Electricity Archives - Medialternatives

by davidrobertlewis - October 20, 2022October 31, 2022

Dear Mr Gordhan, Eskom is a ‘public bad’, not a ‘public good’

IN A PIECE published in the Daily Maverick, Public Enterprises Minister, Pravin Gordhan appears to respond to an earlier piece written by myself and published here and in the Cape Argus. The example of Telkom deregulation which I have raised, on more than one occasion, is most certainly taken verbatim, and it is no coincidence Gordhan’s response occurred on the day my piece was published by IOL.

Electricity may be a public good, but when the only source of electricity for the majority of South African households is a government department or City billing system, the results will always favour the producers not the consumers.

Peter Fabricious reports that Gordhan responded to a question put to the Financial Times Africa Summit on Tuesday on “why South Africa needed Eskom at all?”

He says: “A member of the audience put it to him that South Africa had been ahead of the curve in 1993 and 1994 in licensing mobile telephone companies and that had changed the country’s telecoms landscape.”

“Given that history of trailblazing, why do you need Eskom?” was the question for Gordhan, who was participating in the London summit remotely.”

To which Gordhan responds by doubling down on his party’s statist rhetoric, that “Eskom is necessary because providing electricity is a public good and the state should be involved in the provision of public goods.”

Gordhan then goes on to suggest without any evidence, that “placing the provision of electricity into private hands in other parts of the world had not worked out well, including because it had increased prices” and this by falsely listing Britain as an example. Either he is a willing idiot, or totally oblivious to the accepted wisdom and economic consensus surrounding the rise in UK fuel prices.

It is no secret that Europe’s plan to deploy natural gas as a ‘transition fuel’ has encountered a major setback and has run aground due to the collapse of the NordStream Pipeline resulting from the war in Ukraine. There is thus a major gas shortage, where 80% of the increase in UK electricity prices has been due to soaring gas prices, resulting from the supply-side market contraction. The Economist provides reasons for soaring energy bills based on projections on the basis of wholesale prices for natural gas, and the problem has nothing to do with privatisation.

Even in Costa Rica where private companies are being criticised for failing infrastructure following a natural disaster in a situation where the state has failed to regulate on service quality, there is broad consensus that the previous regime under a single state-run operator, was far worse.

Instead of deflecting our attention away from deregulation, by providing us with a reasonable timeline for private sector participation in energy-to-the-home (ETTH) and actioning upon plans already in place to split Eskom up into competing entities, Gordhan insists on trotting out effete intellectual arguments that lack any substance, save to satisfy his party’s bizarre insistence that maintaining the solitary energy SOE as a mechanism for sheltered employment to reward its union partners, is somehow a ‘public good’.

The results are plain to see.

Far from engaging the private sector in the provisioning of energy directly to consumers, our government is maintaining a false energy monopoly, in effect a pyramid scheme responsible for rolling blackouts.

A flawed scheme based upon a shibboleth, a custom or tradition, which essentially bars the independent sale of energy directly to South African households and which is anything but an ‘energy commons’, derived from a ‘national pool of energy’.

My earlier piece outlines why the inclusion of inputs from Independent Power Producers (IPPs) will have no direct impact upon consumers, given the massive Eskom debt (currently 400 billion rand), and especially if the resulting model continues to be driven by government diktat — socialist-motivated centralisation and bureaucracy-driven, command-style economics, instead of the free market.

Even if our government were to roll-over the entire Eskom debt, the modus of the SOE is so far gone down the road of welfarism and bail-outs, that we are flogging a dead horse and expecting it to run. “Between 2007 and 2021”, writes Drikus Greyling “Eskom invested R680 billion to increase its generation capacity. However, after this huge investment, Eskom produced less power than when it started.“

Gordhan’s response to the Financial Times Africa Summit must be rejected as nothing more than empty rhetoric, elegant-sounding political words, entirely lacking evidence-based research and clearly statements not based upon any empirical inquiry. His pronouncements need to be called out for the dangerous obfuscation and mendacity they truly represent.

published in part by Cape Argus 28 October 2022

by davidrobertlewis - September 22, 2022December 16, 2022

Flogging an Eskom dead horse? You’ve got it all wrong

SO LONG as this country myopically persists with it’s strange obsession in maintaining the Eskom energy monopoly, there will be load-shedding and blackouts. Consumers desperately require choices in energy provider, options on who can connect their home grid, to power the toaster and microwave oven. But practically nobody here is speaking out on the lack of consumer choice when it comes to electricity.

Its as if energy analysts are brainwashed morons flogging the proverbial dead horse, each year they call for inquiries into why the horse died, reclassifying the dead horse as ‘living impaired’, arrange for officials to visit other countries to ‘see how they ride dead horses’, call for additional funding and training to ‘improve the dead horse’s performance’, or the hiring of outside contractors to ‘ride the dead horse’, and so on, but are simply too afraid to ‘let go of the horse’, lest they be out of a job.

