Why do we have load shedding? It's NERSA not ESKOM

In conversation with Dumo Denga

There are many theories out there as to why South Africa is experiencing rolling blackouts, known as load shedding, ranging from poor engineering, to affirmative action, to corruption, maintenance failures, incompetent Ministers of Energy and Electricity, and cost overruns at Medupi and Kusile. Even though these phenomenon might have played a role, they are all simply wrong.

The most obvious argument is overlooked, basic supply and demand. South Africa has a lot of demand for electricity (as is evident by loadshedding), but limited supply (as is evident from Eskom’s availability factor). The question should be why isn’t investment, government or private, flowing into the country if there is clearly a market for it?

The answer is simple, because government prevents it through NERSA, The National Energy Regulatory of South Africa, that sets licensing laws and tariff structures based on political interventions and thumb suck calculations.

If we abolish NERSA or reintegrate it into Eskom, South Africa’s electricity shortages can be a thing of the past in the next 18months to 3 years as the LNG Gas market world wide is so competitive, capable of scaling, and low cost.

The debate between nationalization vs privatization is entirely misplaced. Load shedding is simply a consequence of price controls. Nationalized utilities under the right policy framework, perform just as well as private utilities as per the world bank’s study in 2018.

If the price was allowed to go up, capital will easily flow to where it is most needed, whether Eskom or the Private Sector.

Price controls lead to shortages, its the basic law of economics that South Africa is learning the hard way and if the system continues it will create generator Mafias as is the current case in Lebanon. The Mafia provides a better service than Électricité du Liban as Robert Bryce showed in his film Juice.

See below for how the general phenomenon on price controls work.

I discussed the phenomenon with Dumo Denga, a market analyst who figured it out in 10 seconds. The interview is below, please also read his article on NERSA and how the policy framework is primarily responsible for load shedding.

I have to repeat, change the policy framework and load shedding will be solved, if not SA is going to have this debate again and again and just revert back to where we started.

It only takes a few legislative repeals to solve the problem.