On unbundling: Don’t privatise the energy transition
Alternative Information and Development Centre |DailyMaverick| 19 August 2021
There are few entities in South Africa that are as loathed as Eskom – and for good reason. Load shedding is clearly public enemy number one, but the utility has also increased its tariffs by 400% over the past decade. These increases have not meaningfully reduced its staggering debt burden and have been accompanied by widespread cut-offs of working-class and poor households. Eskom also remains almost entirely dependent on coal for the production of electricity. This is killing the planet, and thousands of people every year. The current government has a plan – unbundling. Unbundling has been lauded by business and vast sections of the media, whilst for the most part rejected by organised labour.
The latter’s concerns are of the privatisation of Eskom, but unbundling is hardly about the privatisation of an ageing utility in the red. It is about getting Eskom out of the way for private generators, it’s about the privatisation of energy generation. However, screaming “privatisation is bad” is not good enough for those of us who oppose it. It is entirely reasonable to question whether privatisation could be any worse than what we have now.
For most South Africans, the overwhelming concern is that their supply of electricity is both affordable and reliable (and increasingly, clean); not who owns the generation of said supply. However, they should be concerned. The privatisation of generation is bad for Eskom (which we depend on), bad for its workers, and bad for the climate.
Bad for Eskom
The overwhelming majority of Eskom’s coal-fire fleet, irrespective of climate change, needs to be shut down over the coming decades. It is the debilitation of this fleet that brings us load shedding. But new coal power is expensive, or at least when compared to new solar and wind power (although these are hardly as cheap as they are made out to be). If new solar and wind capacity continues to be overwhelmingly restricted to Independent Power Producers (IPPs) Eskom’s generation capacity will simply fall away and incur additional costs as it fails to adapt to, but has to back up, an increasingly flexible power mix. Eskom transmission, whilst able to better secure investment, will hardly be a profitable venture given the poverty of South Africans and will instead subsidise IPP profits as well as the significant costs of upgrading transmission for increasing renewables penetration.
Bad for workers
Eskom workers, alongside those in the coal mines and the communities that surround them, are the most critical constituencies of the transition. These workers are overwhelmingly against unbundling, but this resistance is unfairly taken as them being against renewable energy. Rather, it is a fear of working in a private renewable energy sector that is hostile to unionisation and will never accede to the hard-fought wages, and benefits workers have at Eskom. Of course, many workers fear not getting a job at all. This fear is likely misplaced. The REI4P has seemingly delivered on its operating and construction employment requirements, and a variable renewables-based power sector will need significant over-capacitation (and hence more jobs than coal). However, the programme has done little to drive localisation and industrialisation with the majority of components coming from overseas. Further, the quality of many of these jobs is questionable, with few local principle contractors or employment of skilled engineers and technicians. A New York Times report from the United States and other accounts suggest that renewable energy doesn’t absorb the jobs lost in fossil fuels. These accounts also back workers’ fear of lower wages, benefits and hostility to organising. This is why most workers believe that Eskom should build its own renewable energy, but the utility’s ambitions on this front are sorely lacking, where the bulk of renewables is set to continue to come from the private sector especially in light of the decision to exempt 100MW generators from licences.
Bad for the climate
The International Panel on Climate Change (IPCC) just confirmed what most of us already knew, but often wanted to deny. Major climate change is inevitable and irreversible. The governments of the world have known about and deliberated on the climate crisis for decades. It has essentially come to nothing, with annual emissions barely lower than their 2018 peak. Whilst climate denialism was once a primary concern, this is hardly the issue anymore with the overwhelming majority of major emitters, whether it be state-owned entities or transnational corporations, dubiously committing to net-zero emissions. Rather, it is the continued commitment to the status-quo that prevents any meaningful action on climate. That the market and the pursuit of profit can be the solutions to the crisis of their own making. Investment in renewable energy has been stalling for most of the decade, and whilst the costs have come down (i.e. more capacity per amount invested), renewables account for under 6% of total energy consumed.
Despite confirmation the climate’s trajectory will overshoot the 1.5°C mark, this commitment to the status-quo still pushes a more-than-possible habitable future further out of our grasp. And whilst there are numerous reasons for breaking with our current neoliberal paradigm, what is required is hardly unprecedented in nature (albeit totally unprecedented in scope). The technologies that we need to avert the worst of the climate crisis are available to us. However, their rapid mass rollout and in some cases, further development, are not suitably profitable and therefore cannot happen under the status-quo determined by profitability. Rather, we need unparalleled investment based solely on the need to decarbonise economies, no matter the “cost”. Unbundling, by privatising generation, compromises the public pathway required for the transition we need.
None of the above addresses the perilous state of Eskom. Nothing short of a deep and widespread transformation will turn it into the entity we need. But this is hardly impossible. The current executive should be applauded and further supported in their efforts to recover stolen funds and end dodgy contracts. As for the workers themselves, they’re absolutely fed up with corruption and mismanagement. Empowering them to be the vanguard of accountability is an urgent requirement. The utility already has a just transition office that seemingly has key people who are serious about decarbonisation and protecting jobs. As for the debt, there are already public solutions and various measures of financing our transition. Eskom must be transformed and lead our transition, not unbundled and side-lined. DM/BM
By the Alternative Information and Development Centre, Graphics designed by Lisa Nelson
Read our booklet on “What’s Wrong With Eskom and How To Fix It” [click here to download]
For more on the crises at Eskom, and how they can be resolved check out the resources below:
Read our research report on “Eskom Transformed: Achieving A Just Energy Transition” [click here to download the full report]
Read our booklet on “Why Eskom Is In a Mess and What To Do About It” [click here to download]
For more on why Unbundling will not work read our 4 part series published on the Daily Maverick:
Renewable energy must become a public good By Jonathan Cannard