Eskom’s limitations restrict economic recovery, says expert

The mining industry has added its voice to the call by big business to increase electricity generation in a way that will not only unburden power utility Eskom, but attract more investment that will foster economic recovery and growth, as well as create jobs, but an energy expert believes it’s not enough.

Industry’s proposal seemed to be a compromise and fell short of the more radical view of energy expert and strategist Dr Ted Blom, who said energy caps were unnecessary and impeded energy supply and economic growth.

Blom said he was “absolutely for the opening up” and zero restrictions. “This capping thing is artificial, it is meant to keep the monopoly on Eskom,” he said.

“If you want more investment and economic growth you need uncapping, we should not constrain the economy like Mr [Gwede] Mantashe.”

The mining industry favoured an increase from 10MW to 50MW which would attract investors. The miners, who were hardest hit by load shedding in the last decade, were of the opinion that additional electricity security by other players would not compete with Eskom, but would provide a desperately needed supplementary supply that would “help stabilise the grid and enable the economy to resume a higher level
of growth”.

The Minerals Council South Africa said security of electricity supply must be established to enable recovery from the pre-Covid fiscal crisis and the Covid-19 pandemic. It was need for growth, to protect jobs, create new employment opportunities and grow investment.

This was recognised by the energy security measures included in the National Economic Reconstruction and Recovery Plan. The council aligned itself with the submission by Business Unity South Africa (Busa) to the department of mineral resources and energy for the schedule 2 licence cap to be increased from 10MW to 50MW.

The council said it backed meaningful amendments to schedule 2 of the Electricity and Registration Act 2006 (ERA) to enable additional electricity generation to improve energy security, which ultimately would foster economic recovery and growth.

Busa proposed drastic changes that would enable supply to be boosted via legislative amendment.

Minerals Council chief executive Roger Baxter said: “In particular, we support the proposal to increase the schedule 2 licence cap from 10MW to 50MW.

“A limitation of 10MW may unlock embedded generation for commercial operations, but it will not enable investment in larger self-generation projects for larger industrial or mining operations.

“A cap of 50MW will allow for more than 5 000MW of new, mostly renewable electricity generation to be unlocked through investment by the private sector.”

Baxter said this electricity would not compete with Eskom, but would provide desperately needed supplementary supply that would “help stabilise the grid and enable the economy to resume a higher level of
growth”.

High electricity prices and unreliable supply due to load shedding had caused irreparable harm to South Africa’s economic and development performance and aspirations and had a major impact on the mining industry.

It cited the estimates that indicated that in 2020 alone, load shedding had cost the economy between R80 billion and R160 billion and continued to impede the economy.

Baxter said: “It is critically important for all South Africans to realise that one of the critical binding constraints to higher investment and economic growth is that Eskom simply does not have  enough reliable electricity generation capacity to keep the lights on, let alone the extra electricity supply needed to support higher economic growth.

“Unlocking 5GW of new electricity supply capacity will not cost the government a cent and will protect up to 80 000 jobs, create up to 70 000 additional jobs, and unlock up to R150 billion in capital investment…

“This will go a long way towards easing existing electricity supply constraints and unlocking further potential.

“For larger industrial and mining operations, the need [for more] power to capture economies of scale with larger, more cost-effective projects will become increasingly critical.

“And, if enabled, this could unlock further opportunities for economic and socioeconomic growth and development.”

Baxter said the availability of secure, reliable and affordable energy supply underpinned economic growth and prosperity the world over.

“If we are to succeed in improving our country’s economic prospects and improve the lives of South Africans, we must implement further reforms based on the most practical, fastest, lowest-cost and lowest-risk option,
which remains embedded electricity generation,” Baxter said.

Blom said for large investors, the 50MW was not large, therefore would still constrain the economy.

“All the caps are artificial, they will constrain the economy. Energy must be opened up,” he said.

– ericn@citizen.co.za