What Gordhan’s condemnation of Stage 6 load shedding tells us

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JIMMY MOYAHA: Public Enterprises Minister Pravin Gordhan has come out to condemn Stage 6 load shedding, saying that Eskom needs to remove Stage 6 immediately and also conversations around possible sabotage as to why this is taking longer than necessary.

I’m joined on the line at the moment by Roger Lilley and Chris Yelland, both gentlemen independent energy analysts, to a look at this Stage 6 load-shedding situation, and determine whether or not this can constitute an energy crisis.

Good evening, gentlemen. Thank you very much to both of you for your time. I think the obvious question before we kick off the conversation is: Is this a crisis or do we have to wait for further load-shedding stages? At what point do we call what we’re experiencing a crisis as a country?

CHRIS YELLAND: Well, my view is that this is certainly a crisis and has been so for a long time. And it’s evident from the fact that the president has set up a so-called National Electricity Crisis Committee to deal with this crisis. So I don’t think there’s any argument; we are in the middle of a crisis.

JIMMY MOYAHA: Chris, from your perspective we know that President Ramaphosa established the National Electricity Crisis Committee. Can you shed some light on what that committee was established for? Is this not the time for them to intervene? Do we have to wait for a bit more before we can refer to them? There was obviously the statement from their side to say that they’re meeting on a weekly basis – but what are those meetings translating to?

CHRIS YELLAND: Remember, the National Electricity Crisis Committee was established by President Ramaphosa in order to implement the president’s plan.

The president consulted widely and developed the plan. In my view, personally, the plan is way too complex.

It follows the typical president’s approach. In other words, consult very widely, and then try to appease each and every stakeholder in a very complex plan. I think it’s unnecessarily complex.

But nevertheless the crisis committee has been set up and a number of working streams or work groups have been established. They are busy apparently working on this.

One of the problems is that all the participants in the National Electricity Crisis Committee and its work streams have had to sign a secrecy agreement.

Now, I don’t really have a problem with that, because you can’t have every Tom, Dick and Harry on the committee and work streams talking to the media all the time.

But if you’re going to do that, then you need to establish at least a central [point of contact] or a spokesperson or somebody who can keep on communicating to the public, because if you have a secrecy agreement with everybody, the reality is there is communication coming out of it, really, as to what they’re doing and what they’re achieving, and what the results are.

And so we actually don’t know. I have a fear that this is evolving into what we have had before twice, where war rooms have been established which in the end have achieved very little other than being a talk shop. But I hope I’m wrong. I hope there is real good work being done.

I believe there is real work being done but, as usual, it’s being stopped at the level of the DMRE [Department of Mineral Resources and Energy] and Nersa.

And really, it’s interesting to see whether the president has enough will to impose on these two organisations to make them get things done and unblock these blockages.

JIMMY MOYAHA: We’ll come back to that ‘will’ conversation just now, Chris. I just want Roger [Lilley] to give us some context as to some developments that we saw as well. We saw that the City of Cape Town and the City of Tshwane both established or activated their disaster-management operation centres as a result of Stage 6. Now, these two cities are big metros in the country. They’re considering this a disaster-level event, or preparing for it to be a disaster-level event. Should we not be bracing ourselves as consumers or as citizens of the country, given that two of our biggest cities or two of our biggest metros have activated their operation centres for this. Is there something that they know that we don’t know?

ROGER LILLEY: Good evening. Thank you. You’re right. We should be far more concerned than we are.

We seem to accept Eskom’s comments about the various reasons for load shedding, but this has been going on for 15 years now.

So if it was a crisis, it’s been a crisis in the making for many, many years, and frankly the South African government and the officials therein have sat on their hands and allowed this to happen.

I was most amazed when I read what Minister Gordhan had to say in terms of his outburst of outrage with load shedding Stage 6, because he acts as though this is something unexpected, this is something that caught him by surprise, when in fact this is on the cards.

