Reform backsliding?
There are worrying signs that the economic reforms under way in the electricity sector are stalling, or are even facing active resistance.
Arguably, this development is predictable given the far-reaching implications of these reforms for Eskom, which has operated as a monopoly for most of its 102-year existence.
It is nevertheless disappointing given the drag that the State-owned utility has been on this country’s growth since loadshedding and State capture sapped confidence in Eskom over the past decade. Most concerning for South Africa’s national interest is that this resistance coincides with once-in-a-generation changes in the global energy sector, whereby electricity is poised to enter a new era of ubiquity and where electro-States are emerging as world leaders.
For South Africa, which has all the ingredients needed to become an electro-State, the answer lies in embracing, not resisting, the reforms needed to shepherd in a more distributed, diversified, digitised, decarbonised and democratised industry.
Instead, there are indications of the emergence of a more backward-looking project, galvanised, in part, by the laudable successes Eskom in tandem with wider sectoral investment has made in tackling loadshedding.
Policy confusion has also resulted from the ill-advised decision to return ‘shareholder’ responsibility for Eskom to the energy ‘policy’ department, which now has the muddled mandate to set forward-looking electricity policy for the country as whole, while also being responsible for the narrow commercial interests of Eskom.
The challenge to South Africa’s energy transition is also being amplified by a political ecosystem that is being actively contested by special interests and is generating antagonistic, often false, narratives disconnected from economic and commercial realities.
This was epitomised by a recent statement by the Portfolio Committee on Electricity and Energy that, without any sense of irony, laments the employment risks linked to the just energy transition, while making no mention of the role that unreliable coal plants have played in South Africa’s recent catastrophic growth and jobs performance. Not to mention negative health impacts and the threat that an interrupted energy transition would pose to South Africa’s future export competitiveness.
Instead of retreating from the reforms, it is now more crucial than ever that there be an acceleration.
The National Transmission Company South Africa must become a fully fledged independent Transmission System Operator, with the balance sheet and asset base to match. The South African Wholesale Electricity Market has to be launched next year as announced. The build-out of the grid, including through the mobilisation of private capital, should be hastened. And the regulator and the energy department need to be capacitated to oversee reforms and guide tariff policy in a way that promotes growth, and is supportive of vulnerable households.
Given the moral hazard facing the department, it is up to the National Energy Crisis Committee (Necom), which played an important role to help ease loadshedding, to seize the initiative. If Necom fails to step up, there is a real risk that South Africa’s electricity policy will lose its way.
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