POWER October 2016 - 55

GENERATION TRANSITIONS
5. Late. This image of the Ingula pumped hydro storage plant, the latest dated one on Eskom's
site as of August, is dated December 2010 and is identified as the " outlet channel. "
Eskom disputes multiple sources that claim the project is behind schedule and over budget.
Courtesy: Eskom
private sector. This meant that 'the consumer
pays only for the power that's been delivered,
avoiding having to pay any subsidy for capital
spent,' said Bischof-Niemz. "
Financial Mail columnist Peter Bruce is
the most dogged Eskom critic, often verging
into personal attacks on the leadership of the
company. Bruce recently argued that " Eskom
puts SA economy in danger " by its focus on
coal and nuclear generation. " Eskom, whoever
runs it, is a vital cog in our economy but
it is just madness to allow it to crowd out the
private sector like this, " he wrote. " Renewable
energy provides much cheaper power
than Eskom can with its current fleet. "
Writing in Business Daily, economist Rob
Jeffrey argued the case for Eskom's resource
strategy. " The discussion about energy and
electricity is one of the most important debates
in SA, " he wrote. " Urgently tackling inequality,
unemployment and poverty cannot
be achieved by the redistribution of wealth
alone. It can only be achieved by raising the
economic growth rate-which is dependent
on having the correct public policies in place
and having an adequate and growing supply
of affordable electricity. "
Molefe's push for coal and nuclear, said
Jeffrey, makes sense. Molefe " accurately described
the fallacy and weakness of the primary
renewables, wind and solar. These supply
power when it is not needed and do not supply
power when it is needed. As a result, they
are expensive forms of energy production, yet
the supply must be bought in terms of the purchase
agreements at set prices.
" Germany sells unwanted electricity at
a loss to other countries and purchases the
October 2016 | POWER
required supply from them at a premium.
These prices are in effect financial subsidies
for wind and solar. Germany has other major
electricity-generating countries nearby. It can
tap into electricity provided by nuclear power
plants in France, coal-generated electricity in
Poland or hydro-electricity from Scandinavia;
SA is not in that enviable position. "
POWER reached out to Eskom for executive
comment for this story four times but did
not receive a response.
Competitive Pressures
The future direction for power generation in
South Africa is entangled in issues that intertwine
technology choices, competition, and
competence. In an August 8 opinion piece on
South African online news site IOL, Richard
Halsey, identified as a member of Project
90's policy and research team, which advocates
for a low-carbon society, noted that
Eskom itself has publicly delivered mixed
messages about renewables. The company's
chair, Dr. Baldwin Ngubane, has said, " South
Africa's energy mix is expected to shift considerably
towards renewables over the next
two decades. " CEO Molefe appeared to
contradict that position by saying renewable
power " just raises Eskom's costs. "
Then, shortly after Eskom announced it
would stop signing new contracts with IPPs,
Koko said, " Eskom embraces renewable energy, "
and added that " renewable energy projects
are not a threat to the Eskom business
case, they complement what Eskom is already
doing. " Halsey concluded, " Evidently Molefe
and Koko don't have the same spin doctor. "
Koko acknowledged that South Africa rewww.powermag.com
quires
a cleaner baseload solution than coal,
given its COP21 commitments, but whereas
he sees nuclear as the answer, Halsey and others
see renewables plus gas as a better option.
As for the IPP view, that was recently presented
in an August 24 City Press editorial by
Sisa Njikelana, chairman of the South African
Independent Power Producers' Association,
which represents electricity producers regardless
of technology. Though he expressed
concern about Eskom's decision in July that
" it would suspend the signing of any new
contracts with IPPs until it had consulted the
department of energy-because it was concerned
about being forced to buy energy from
IPPs at prices it did not negotiate and that these
prices would constrain its revenue stream, "
Njikelana also cautioned against creating " unnecessary
tension. " Delays and changes in
the power market affect not just IPPs but the
country's overall recovery, he argued.
To be fair, it appears that Eskom is not
the only player in the energy arena missing
deadlines. Njikelana also commented on the
government's " persistent silence about the
review of the Integrated Resource Plan [IRP],
a long-term energy plan for the economy that
projects demand and analysis costs of competing
technologies, " Though the IRP is to
be revised every two years, he said, " the last
update was conducted in 2010. "
Stand Still and Risk Getting Run
Over
Whether the focus is adequate supply, reliable
supply, or cleaner supply to meet domestic
and COP21 low-carbon goals, the evidence
suggests that Eskom's " generation transition "
is happening far too slowly. The utility's
history of tardy action (arguably abetted
by lack of timely government regulatory and
policy support) has put it in a position from
which it could be difficult to recover.
Even the financial and regulatory tangle
over rates mentioned at the top of this article
has broader implications. In the Moneyweb
story previously cited, economist Mike
Schüssler noted that Eskom is one of the
country's best-paying employers and raised
the question of whether " its procurement practices
are really aimed at best value for money. "
A 22% rate increase could add 0.8% to consumer
inflation, according to Schüssler, who
concluded, " Eskom is alienating its customers
by raising its tariffs to unaffordable levels.
More and more people are looking at alternative
sources of energy and defecting from the
grid. If this continues, Eskom might cease to
exist in another 15 years. " ■
-Kennedy Maize is a long-time energy
journalist and frequent contributor to
POWER. Editor Gail Reitenbach contributed
to this story.
55

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POWER October 2016

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