South Africa. 

The work on the report was primarily carried out before Covid-19 hit the world, but rather than making the research outdated, the pandemic has served to emphasise how important the public sector approach is, not just to health, but to all services that are vital to ensuring a decent life for all. 

When health services are privatised and governments cut funding to public health, the result is an ill-equipped public health sector, alongside a private health sector that is built to serve a few and does to meet the needs of the majority who cannot afford to pay. 

In the report we have argued that a market-driven transition to renewable energy will not only fail to deliver sufficient and affordable electricity to those most in need — the poor and working class — but will also hold back the transition to renewable energy from happening at the speed and scale needed to meet sufficiently ambitious greenhouse gas emission reduction targets.

The pandemic has been a major disruptive force and moves along existing divisions, inequalities and injustices, both emphasising and deepening them. We need fundamental shifts that will never again leave our society so vulnerable to devastating crises. 

Climate change is one such crisis. A strong, effective Eskom is an important bulwark to deal with it. We recognise the many-faceted crises of Eskom. The power utility needs to be transformed but not through unbundling into the separate entities of generation, transmission and distribution that can be privatised. We want a just transition that is not just about greening market relations and profit-making; it must be about creating a society where the needs of all are met, workers are treated decently and the natural environment is respected.

This article, the first of several on Eskom transformed, provides a broad overview, with the others developing the arguments in more detail. 

The first key area of our argument is the effect that corporatisation has had on Eskom. This process started in 1987, culminating in the Eskom Conversion Act of 2001. Eskom shifted from being a world-class public utility to essentially a private company, required to make a profit and pay dividends and taxes. 

It is this process that has opened the door to many of the subsequent problems that beset it, such as its overwhelming debt, mismanagement and corruption. We are not saying, in a simplistic way, that corporatisation explains all these problems, but rather that corporatisation created the conditions for these problems to flourish.

The second area relates to the need to move away from coal to renewable energy to cut South Africa’s carbon emissions. Our argument is that this transition is not happening, and will not happen fast enough, or with enough ambition, unless it is done through the public sector. The profit motive will not allow it. 

A popular argument is that, as the price of renewable energy drops, the transition is inevitable, with government the only hindrance to this process. But, because of the “three fall” effect we argue that this is not the case. This refers to the slow-down in investments in renewables as a response to diminishing returns. Returns diminish as competition increases, which requires firms to lower their prices.

At the same time, it is public money that has made the renewable energy industry as profitable as it is. Public money has funded the research into technologies, and subsidised the generation of renewable energy through the power purchase agreements that give private companies guaranteed payments for the electricity they generate.

The third area of our argument is that it is only a strong public sector driving renewable energy that can ensure a coherent, national and planned transition that adequately addresses a) the technical issues of systematically shifting to 100% renewables ensures fair mechanisms for the transition and b) protects workers and people most affected by the transition. It is also only the public sector that can drive a transition to renewable energy while also decarbonising the entire economy, including transport, manufacturing, and construction.

This report is a call to action. We have identified a number of specific actions that can move the energy transition forward.

• Conduct a forensic audit of Eskom’s debt. Some of that debt is odious and must be declared so and repudiated. The remaining debt must be restructured in such a way that billions of rands are not used from the fiscus to bail out Eskom, but rather that surpluses in government funds — such as the Government Employees Pension Fund — are used, subject to the power utility’s transformation along lines of democratic accountability and the transition to renewable energy.

• Halt any plans to unbundle Eskom. The government has chosen to adopt a process of unbundling and deepening corporatisation, rather than explore viable public options. Unbundling will cause job losses and drive electricity as a profit-making enterprise rather than an essential public service.

• Build global cooperation — rather than competition — regarding the use of renewable energy technologies in the interests of stopping runaway climate change and harm to people’s health. This will mean loosening the stranglehold of international trade law, with its intellectual property restrictions, and allowing for greater use of the technology. 

• Focus on strengthening the competencies, skills and technologies of Eskom employees to allow the power utility to shift to renewable energy generation.

• Develop a planned approach to the shift to a low-carbon economy. A transformed Eskom must lead the way to a decarbonised economy. The planning process must also take into account an honest appraisal of the technical difficulties, such as storage, that will be faced in the shift to renewables, and develop strategies to deal with these.

• Use public financing to build a public system, not subsidise a for-profit system. There are many possibilities to explore in looking for public finance options. But it involves, first and foremost, rejecting the full cost recovery model (so loved by neoliberal policymakers) and the hybrid model. 

• Build a future Eskom according to key public ethos principles. These include ensuring affordable electricity for all; environmental sustainability; subjecting all decision-making and operational running decisions to public ethos criteria; expanding participation in Eskom decision-making processes and ensuring transparency and accountability in the running of Eskom.

At a meeting of the public enterprises parliamentary committee in early June this year, Eskom announced that it was extending the timetable for starting the process of unbundling. This is the perfect opportunity to investigate more thoroughly the role that Eskom could play, in partnership with local government and local organisations, in the transition towards a low carbon economy.

What we are calling for is not an easy solution. Rather than breaking down and dividing up Eskom, we want a thorough restructuring along different principles. Rather than competition, with financial profit the ultimate goal, we need to focus on meeting public needs through accountable and transparent structures and operational decisions. To achieve this we need public funding. This is not an easy route, but it is the route that we need to follow to move us closer to a more equitable and just South Africa.

Sandra van Niekerk works for the Alternative Information and Development Centre