In a recent piece on the state of the world economy and its apparent recovery, the chief economics commentator at London’s Financial Times, Martin Wolf, argued that, instead of patting themselves on the back for a job well done, a sustained effort would be required from policymakers to return the world economy to vigorous health.
Such an outcome would require, Wolf averred, much cooperative intellectual and policymaking effort. “But, first, we must eschew perilous complacency,” he cautioned.
In the South African context, surely that same sentiment could and should be transposed to South Africa’s energy economy and its apparent recovery.
Unfortunately, 2009 turned out to be something of a lost year in this regard. And, with the supply demand balances showing signs of normalising, all South Africans should be concerned.
In fact, the Minister in the Presidency responsible for the National Planning Commission, Trevor Manuel, admitted as much in December when he shouldered the blame, on behalf of President Jacob Zuma’s government, for not having convened the structures set up in 2008 to respond to the power crisis, following the electricity blackouts earlier in that year.
Following what was only the first gathering of the multistakeholder Electricity Advisory Council since Zuma’s new government was assembled in early May, 2009, Manuel said government had been “hammered” for failing in its responsibility to convene the meetings.
The council met previously in April 2009, and, by November, it had emerged that not only had the National Electricity Response Team (Nert) not been meeting, but the project office set up in December 2008 to coordinate the various response programmes was also facing serious cash flow constraints, having not been paid since March.
The Nert structures comprise officials from various government departments, led by the Department of Energy (DoE), representatives from power utility Eskom and a host of private-sector organisations and individuals. Nert also meant to have a direct link to Cabinet through the Nert steering committee.
False Sense of Security
The breakdown had also contributed to what Manuel described as the current “false sense of security” about the state of electricity supply in South Africa.
“Life is actually not as easy as we pretend,” he admitted, adding that, as the economy emerged from recession, electricity demand growth would “put the current supply under pressure”.
This reality was confirmed earlier by Eskom’s chief officer for networks and customer service, Erica Johnson, who said that, while there was no short-term threat to security of supply, the system would be extremely vulnerable from 2011 through to 2012, ahead of the synchronisation to the grid of Medupi’s first of six 790-MW units in April 2012.
“Therefore, there is no alternative but to have an intensive focus on demand management,” Johnson averred.
She explained that this programme would have two components: a power conservation programme, which was designed to reduce demand from large customers by between 8% and 15%; and demand-side management (DSM) measures at commercial and residential level, with a strong focus on solar water heating.
The business, labour and community representatives who attended the Electricity Advisory Council meeting, at the Union Buildings, endorsed the need for more frequent meetings, as well as the need to scale up DSM.
Business Unity South Africa deputy CEO Raymond Parsons also said that a renewed commitment to Nert and its programmes was important to dealing with the power crisis, while the Congress of South African Trade Unions’ Jan Mahlangu revealed that a year planner would be published outlining the meeting schedule for and programmes of the council.
There was also agreement on the need for a longer-term focus, which would enable the social partners to pursue plans that were more coherent in the areas of DSM and the future electricity mix.
The meeting agreed, for instance, that there was an urgent need to accelerate the National Solar Water Heating Programme, which planned to oversee the installation of a million solar geyers by 2014, and to introduce incentives for voluntary rationing where feasible.
The social partners also renewed their call for South Africans to reduce electricity use by at least 10%, which they said would increase the reserve margin to above 13%.
Elephant in the Room
But the elephant in the room not fully thrashed out, at least not in public, was the slow pace of delivery by the DoE of a useful integrated resource plan, or IRP.
The first version, or IRP1, was disappointing in its scope, timeframes and lack of ambition.
It appeared to be an exercise in attempting to move the horse back in front of the cart, given the fact that an IRP was required to provide guidance to the National Energy Regulator of South Africa in its deliberations regarding Eskom’s revenue requirement as far as those related to the utility’s capital programme.
The DoE has promised an overhauled version by the middle of 2010. However, that is a disappointing timeframe in itself, particularly for those investors that have been lining up to develop new generation projects, whether these be conventional, renewable or cogeneration endeavours.
In other words, the uncertainty created by IRP1 affects big and small, and has many questioning whether government is truly serious about closing what is looking more and more like an unavoidable supply-side gap.
Therefore, the first thing on the agenda of the next electricity council meeting must surely be the acceleration of the processes of consultation for the delivery of a far more comprehensive electricity generation plan covering the next 20 years. If this vision is not forthcoming, and fast, then investors will lose interest and the system is quite literally going to become dangerously unbalanced once again.