What is wrong with you people?

A decade ago I attended a talk by David Lipshitz, founder and CEO of MyPowerStation. A company which aims to provide a ‘virtual power station’ solution via online billing and provisioning of energy services to consumers. His magnificent idea of introducing information technology to the sale of electricity to the end-user and consumer, has been stymied by a regulatory environment which is more in keeping with a 19th Century model of distribution than the 21st century.

Lipshitz’s website is now merely a link to his book, The Last Blackout, available via Amazon.

“What would happen if city dwellers in cities with more than 1 million people suddenly had no electricity?” asks Lipshitz in an ‘electrifying, shocking, and powerful thriller’, that is too close for comfort. The past week has seen some areas of South Africa experiencing 9 hour blackouts. The weekend was a series of 6 hours of load-shedding for my own household.

South Africa’s model of energy distribution requires urgent and drastic intervention. And I don’t mean to re-engage the debate on where our electricity should be coming from in other words, how it is produced. Doing so merely adds to the pile of doggy-doo dolled up by consultants, analysts and self-proclaimed experts dished up on national television on a daily basis.

Whether or not, electricity is provided by the state, or Independent Power Producers (IPPs) is of no real consequence in a system in which the end-user is placed at the forefront. There are no rational reasons why consumers should not be given the choice of purchasing energy from sustainable resources, whether women-owned utilities, or listed companies with a high ESG and BEE component. Let the people decide.

Unfortunately, and despite the mooted plans to open Eskom’s grid to the ‘wheeling of energy’ by third parties, there remain a number of obstacles. The first is the fact that our government and especially its Marxist Energy Minister Gwede Mantashe, continues to embrace a blind focus on centralisation. You can read my piece on why the state is rooted in an ideological fixation, the problem of ‘Socialist Complexity’, and my proposal for an Energy Commons. I continue to believe a commons is a ‘way out of the debt trap’.

Eskom is heavily in debt and clearly unprofitable when it comes to the generation of electricity, and is a prime example of why governments and bureaucrats are less efficient than the market and free enterprise when it comes to allocation of capital. Which is why we continue to see the introduction of tariff increases several times over the inflation rate. Is more money really going to solve the problem?

Not when we have the bizarre situation in which our Muni’s and Metro’s, alongside the corner Cafe ‘prepaid token’ store, are all added to the game of profiting off the bulk sale of electricity, energy provided by a grossly inefficient pyramid scheme by a solitary, underperforming producer of electricity. Nobody is fooled by people like Cape Town mayor Geordin Hill-Lewis promising the City will bring new capacity online, give or take a megawatt, or our President Ramaphosa, racing home to declare yet another electricity crisis requiring a crisis committee.

Without actioning on our rights as consumers, rights enshrined in our constitution, we will be left in the dark. It is essential for Eskom to open up the grid, not only to the ‘wheeling of electricity’ but to the dealing and virtualisation of billing and provisioning of new services. Then we might take a cue from New Zealand where deregulation has proven incredibly successful.

The country has 5 major electricity generating companies. Genesis Energy, Mercury and Meridian Energy operate under a ‘mixed ownership model’ in which the government holds a majority stake, while Contact and Trustpower are private sector companies. The country once struggled with a system very similar to our own, before dumping a socialist government.

Sadly, despite promises, there appears to be no genuine enabling legislation nor incentives in South Africa to allow a third party to purchase electricity, from either the state or the IPPs, and to resell the result on the open, rather than captive market, to the consumer. This is clearly why our system is failing. Embracing Lipshitz’s modest proposal and learning from the example of New Zealand, would be a step in the right direction.

In fact one does not have far to travel, to examine the case of another state monopoly, to see why deregulation when it comes to South Africa is the only solution. The fate of Telkom, once the country’s sole cable monopoly, provides us with a good case in point. If we had not opened up, we would still have a situation in which the only telephone available, was from the same company, with a single color, beige. Left to its own devices (excuse the pun) Telkom would still be in the copper age.

Look at how Internet Services Providers (ISPs), just like IPPs began to emerge in the 90s, while our government to its credit allowed a semblance of competition (initially only in the mobile market). With the result these companies grew up and essentially outflanked Grandma Telkom. In the process provisioning fibre cable infrastructure to the suburbs, and FTTH, all of which cost the taxpayer not a single penny.

Given enough time, our IPPs might eventually begin rolling out similar infrastructure. In fact they would be negligent if they did not. Best to get Eskom into open competition mode as soon as possible. The alternative is living with a permanent threat of massive grid failure just around the corner, alongside a collapsed economy.

Published by Cape Argus 17 October 2022

by davidrobertlewis - October 24, 2012

South Africa’s Energy Commons

ENERGY systems linked by information technology could deliver a revolution in energy provision as the PC does for electricity what Windows and Macintosh did for operating systems. Remember the days when the only computers to be found were large mainframes in universities? The personal computer helped consumers escape from the clutches of centralised computing and large corporates like IBM.

