An article by Ian Kilbride.
South Africa has entered a long, winding, dark and dangerous tunnel called the energy crisis, but there is a flickering light at the end of it. The issues confronting us are far broader and deeper than just Eskom and how we tackle them will shape the future trajectory of our country. I believe there are empirical grounds for cautious optimism.
Since 2008, Eskom has collapsed from a marginally profitable power utility with an installed capacity of 43, 000 megawatts and a selling price of 19,45 cents per kilowatt hour, to an installed capacity of 47, 000 megawatts at a selling price 127,9 cents per kilowatt hour, while making a loss of R14 billion in 2022. Of the 47,000-megawatt installed capacity, less than 30,000 MW may be available at any one time. The result is that, last year, the country endured over 3, 300 hours without electricity from Eskom.
The broader impact of energy scarcity and unreliability translates into lower economic growth and job losses in a country with some of the highest unemployment globally. We are rapidly learning the inconvenient truth that power-cuts affect water supply and sewage treatment, thereby compounding the already unsanitary conditions millions of citizens endure on a daily basis. Patients are dying in operating theatres during power cuts, while politicians and diplomats are spared the inconvenience of load-shedding for reasons of expediency and international reputation. Having emerged from the Covid pandemic and its attendant school closures, scholars are now confronted with the new challenge of learning in the dark and for those with the wherewithal, being disconnected daily from the virtual learning environment that is the internet.
Yet, not allowing a good crisis to go to waste, there are grounds for cautious optimism. At the macro level, the Eskom crisis provides an enforced opportunity for the country to plan for and implement a structural transformation in its energy mix, particularly with respect to a lower carbon future with greater reliance on renewables and nuclear energy. Coal was around long before us and its greenhouse gas effects will be in the atmosphere long after we have gone, the question now is how much do we use to get out of the crisis and with what consequences and how much do we leave in the ground. While reliable energy is critical to the nations’ development, a just energy transition is vital for our children’s’ future.
Currently, an uneven political and economic arm-wrestling match is unfolding between green energy champions in the Department of Environmental Affairs (and to be fair, senior leadership of Eskom too) on the one hand and the Department of Minerals and Energy on the other. Minerals and Energy Minister and coal heavyweight, Gwede Mantashe, may feel his on his way to a home run, but if he is unable to translate his coal addiction into real-time energy solutions for the people, his own political fortunes will dim. What Mantashe fails to recognise or acknowledge is the enormous economic and job-generative potential of green energy in South Africa, given its abundant ‘natural’ resources. And as outgaining Eskom CEO, Andre de Ruyter, recently remarked, ‘solar, wind and hydro’ can’t be stolen!
Notably too, business and private electricity consumers are becoming more energy efficient, which in turn, allows for less per capita electricity demand and improves macro energy planning. At the sectoral level for example, hit hard in the early years of chronic power cuts, mining houses have responded to higher energy tariffs and crippling power cuts by shifting progressively to electricity self-generation, thereby ensuring sustainability and in so doing, reducing the overall load on the national grid.
Ian Kilbride is the Chairman and CEO of The Spirit Group and an Honorary Professor at Stellenbosch Business School