Time for the energy sector to self-correct



 

May and June 2017 will go down as two of the most dreadful months in the history of the South African power utility Eskom. Its credibility in the eyes of the public has reached rock bottom after a series of well-publicised scandals.

Prof. Hartmut Winkler

Following the suspension of the then acting Eskom CEO, Matshela Koko, over a large contract allegedly benefitting his step-daughter, the nation was stunned by the reinstatement of the former CEO, Brian Molefe, who had previously left the utility under a cloud. The saga also forced the power utility to face the wrath of the parliamentary portfolio committee on Public Enterprises.

Highly damaging revelations followed from leaked emails, corroborating the findings of the Public Protector that Eskom’s leadership had allegedly irregularly assisted the Gupta family’s Oakbay Investments in securing the Optimum mine and the associated coal supply contract. The emails apparently also highlighted indefensibly close links between the Guptas and specific Eskom board members and executives. To top it off, the R4-billion Duvha boiler replacement was inexplicably awarded to a Chinese company, at a much higher cost than proposed by its competitors.

The scale of these alleged transgressions and the initial unwillingness or inability of government to deal with these matters has generated the impression that there are other agendas at play. It suggests that, like many other state-linked entities, Eskom has been taken over by persons furthering individual
interests at the expense of the national good, a phenomenon now referred to as state capture.

This further raises the suspicion that the brazen taking of sides in the rollout of new generating capacity is also driven by other motives. Koko and Molefe have been outspokenly pro-nuclear and have blocked the long outstanding conclusion of power purchase agreements with successful bidders under the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). The power utility appears to have also promoted the distorted narrative that renewables are chiefly responsible for job losses at Mpumalanga coal mines.

The latest REIPPPP projects offer vastly reduced power purchase tariffs compared to the early rounds. Most renewables are now clearly cheaper than the cost of new coal and nuclear. Therefore Eskom’s opposition to REIPPPP on affordability grounds sounds decidedly hollow. The perception has therefore been created that Eskom is part of an effort to sabotage the renewable energy sector, which is the nuclear industry’s chief competitor in South Africa’s future energy landscape.

By late June, after Molefe and Eskom board chair Ben Ngubane left, Lynne Brown, the minister of public enterprises, had clearly had enough of the scandals at the power utility and the associated public outcry. The Eskom board was reconstituted, and with it came the appointment a new and favourably received interim CEO, Johnny Dladla.

The deep crisis that Eskom is embroiled in requires drastic action. The new board must be firm and decisive in dealing with the scandals. The public needs to be convinced that no efforts are being spared in prosecuting those that have done wrong, and in recuperating irregular expenditure.

The power utility continues to be a key enabler of South African economic and social development, and its functionality and effectiveness remains a national imperative. The bulk of Eskom’s employees and the broader public support that goal.

While at this stage not directly compromised in the manner of Eskom, the nuclear industry too is in need of deep introspection. The sector has failed to condemn the irregularities
and presidential interference in the nuclear procurement process to date, which saw Russian developer Rosatom allegedly placed in a dominant position over its competitors.

The Western Cape High Court ruling that the Russian nuclear agreement is invalid is viewed in some quarters as merely a speed hump rather than a call to return to the drawing board. NECSA board chair Kelvin Kemm’s defiant pronouncement in Moscow that the nuclear deal will be finalised before year end, probably to Rosatom’s advantage, is the worst thing the nuclear sector could do right now. Whatever the intention, such sabre rattling will merely harden the opposition from a public seemingly skeptical of all things nuclear.

There are respected people working in the nuclear field who genuinely believe that nuclear technology has a role in the future South African energy mix. These nuclear advocates have to now recognise that rehabilitating their sector requires the rebuilding of public trust, and honest attempts to allay concerns about costs, safety and potential corruption associated with new builds.

The renewable energy sector has been riding high on the back of positive international sentiment and the successful implementation of projects from the first three REIPPPP phases. That ride is however about to get much bumpier as the sector runs into opposition from unions and government.

While this opposition is to some degree based on misinformation, possibly planted deliberately, the renewable industry also needs to re-evaluate its tactics. Green hype and crude PR are no longer going to cut it, and current and past mistakes are about to be exploited ruthlessly. As with nuclear, sober engagement and diplomacy are now crucial to take the renewable energy sector forward to its rightful place in South Africa’s energy landscape.

Send your comments to energize@ee.co.za

 

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Source: EE plublishers

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