Can poor governance ruin South Africa’s future energy landscape?



 

Government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is guided by a sound policy bedrock. Over the past few months, a key question within the renewable energy industry has been raised: Is it possible that this comprehensive legal framework, government vision, the investment attracted, the widely recognised proven track record and all of the implementation learning of the REIPPPP could be undermined by one monopoly institution?

Brenda Martin

After duly completing six rounds of competitive bids, by the third quarter of 2015 the Department of Energy had successfully procured 6376 MW of independent renewable power. While the national utility Eskom, as designated sole power purchaser had previously taken around twelve months to sign agreements with bid winners, this well-oiled process ground to a halt in 2016. For almost two years, 37 duly selected bid-winning independent power producers (IPPs) have been waiting for the conclusion of power purchase agreements with the vertically integrated monopolistic power utility.

The South African Renewable Energy Council (SAREC) sought legal opinion from senior counsel, which concluded that Eskom has no prerogative to delay or prevent the signature of duly awarded winning bids. In short, ministerial determinations are binding on Eskom and the utility has no discretion to unreasonably delay conclusion of purchase agreements or to impose further conditions on preferred bidders. Taking a step back from this short-term impasse, it is worth considering how Eskom’s continued behaviour as vertically integrated monopoly aligns with one of the calls made at the end of the most recent African National Congress (ANC) Lekgotla.

The ruling party’s secretary general, Gwede Mantashe, says economic growth, accelerated radical socio-economic transformation, land reform and redistribution, the funding of higher education, fighting crime and corruption as well as building the capacity of the state have been identified as key priorities by the ANC government for the current year. Achieving this, Mantashe says, requires a fundamental shift from a pure capitalist state to a state-managed developmentalist economy underpinned by a developmental public service.

In South Africa, which has a strong emphasis on realising a developmentally-oriented state and a commitment to shedding the legacies of an Apartheid-era centralised command and control government and which places an emphasis on public service to all, the lines of energy governance and accountability are clear. As the minister of energy, Tina Joemat-Pettersson is mandated to ensure the country’s energy security; and Lynne Brown, the minister of public enterprises, has to ensure that state-owned enterprises, like Eskom, deliver on their respective service mandates.

From the point of view of good governance, it was thus significantly concerning when at a press briefing on the state of the system recently, Brown chose to support the incorrect behaviour of the power utility. Thankfully, this concern was ameliorated somewhat by Mantashe just six days later, in the statement issued post-Lekgotla.

Unlike monopoly utilities, and individual institutions generally, governments are entrusted with prioritising the national interest – in the short and long term.
In their case study-rich book “Why Nations Fail”, Acemoglu and Robinson conclude decisively that the most common reason that nations fail, is because they have extractive institutions. They point out that when institutions are permitted to act in their selfish interest, when nations do not work to thwart poor institutional practice, this has often led to the weakening and ultimately collapse of the state. Holding institutions accountable is an essential part of achieving national success.

This is a crucial year for South Africa’s long term energy future. Both the Integrated Energy Plan (IEP) and the Integrated Resource Plan (IRP) are currently out for public comment. While we engage with that important investment planning process, it is crucial that we also pay attention to issues of good governance in the short term.
If Eskom continues to refuse to act in accordance with the law, government’s recognition of the value of diversity and transformation at all levels of the economy and its vision for an expansion of South Africa’s energy mix to include independent power, with a range of clear developmental imperatives, is at risk of being stillborn.

Send your comments to energize@ee.co.za

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Source: EE plublishers

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