We know very well this is going to happen. So a crisis, indeed it is a crisis. It has caused immeasurable damage to the economy. It has cost so many people their jobs, it has destroyed foreign investment opportunities and so on and so forth. This is certainly a crisis.

JIMMY MOYAHA: I like that you mentioned the foreign investment opportunities and the erosion to the economy, Roger. From Eskom’s perspective, or rather from a country’s perspective, what should we do? Are we to place Eskom under independent management, are we to blame the management, are we to blame the government? You mentioned something quite important, saying that Pravin Gordhan as the minister of public enterprises came out and was shocked by something that has been plaguing the country for 14-odd years, if not longer – since probably about 2008 or so. Is the government still allowed to be shocked at this stage, or should they be doing more to intervene at a national level?

ROGER LILLEY: Well, I think the answer to that is fairly clear, and I’m sure everybody listening to this would be able to give you the same answer.

Of course the government needs to do more. The government is solely responsible by its own choice.

Having set up a monopoly for the generation of electricity, it is therefore solely responsible to make sure we have that electricity, both affordable electricity and reliable electricity, and neither are true.

There is no one else to blame. There is no one else to blame.

What’s really interesting is that the only way we’re going to get out of this situation is by taking it out of the government’s hands and putting it in the private sector’s hands, because the moment we get the private sector involved, we suddenly find out that all the shenanigans that go on don’t go on in private-sector involvement. We don’t have the same levels of corruption and criminality and so on and so forth.

So really this is the only way forward for me. And a typical example, if I may just divert slightly, is this. Yesterday I was in the car and I was listening to the radio, and I heard the minister of health being quoted as saying that he acknowledges the fact that the South African state does not have enough ambulances. But, never mind, he told parliament – I’ve made an arrangement with Netcare 911 and they will help us out.

So there you are. Immediately, the moment there’s a problem, call in the private sector and, guess what? The problem goes away. Why can’t we do that with the energy sector?

We’ve been crying about this for, what, five years now, six years now, and nothing’s happening.

JIMMY MOYAHA: Now Chris – Roger makes a very important point there to say that this is a problem that the government has created, and it’s for them to then fix.

As another example, we saw in 2020 that we went into a national lockdown and suddenly our government’s ministers had the powers to impose alcohol bans and that sort of thing in times of a crisis, and in times of an emergency.

Surely this emergency situation should warrant that the powers that be have the authority to make it easier for independent power producers to lift all the red tape and to address the issue?

CHRIS YELLAND: Yes, I agree exactly with that. I think the time has come that leadership in this country needs to start making certain proclamations.

I’ll give an example – wheeling tariffs. Municipalities have been talking about municipal wheeling for the last 10 years. To date we do not have a municipal wheeling framework, and wheeling tariffs do not exist in any of the municipalities. This is really holding things up.

Likewise, feed-in tariffs, tariffs for which customers will get paid for excess surplus renewable energy generated by solar PV battery systems generated back into the municipal grids. Only one municipality, or shall I say one or two, have municipal feed-in tariffs.

This is a prime example where I think leadership needs to step in and, by proclamation, proclaim at least for a period of, say, two years, a national wheeling framework and a national feed-in tariff so that we can get immediate incentives for small-scale embedded generation and battery storage, and there will be incentives to do this.

The same thing applies, for example, to tax breaks at the domestic level. There are tax breaks at the commercial level for businesses. But the same incentives, tax incentives, could be applied for private individuals in which essentially the cost of a solar PV battery system can be expensed and deducted from one’s taxable income.

This gives a significant tax reduction and incentive that makes the business case much stronger, and would result in an immediate uptake massively of solar rooftop PV and battery storage around the country.

This can be done by proclamation in the same way as the Covid emergency. There were rules proclaimed almost overnight. This is the kind of approach that should be taken in an emergency, and we’re not seeing this kind of action at all.

JIMMY MOYAHA: Yes, we need to see firmer movement and more concrete movement from all stakeholders involved. In the event that Eskom is not privatised or the government refuses to revisit the privatisation conversation – because that’s been a theme in the past where it’s been brought to the government’s attention to, say, semi-privatise, privatise entirely – and the government has said that that is not an option.

