Electricity crisis can be solved – here is how

Leader of the Democratic Alliance (DA), Helen Zille, has recommended several urgent policy interventions that may help Eskom out of its current crisis.

“The DA believes it is possible to solve South Africa’s electricity crisis. This will require, however, bold leadership, policy certainty and a commitment to reforming the electricity sector,” Zille said.

“We are…witnessing unprecedented turmoil unfold within Eskom,” the DA lead said, highlighting the suspension of top executives and the announcement of an inquiry into Eskom’s affairs by Board Chairperson Zola Tsotsi.

In the midst of this political disruption at Eskom and a second credit downgrade to “junk” status, it is estimated that load-shedding costs the economy R20 billion a month, the DA said.

South Africans are now bearing the brunt of a preventable crisis caused by poor policy decisions from the ANC in government spanning 17 years, the political party said.

In 1998, the White Paper on Energy Policy made the case for breaking the Eskom monopoly to coax private sector investment in electricity generation.

“This was ignored by the ANC despite warnings in the policy that blackouts would follow if reforms were not made,” Zille said.

The DA lead added that no new electricity generation investment took place from 2000, through to 2005, leading to a depletion in the country’s electricity reserve margins.

“All the while, executives raked in bonuses based on targets to avoid load-shedding, generate profits, and meet BBBEE targets. This goal displacement resulted in massive payouts to executives without them needing to meet crucial electricity generation or maintenance targets,” Zille said.

“The ANC’s refusal to end the state monopoly on electricity supply was based on maintaining a closed enrichment scheme. Through their front company Chancellor House and its shares in Hitachi, the ANC made hundreds of millions from boiler contracts at Medupi and Kusile,” the Western Cape Premier said.

The DA recommended several urgent policy interventions:

  • End the Eskom monopoly: The DA believes the management of the grid needs to be taken away from Eskom and placed under an independent state-owned entity. A necessary first step in this process is the passing of the Independent System Market Operator (ISMO) Bill.
  • Release IRP 2015: In the midst of an electricity crisis, government is operating from an Integrated Resource Plan (IRP) that is 5 years out of date. Updating the IRP is vital for strategic decision-making on what energy sources best suit the country’s immediate power needs.
  • Publish the Gas Utilization Master Plan (GUMP): There is immense potential for gas turbines to be brought on stream within a few years. Policy certainty is urgently needed, however, through the publishing of GUMP, which will provide clarity to the market on South Africa’s contemplated investments in the gas sector over a 30 year period.
  • Incentivise embedded generation: To reduce pressure on the national grid, the DA proposes a 3 year national subsidy scheme to incentivise businesses and households to install solar panels on rooftops. We believe a subsidy of R1.10 per kWh could see as much as 500MW of power being installed in a year.
  • Fast-track the completion of Medupi and Kusile: The completion of these projects is a national priority and must be backed by a similar approach to the 2010 World Cup infrastructure needs.
  • Investigate the procurement of diesel and coal: An independent inquiry into diesel and coal contracts is required along with rigid and transparent systems to prevent abuse.
  • Publish accurate maintenance reports for power plants: Eskom needs to demonstrate accountability for the state of our power plants. Accurate maintenance reports need to be published and clear targets set for each plant.
  • Link Eskom salaries and bonuses to performance: All salaries and bonuses at Eskom should be directly linked to performance, with a distinct focus on rewarding engineers for meeting targets. Despite pervasive management of the utility, Eskom executives earned R11 million in bonuses in 2014, according to a parliamentary reply by Minister Lynne Brown.
  • Link tariff increases to efficiency at Eskom: The National Energy Regulator (NERSA) needs to ensure that any electricity tariff increases granted to Eskom are based on stringent efficiency requirements to protect South Africans from bank-rolling mismanagement at the utility.

In addition to these urgent interventions, the DA position paper proposes several short to long term initiatives aimed at solving the country’s electricity crisis.

These include:

  • The purchase of open-cycle gas turbines to reduce dependency on diesel;
  • Rapidly increasing generation capacity in the next 2 – 3 years through energy projects undertaken by IPPs;
  • Upscaling of investment in larger renewable energy plants;
  • Commissioning new coal and natural gas projects;
  • Abandon the R1 trillion nuclear deal in favour of smaller more affordable builds.

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Electricity crisis can be solved – here is how