Citadel hosted an enlightening webinar around the future of Eskom and ways to overcome South Africa’s ever-growing energy crisis.
“There’s an important future role for Eskom but it’s completely different to what it is now.” Said Chris Yelland, Managing Director at EE Business Intelligence, a company which focuses on strategic issues facing South Africa’s electricity, energy, and information and communication technology (ICT) sectors. He was speaking at a 3 February webinar addressing the energy crisis as part of the #CitadelHotTopics series.
Hosted by developmental economist and radio presenter Ayabonga Cawe, the webinar featured three expert panelists, Yelland, political and economic analyst, Bronwyn Nortje, and Teri Kruger, founding Director of Synergetics Sustainable Solutions. The discussion shed light on the extent of Eskom’s problems, and looked at possible solutions including renewable energy and self-generation.
THE EXTENT OF THE CRISIS
Facing a crisis that’s been over a decade in the making, Eskom’s woes have severely damaged the economy. Besieged by years of corruption, mismanagement and maladministration, the parastatal is undeniably in trouble. So just how bad is it?
“We find ourselves in a situation where we have a utility electricity supplier,” said Yelland, “We have a monopoly that’s basically unsustainable on every level.” Not only is Eskom structurally unsustainable, not having sufficiently evolved in its hundred-year history, explained Yelland, it’s also financially unsustainable. The parastatal has repeatedly had to borrow money to pay off its R450 billion debt, creating a kind of debt spiral. Load shedding proves that it’s operationally unsustainable too.
And considering the fact that Eskom’s electricity supply comes mainly from coal-powered power stations, which are poorly maintained and non-compliant with South African law, Eskom is also environmentally unsustainable. “The new economy will be based on green hydrogen and ammonia,” noted Yelland. “Old coal is a declining resource that will be decommissioned as new things take hold,” he added.
A VICIOUS CYCLE
Eskom’s woes are not simply about power supply. The Eskom crisis is contributing to a downward spiral of South Africa’s economy. Nortje discussed the industrial, social and economic ramifications of not being able to keep the lights on. She quoted a Council for Scientific and Industrial Research (CSIR) study, which estimated that the total economic impact of load shedding could be as high as R338 billion over the last ten years.
It’s a vicious cycle, she said. “If the economy isn’t running, Eskom isn’t going to earn enough tariffs to settle its debt and be a viable energy utility,” she said. “Business owners know the direct economic impact of load shedding, of hours lost revenue and productivity but this also impacts the person on street as it translates into higher costs.”
Adding to this, Nortje explained that in recent budgets for the Department of Mineral Resources and Energy, Eskom has cut electrification to 32 000 rural homes in the past year. This Nortje noted, means that the impact of the electricity crisis can be seen throughout the economy.
RENEWABLE ENERGY OPTIONS
This crisis though, could be just the catalyst the country needs to find more sustainable solutions to its electricity supply. Kruger, the webinar’s third panelist, discussed the role of renewable energy in addressing the energy crisis. Available in South Africa for over ten years now in the form of wind and solar power, renewable energy use is a reality for individuals, as well as industrial and commercial businesses. What’s more, it’s becoming steadily cheaper, with the cost of solar having come down by 73%.
“Many shopping centres and property developers have covered their roofs with solar systems and added battery storage so when the sun doesn’t shine or wind doesn’t blow, we can still keep our lights on,” she explained. “There is also a huge value chain that comes with renewable energy, in terms of job skilling, new job opportunities, and in keeping your lights on and maintaining your credibility with customers.”
Change, however, requires political will.
THE WAY FORWARD
Yelland suggested that Eskom look to create a different future. He proposed a structure inspired by the Chinese electricity industry. “We cannot just continue to protect something that is not working properly,” he said. “I believe that the future structure of the electricity supply industry is an unbundling of Eskom generation from the current monopoly environment to a competitive and diverse generation sector.”
If this does happen, the former Eskom would be unrecognisable, morphing from being primarily a generation company to becoming the monopoly state-owned independent grid company. “They should become the transmission company that facilitates trading through an electricity market, and bilateral contracts between generators and customers of electricity,” he said. “They’d also facilitate wheeling (transportation of electricity) across its grid and charge a fee for use of its grid between creditworthy customers and generators of electricity in this competitive generation environment.” Eskom would downsize in this scenario by selling off its generation assets, ridding itself of its debt.
While Nortje had slightly different ideas, she too argued for a blended system where Eskom still plays a role. “It’s in no one’s best interests for Eskom to go under because if it does, it takes the rest of the country with it,” she said. “We need to look at a regulatory overhaul from the top and bring in the private sector. We also need the Departments of Public Enterprises and of Mineral Resources and Energy to work together to facilitate this transition.