By: Tshepo Kgadima
The President’s Abracadabra approach articulated in SONA2020 for solving, once and for all, South Africa’s electricity crisis means that South Africa is condemned to darkness and extreme energy poverty.
It is patently clear from the President’s SONA that he has been seduced by NeoHitlerists (Totalitarian Fanatics) whose aim and objective remains greedy profiteering at all costs without any due regard to the catastrophic consequences for South Africa’s economy.
It is flabbergasting that the President could be so misled to the extent he believes that South Africa needs additional electricity capacity and that such capacity must comprise of unreliable and totally redundant wind and solar power.
Even worse, the President seems to have completely ignored the established fact that Wind & Solar power costs 6.35 times more per megawatt hour than Eskom’s primary energy cost of production (REIPP costs R2,223/MWH against Eskom’s R350/MWH), in a regulated energy system wherein NERSA has set the tariff at R1,100/MWH.
Now, Eskom has proprietary generation capacity of 46,000MW with another c6,000MW in development whilst electricity demand has plateaued at 33,000MW.
Renewables (Wind & Solar) are not suitable for Eskom’s grid and require 100% back up which has to come from Eskom’s coal fired & nuclear baseload power stations and that translates into a R93.150 million per day direct loss to Eskom and this loss is set to increase to R190 million per day in 2024 when so-called Jeff Radebe’s 27 IPPs come on stream.
The President should have, or maybe now has, recognized that Eskom is a creature of statute and therefore any alteration to objects and MOI or “Unbundling” of Eskom must be preceded by legislative amendments, hence his recent talk of “Divisionalisation”which is itself not an appropriate solution.
Some of the appropriate and cost effective remedies the President should have prescribed in his SONA for South Africa’s electricity crisis include:
Eskom must remain an integrated utility with generation, transmission, distribution and engineering competencies and capacity intact so that it can meet up the legislative requirements contained in Eskom Conversion Act of 2001;
Eskom should therefore refinance its total debt of cR450 billion at a maximum of prime interest rates. This would avert the impending default on the R86 billion payable at the end of March 2020, a default which carries the highest risk of Eskom going into business rescue which would eventuate in
Uncontrollable primary energy costs of R34 billion manifesting in the form of IPPs must summarily be removed from Eskom’s cost structure on its Income Statement while the ill-conceived plan of acquiring unreliable, intermittent and totally redundant “renewable energy” must be abandoned;
Eskom must increase EAF to 80% in the short term (6 months) and thus provide energy security of supply with a reserve margin. This is immediately achievable as Eskom is currently spending cR46 million per day in maintenance.
The proposal to allow energy intensive users such as mines to self-generate is ill conceived as it will cost Eskom cR25-30 million per day in lost revenue and it is therefore dangerous in the extreme as it spells a real death knell for Eskom which has experienced continued decline in demand over the last 10 years, notwithstanding the compounded 510% tariff increases in the same period.
Should President’s SONA pronouncements on SA’s energy market and Eskom be realised, it would bring into reality the metaphor that: South Africa is riding fast in a brakeless bus driven by greedy profiteering NeoHitlerists towards a gorge of misery!
*Tshepo Kgadima – Independent Economic, Energy & Political Analyst