Shortcomings in South African Energy Policy

Expert takes government to task for failing to restructure electricity and plan adequately for long term

2 min read

Chris Yelland, a well-informed electrical engineer in South Africa and a director of the country's EE Publishers, delivers a scorching critique of Pretoria's energy policy in a recent EE post. He decries the government's failure to formulate a 20-year integrated plan and its issuance instead of an improvised three-year interim plan, "a shoddy and inadequate piece of work" done without consultation with relevant parties such as independent power producers. Further, says Yelland, despite a government 1998 white paper calling for the electricity system to be restructured along the usual lines, "in the subsequent twelve years, nothing concrete materialised from this grand vision." Meanwhile, he continues, Eskom, the country's main energy company, "no longer has the wherewithal to continue as the sole builder, owner, operator, and maintainer of generation in South Africa on an exclusive basis."  Plans for construction of coal and nuclear plants have been scuppered, without any credible planning for substitute generation.

In fairness, South Africa is by no means the only country or region to have back-tracked on plans to "unbundle" transmission, generation, and distribution, and to establish a single grid operator or regulator. Many others have had second thoughts about the wisdom of trying to introduce competition into electricity, which traditionally has been considered a natural monopoly, and not only because of vested interests getting in the way. Deregulation has not consistently produced lower consumer prices, concerns about reliability and market rigging have surfaced, and there are valid worries about whether companies eying mainly their short-term balance sheets will invest adequately for a long term that can be as long as 60-75 years in the power sector. In the United States, only about half the states have opted to restructure, and it's no accident that those retaining old-fashioned integrated electricity companies are looking most seriously at nuclear, which has high up-front costs but very attractive long-range operating costs.

None of that detracts, however, from the force of Yelland's concerns about South Africa's energy planning, which indeed appears to be woefully unsatisfactory.

POSTSCRIPT (Feb. 26, 2010): A radically different perspective on South Africa's energy dilemmas has been drawn to my attention. A coalition of organizations has launched a global campaign to block the World Bank's plan to lend the country US$ 3.75 billion for construction of a South African coal-fired power plant, with a possible follow-on loan of $1.25 billion. The coalition comprises (among others) Climate Justice Now, groundWork and the Federation for a Sustainable Environment, and has backing from the National Union of Metalworkers of SA, the SA Council of Churches, and other organizations in the United States, India and Bangladesh.

South African opponents of the coal plant project and the World Bank's financing proposal argue that it will drive up consumer electricity rates, impose a long-term debt burden the country cannot afford, further bloat the country's vulnerable "minerals energy complex," and add to the country's "climate debt" as well. (South Africa, with 6 percent of Africa's population, accounts for 40 percent of its carbon emissions.)

The campaign against the Medupi coal plant project comes in the context of growing tension between the U.S. Treasury and the World Bank over its program to fund coal electricity generation in developing countries. The U.S. government has issued a "guidance note" to multilateral development banks saying they should tighten conditions for Third World coal projects. The World Bank's decision on Medupi, expected at the end of March, will be a test of that guidance.


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