This article was first published on City Press on 19 May 2022
Privileged preoccupation with renewables not a solution to loadshedding
South Africans are knee-deep in rolling blackouts once more, with a new round every few weeks. Eskom’s monopoly is the gift that keeps on giving, and the government continues to drag its feet when pressed to bring this situation to an end. The State’s disconnected precondition is that the future must be “green.” But the solution to loadshedding is potentially simpler than that opulent notion.
There is no law in South Africa that entrenches Eskom as the monopoly provider of electricity. The State achieves this monopoly indirectly, by way of section 8(1) of the Electricity Regulation Act. This section provides:
“No person may, without a licence issued by the [National Energy] Regulator in accordance with the Act, operate any generation, transmission or distribution facility; import or export any electricity; or be involved in trading.”
The next step to monopoly is that only Eskom is licensed and enabled to provide large-scale electricity.
Banish the thought that a consortium of companies could band together and erect a bunch of coal-fired or nuclear power stations. They simply will not be licensed, and if they inconceivably are, the conditions of those licences will be so burdensome that the initiative will probably never get off the ground. Even the activist Competition Commission might step in, brand such a private consortium as “collusion,” and prohibit it, without ever questioning Eskom’s de facto monopoly.
Meagre liberalisations were recently announced that allow private producers to generate electricity from “renewable” sources and sell directly to municipalities. But these companies are already complaining that the Department of Mineral Resources and Energy and the National Energy Regulator are dragging their feet and tying the registration processes up in red tape.
Eskom is therefore assured its monopoly status through a refusal by government to freely licence its competitors, especially when those competitors have optics that the wine-sipping “progressive” classes regard as distasteful.
Indeed, it is a socially disconnected privilege of the highest order for fat cat South African politicians and global “experts” to be dictating to a developing economy like ours, with millions of unemployed and destitute people and families trying to scrape together an existence, that we must comprehensively adopt green energy. All other successful countries were allowed to exploit the real power generators – nuclear, coal, natural gas, and hydroelectric – to pave their way to prosperity and to the ability, now, to roll out renewable alternatives. But South Africa and the developing world are expected to bin coal, to avoid nuclear, and to make their way on the strength of sunlight and wind alone.
South Africans ought to reject this notion with the contempt that it deserves. We will concern ourselves with green energy the moment most South Africans are participating in a powered, prosperous economy – but not a moment before. Of course, if green energy becomes as affordable or cheaper than the real sources of power, that would be splendid, but it is exceedingly unlikely.
If the government wishes to solve the electricity crisis, it must end Eskom’s de facto monopoly by amending the Electricity Regulation Act. As a start, all it needs to do is change one word in section 8(1). Rather than “No person may, without a licence…”, the Act should provide that “Any person may, without a licence…”
It is true that significantly more technical work would be required to make this change a practical reality. But amending this single word would bring about a radical shift in how the Act is interpreted and how it should be applied. The burden would shift from the private power producer to the government to ensure all the Ts are crossed and all the Is are dotted.
This change will not necessarily relate only to providing the national grid with electricity, however. It will allow neighbours to sell electricity to one another, and for commercial undertakings to provide electricity for themselves without having to jump through regulatory hoops.
Farmers and rural business chambers could band together and create power plants that serve their regions, without needing to worry about “environmental inspectors” and other interfering busybodies from government. If the undertaking makes commercial sense, it proceeds. This could result in an entire municipality disconnecting itself from Eskom’s grid, giving the rest of the country much-needed relief.
The South African government has had a century of dominance in the electricity sector. In that time it has, predictably, failed to create a lasting institution that is immune to capture and failure. The myth that Eskom used to be an exemplar of brilliance in the electricity field is comprehensively debunked by economic historian Nicholas Woode-Smith.
Eskom did not provide “cheap electricity” – the government fixed its prices – meaning the entity was at the same time not allowed to charge market prices and not allowed to receive State bailouts. It was only able to sustain itself because South Africa had cheap and abundant coal reserves and, at the time, cheap labour.
In the 1960s and 1970s, Eskom produced too much power, and this was not something to be celebrated. Surpluses are economically wasteful, which is what makes market-based pricing crucial. Today Eskom suffers from the other extreme, a shortage, also in part because market forces are coercively excluded from the sector.
2022 is the 100-year anniversary of the 1922 Electricity Act, which Woode-Smith identifies effectively as the beginning of monopolistic trouble for electricity in South Africa. It signifies a century of the failure of central planning. The ANC’s profound incompetence did not solve the structural weaknesses in South Africa’s electricity sector after 1994, and in fact worsened it catastrophically.
How long will South Africa continue to beat about the bush, as the ability of Eskom to keep the lights on sustainably diminishes by the day? It is suicidal that we are still debating whether nuclear and coal power should be utilisable by the private sector, and whether privatising and demonopolising Eskom is an apt way forward. It simply just needs to happen. Legislative change cannot come soon enough.