Op-Ed: Beyond patronage politics – where is South Africa going with Eskom?

Daily Maverick, Piet van Staden, EIUG, 3 July, 2017.

Eskom being constantly in the news for all the wrong reasons is masking a more structural problem – the utility’s financial sustainability as a vertically integrated public utility company in a rapidly changing world. By PIET VAN STADEN.

The seemingly never-ending series of reports and investigations on financial mismanagement at Eskom rightfully trigger a media frenzy. Concerned citizens can only hope that the many investigations and reports will eventually result in prosecutions where needed and that the rule of law will be seen to apply to everyone, irrespective of patronage or political affiliation.

However, Eskom being constantly in the news for all the wrong reasons is masking a more structural problem – Eskom’s financial sustainability as a vertically integrated public utility company in a rapidly changing world. The size of the problem is not well appreciated. The price risk to customers is not understood. And replacing the leadership and some board members will not solve the immediate debt and liquidity challenges staring us in the face.

Here is the full article

South Africa needs to find middle ground for electricity conundrum – former EIUG chair

Engineering News, 29 June, 2017.

If South Africa wants to prevent its deindustrialisation and find middle ground between the sustainability of State-owned Eskom and the affordability of electricity, a few “holy cows will have to be slaughtered”, former Energy Intensive User Group (EIUG) of Southern Africa chairperson Piet van Staden believes.

In an opinion piece published on EE Publishers on Thursday, Van Staden added that this required “out-of-the-box thinking” as business-as-usual would not do it. He also suggested that it could be a good idea to use the existing Ministerial Advisory Council on Energy or set up a special industry think tank to come up with proposals for EnergyMinister Mmamoloko Kubayi’s consideration.

He suggested that, over the short term, more cost-reflective pricing for large power users (LPUs) would help to sustain current sales, as well as generation displacement agreements where nonutility generation can be curtailed if it makes sense.

“In all such cases, the LPU prices should be above Eskom’s marginal costs to ensure the additional electricity sales still contribute to fixed costs.

“For a long-term solution, we will have to look at the industry structure, Eskom’s business model and the electricity pricing policy”, he said, adding that the current rate-of-return regulatory methodology spoke to a previous era, where utility companies were low risk/low return businesses, entitled to recover prudently incurred costs and earn a fair return on assets.

However, he pointed out that if the future belongs to distributed energy resources and some gas-fired independent power producers (IPPs), the question becomes how to optimally manage the decarbonisation journey, and not how to ensure Eskom’s generation fleet stays on as a sustainablebusiness ad infinitum.

The optimum way forward may be to separate the transmission and market businesses and ensure it is managed sustainably, while the existing Eskom generation business should be exposed to competition and managed as efficiently as possible to the end of life over the next few decades, he suggested.

Van Staden further noted that it may also be decided to maintain some momentum in the renewables programme by pre-investing until new capacity is really needed, as long as it formed part of an agreed national plan and the cost of renewables displacing cheaper Eskom generation is manageable.

Here is the full article

South Africa moving ahead with nuclear energy expansion

ESI Africa, 28 June, 2017

The South African energy minister, Mmamoloko Kubayi, has declared that government is still committed to rollout the nuclear energy expansion forming part of the country’s energy mix.

Kubayi noted in a statement that this is to ensure energy security, adding that government is committed to the provision of reliable and sustainable electricity supply, as part of reducing carbon emissions.

Nuclear conference

Minister Kubayi recently led a delegation to the 9th International Forum ATOMEXPO in Moscow, Russia.

(Ed. note: Aha, something is afoot, and it is not good for SA!)

According to the press release, during discussions the minister reiterated the department‘s openness and transparency, as well as to engage all spheres of government and the public, in line with the country’s legislation and policies.

“It is critical to recognise that the nuclear new build programme will enable the country to create jobs, develop skills and create industries. More critically, we encourage young people and women to participate in the energy sector,” she said.

The Grid Needs a Symphony, Not a Shouting Match

Rocky Mountain Institute, Mark Dyson and Amory Lovins, 12 June, 2017

We Cannot Afford to Stifle Innovation by Enforcing Outdated Notions of “Baseload” Power

For more detail on the topics covered in this article, readers should see Amory Lovins’ FERC comments, a recent article on Forbes, and a forthcoming article in The Electricity Journal.

In April, U.S. Secretary of Energy Rick Perry announced a 60-day study on electricity market design and grid reliability, meant to assess to what extent current market designs fail to adequately compensate “baseload” (i.e., coal- and nuclear-fired) power plants.

The memo commissioning the study presents as “fact” a curious claim: “baseload power is necessary to a well-functioning electric grid.” This notion has been thoroughly disproven by a diverse community of utilities, system operators, economists, and other experts that moved on from this topic years ago. To these practitioners, this premise seems as backward as if President Eisenhower, instead of launching the interstate highway system, had called for restudy of the virtues of horse-drawn carriages.

Today, the grid needs flexibility from diverse resources, not baseload power plants. Leveraging market forces to help us decide between options offers the best chance of avoiding the multitrillion-dollar mistake—and gigatons of carbon emissions—of blindly reinvesting in the past century’s technologies.

Modern Grids Don’t Need Baseload

Here is the full article

Could electric cars save Eskom from the utility death spiral?

Energize, EE Publishers June, 2017

(Ed. note: An interesting idea, and EVs could soak up spare generation capacity and provide despatchable energy storage, but I doubt if the EV numbers would be high enough in time to help Eskom during the surplus supply window over the next few years.)

The South African government, in December 2015, made a commitment to reduce the amount of pollutants the country emits into the atmosphere each year. Besides coal-fired power stations, petrol- and diesel-powered motor vehicles emit enormous quantities of toxic gases into the atmosphere.

Interestingly, liquid fuels for transportation is presently a larger energy carrier than electricity.

Electric cars might be able to resolve two problems at once. Electric cars emit no dangerous gases, and need electricity to charge their batteries. Hence, electric vehicles would supply the demand the power utility needs to keep it sustainable while removing at least some of the pollutants in the air – especially in highly populated areas where poor air quality results in all sorts of ailments in people and animals.

A growing number of car companies already produce electric cars, which are more expensive to buy than a petrol or diesel equivalent at present. However, the government could assist in changing this by reducing the import duty on electric cars in order to promote the sales of these vehicles.

The equation is simple: the power utility will only survive if it can sell the electricity it generates and electric vehicles provide an additional demand for electricity. Tariffs could be adjusted again to reflect a more cost-related figure in the knowledge that demand would match supply.

Here is a link to the article