Netmetering could revolutionise electricity provision in South Africa. We have reached the point of grid parity, “in which the cost of producing electricity and the cost of purchasing it from Eskom are the same’, points out David Lipshitz of Mypowerstation, one of the many online metering projects which have sprung up on the back of the revolution in connectivity, It is therefore only a matter of time before alternative energy grids powered by the Internet become a reality.

New emerging technologies which allow consumers to produce and share energy are already surpassing the state’s ability to deliver affordable electricity, as centralised power grids become a thing of the past and abundant free electricity becomes a very real possibility. It all comes down to how one defines the energy grid and how the new netmetering projects are going to be structured — whether as energy cooperatives or as micro-enterprises — the result determines whether a new energy commons connected by the Internet becomes a reality.

Free electricity systems and the smart grids of the future could be just around the corner. But first, lets rewind to how we got here.

Problem is the manner in which South Africa has structured its energy system as a cash cow for municipalities which purchase bulk electricity from Eskom, the national energy provider. The City of Cape Town for example, earns billions from the resale of electricity to consumers. Municipalities, according to the National Energy Regulator may be receiving up to 60% of their revenue in this way. There is thus no real incentive to support the new decentralised energy systems which could end up, not only saving consumers money, but also providing cheap, low-cost and near-to-gratis energy for everyone.

Historically, small power stations owned and operated by municipalities were gradually replaced by the centralised power grid. In South Africa, the grid is operated by an apartheid-era parastatel, Eskom which took on a new metastasized form after 1994. Following rolling black-outs, Eskom embarked on an aggressive expansion exercise with successive increases of about 25% a year and most recently announced plans for a 16% rise. Eskom Chief Executive Brian Dames explains the reason for the costs: “we need to continue to invest in the electricity infrastructure which can support higher rates of economic growth and development and extend access to electricity to all South Africans.” In other words, needless infrastructure projects which merely benefit tenderpreneurs.

The solution to the double bind of increasing capital and infrastructure costs and the resulting increase in tariffs appears to be in shifting energy away from being just a commodity (to be bought or sold) into a public good. In other words, a broad social commons. Paul Hartzog of the Forward Foundation sees the Energy Commons as one of the five commons (along with food and culture) which emerges as energy production ‘shifts from massive technological production infrastructures to smaller scale distributed energy production networks’.

The return to the idea of small scale energy provision, whether by Independent Energy Providers (IPP), or via small home installations, has been long coming, and is in part fueled by Eskom’s spiraling energy costs.

Relocating energy provision within a social commons, as advocated by academic John Byrne in a deregulated environment would open the way for the networked energy systems and smart grids also envisioned by the futurist Jeremy Rifkin, in which energy is supplied to consumers by thousands of small producers, much like Internet content is supplied by a network managed by service providers. The obstacles are thus not technological, but rather political.

There is no technical reason why small scale suburban and urban energy collectives cannot organise around energy provision, entering into collective bargaining agreements with their respective municipalities in a framework in which the grid acts as a battery, storing energy when there is a surplus, and providing energy when it is needed. It all depends upon the enabling environment, access to the cables which connect homes to each other and the resulting energy traffic.

The entire feed-in tariff debate which has been going on for almost a decade, hinges upon the idea of consumers being able to feed surplus energy back into the grid, and finding some means of metering the result. Climate Smart’s Hilton Trollip, confirms there is no technical reason why your electricity metre cannot run backwards. Online energy companies such as Mypowerstation have already begun to offer netmetering services in anticipation of deregulation, while the feasibility of net-metering and other technologies which could allow consumer-producers to buy and sell electricity, thereby freeing ordinary citizens from the dictates of centralization, is quite advanced.

Yet it could take decades for Eskom to unbundle its infrastructure, granting consumers access to the “local loop” so far as the traditional grid is concerned. If only the South African government would review its monopolistic grip on the local energy market, the market could be freed to deliver what consumers really need, instead of being dictated to by interest rates, the cost of lending, in an environment in which the only winners are the banks, the broad energy commons could provide the same valued added services we find in other deregulated systems such as mobile phones.

* NOTE: Eskom has asked the National Energy Regulator of SA for an increase of 16%/year for the next five years, starting in April 2013. That comes on top of average annual increases of 25% for two consecutive years, plus a 16% r ise in the year to March 2013. Eskom now charges 61c/kWh, before municipalities add their own charges.

** Wind is the now the cheapest form of electricity generation, with an average price of 89c a kilowatt hour compared to 97c/kWh for Eskom’s new coal-fired power stations.

*** The 2012 bidding round for alternative energy projects should add an additional 3,200 megawatts of power to the national grid by 2020. The government is targeting 1,470 megawatts from onshore wind projects, 400 megawatts from concentrated solar power and 1,075 megawatts from solar photovoltaic projects, Biomass and biogas projects should each generate 47.5 megawatts, small hydropower projects 60 megawatts and other small projects 100 megawatts