VGBE and the way forward for Eskom?
Three interviews in a row.
The VGBE Energy Report has reshaped South Africa’s thinking on addressing the challenges associated with the coal fleet. - Maintenance and the lack of skilled operators was a topic that was considered taboo not too long ago.
Today, I engaged in three insightful interviews on this critical subject, and I want to express my gratitude to my many listeners and subscribers for their valuable feedback. The wealth of residual knowledge regarding electricity generation in South Africa is truly remarkable.
I extend special appreciation to the former and current operators, contractors, experienced coal miners, and staff at Eskom for sharing their experiences. Due to concerns about speaking out, they have all, understandably, requested to remain anonymous.
Moving forward, my message is clear and direct. Eskom's newly appointed CEO, Dan Marokane, possesses all the qualifications and experience needed to overcome the challenges at hand. However, the primary obstacle lies in political interference as the VGBE energy report rightfully shows. It is the root cause of Eskom’s inefficient management system.
As the report shows in the section titled “Government oversight and governance” there are too many cooks on-top of Eskom.
I urge the South African public, with the upcoming election, to demand a streamlined approach where the government has only one minister responsible for setting policy and appointing a board.
All functions, including the Integrated Resource Plan (IRP) and the tender processes, should emanate from Eskom's executive.
They must execute policy and have the necessary financial support until the utility successfully recapitalizes.
It's crucial to acknowledge that Eskom is currently bankrupt, and a financially troubled utility should refrain from undertaking new projects such as the ridiculous amount of R 400 billion for the 14 000km long transmission lines that the Minister of Electricity wants to build.
Especially considering that numerous 'independent' subcontractors may never achieve financial closure, leaving them theoretically stranded? Why should the taxpayer bailout the politically connected middlemen?
No government department or politician should have the authority to interfere in the executive functions of the utility. The only exception should be the Treasury, which is limited to setting stringent and rational financial criteria until Eskom achieves financial independence.
Furthermore, I have previously voiced concerns about the unbundling process and still maintain that it is risky without ensuring a secure power supply. The Enron crisis in the early 2000s serves as a cautionary example. In Africa, the Ivory Coast stands as the sole successful case of unbundling, albeit with nearly a third of the rural population lacking electricity. Developing nations should approach restructuring cautiously and only attempt it, in my view, on the condition that they have a sufficient safety margin in place.
The immediate focus should be on repairing existing power plants, because it is a more efficient process compared to constructing new ones. Implementing permanent stage 2 load shedding and commencing the overhaul process, including revitalizing abandoned power stations, is imperative.
To counter the intermittency due to the widespread adoption of rooftop solar, South Africa should promptly shift its focus to natural gas, ideally at Matola, addressing the gas crisis concurrently.
Looking towards decarbonization in the long term, once Eskom recapitalizes, we can reconsider expanding the transmission network, building nuclear plants on the locations of existing coal plants, and/or establishing pumped hydrostations in the Drakensberg.
Plans for these should, indeed, be on the radar, but they should not be the key focus.
In the short term the priorities should, in my view, be:
Address the issues with the coal fleet, backed by a legal commitment.
Eskom should come into compliancewith ISO9000 and other quality control standards.
Renegotiate the expensive diesel contracts with PetroSA (that costs 3 Rand more per liter than you can get at the petrol pump! )
Procure LNG, preferably at Matola, to safeguard heavy industry from collapsing.
Implement an ambitious Rooftop Solar Scheme (targeting 10GW by Christmas, operating during the day). It will be a form of distributed wealth.
Procure coal by railway and not truck (saving SA up to R70 000 per truck).
NERSA should also reform and ideally add capacity charges to prevent richer homes from offsetting their integration costs and backup onto the poorer homes.
Eskom should exclusively engage in power purchase agreements to restore its safety margin. Eskom should not build any infrastructure themselves.
On the political front:
Streamline operations by closing down the Department of Public Enterprises. Pravin Gordan has been a disaster for South Africa.
Establish a single Minister of Minerals and Energy with the authority to appoint the board and shape policy.
Dissolve Necom and any other conflicted lobbyists associated with the Presidential Climate Commission.
Suspend the various policies around Eskom’s neck such as Tresaury note 3, the PPFA and mandatory localisation.
Policy priorities should be structured in the following order:
a) Energy security
b) Electricity Cost and equity
c) Decarbonisation and other environmental concerns.
If we address the red tape and political economy, then the successful outcomes of could ideally be replicated across other State-Owned Enterprises (SOEs) like Transnet and others, providing them with opportunities to thrive once more.
These institutions failed solely due to political reasons, and in the upcoming elections, the blame should squarely be directed at the politicians responsible for them—nobody else.
As VGBE energy’s report showed, they are the ones who broke Eskom.
Below are the interviews.
Power FM (to be added when it becomes available)
SABC