Should we then be looking at municipalities generating their own energy? I ask this only because, if you look at the City of Cape Town as an example, while the rest of the country is on Stage 6, there was a point where the City of Cape Town was on Stage 5 because they had alternative energy coming through by way of a hydro pump. So should we then say to all municipalities that can self-govern or that can govern better, they should be allowed to procure their own electricity outside of Eskom?

CHRIS YELLAND: Yes, that should be the case. And in fact now it is the case. At first we want to just say that I don’t think privatising Eskom is the issue or not the issue.

I think Eskom is always going to be a major player, but it obviously currently cannot meet its obligations. And it has a burden that we need to assist Eskom with.

And when I say ‘we’, I’m talking about customers of electricity, because the more customers [that] put in self-generation, better generation, distributed generation, wheeling the power to the grid, the more we relieve Eskom of a burden which it currently is unable to meet.

So these things should be encouraged. They should be allowed, and they should be incentivised.

The same applies to municipalities. Municipalities are customers of electricity from Eskom, and there’s no reason why they shouldn’t [be], and in fact they are, looking at procuring power from alternative sources other than Eskom, from independent power producers.

That doesn’t mean to say that the city is going to declare independence, or the province is going to declare independence and go off the grid. Not by any means.

It means they are supplementing the energy needs with alternative energy supplies that are greener, cleaner, and in fact at a lower cost. This controls the cost. It does what municipalities are supposed to do, which is to try and look after and serve the best interests of their customers within the municipal group to get them the least-cost, most reliable and most available electricity.

So they should be doing it. They are doing it. There are customers of electricity for example in Cape Town that are generating into the grid and getting paid for it. Cape Town is also looking at procuring electricity from independent power producers into the group to supplement their energy needs, and diversify from, at the moment, exclusive electricity coming from Eskom.

And so I foresee in the future the place that Eskom has – but alongside Eskom, a number of alternative or independent power producers competing on cost, on service, on availability, on cleanness to supplement energy needs, so move away from a monopoly system to a multi-market system.

JIMMY MOYAHA: Roger, one final question. I’ll give this one to you. Are we at risk of a grid collapse and, if so, what happens if the grid collapses? Are we prepared for it as a country? Are businesses prepared for it? And is it a reality we might have to confront?

ROGER LILLEY: Well, it is a reality that we might have to confront. But I can tell you that the last thing that Eskom wants is a grid collapse because it’ll take something like two weeks to get out of it again, to get power back up. And even when it comes up, it’ll come up very slowly and it’ll take a long time before we are even back to Stage 6. It will be far worse than that.

So we really don’t want that.

Load shedding is designed specifically to prevent a collapse. That’s exactly why it’s implied. So you really have a situation where the load has to be balanced with the generating capacity.

Now, Eskom has for many years been calling out for more and more generating capacity to give it breathing space so that it can take some of its older power stations down, either mothball them or pack them up or repair them, whatever has to be done in each case. But this cannot be done unless we get additional power, and we need to get that additional power quickly.

Now we thought things were moving forward nicely earlier in the year when the president announced that we would be able to have embedded generation up to a hundred megawatts without a licence, and we really did expect an uptake of that. I’m not sure what the delay has been there because that really is going to make the difference when we start to get more generating capacity online.

And, as Chris has explained, even if it’s for their own use, if a business invests in its own generation for its own use if for no other use, at least it removes part of the load from Eskom and helps Eskom and gives it the breathing space it needs, albeit from a different perspective.

JIMMY MOYAHA: Yes. And for some businesses that might be a cost that they are willing to incur, because the benefit far outweighs what they’re going through at the moment.

But I guess we’ll have to wait and see what Eskom does or what they say to us, and what the national government does in terms of interventions.

But gentlemen, thanks very much for your time. That was Roger Lilley and Chris Yelland, both independent energy analysts, chatting to us about the current energy crisis that we find ourselves in.

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