On the day last week that the High Court in Pretoria found that the climate change effects of a proposed new coal-fired power station had been inadequately considered, the National Union of Mineworkers (NUM) announced its intention to take action to stop job losses in the coal sector.
This followed protest action two weeks ago by coal truck drivers who nearly brought Tshwane to a halt. They were protesting against renewable energy because their livelihood depends on transporting coal to coal-fired power stations and they had heard that four such power stations were to be closed.
In fact, the reasons for the closures are more complex. Yes, Eskom is obviously cognisant of renewable energy coming on stream.
In 2016 Eskom’s board nonetheless approved a fleet renewal strategy for ageing power stations in order to save jobs. Now, however, reduced energy demand has left the regulator no choice but to close down the ageing power stations.
Whether or not the drivers were entirely correct in blaming their pending plight on renewables, or NUM had considered SA’s environmental obligations, is beside the point because they were raising an important issue.
SA’s journey from a coal-fired economy to an energy mix combining coal, nuclear, gas and renewable-sourced energy is under way. It is a highly complex journey that must be undertaken with due consideration for the tens of thousands of our compatriots who rely on coal for a living.
Adding to the complexity is the critical role that Eskom is asked to play in society. It is a gigantic company employing tens of thousands of people. As a state-owned company in a developmental state, it has obligations both to its bottom line and the socioeconomic transformation of SA.
While there may be very sound financial arguments for shutting down four old coal-fired power stations, from Eskom’s financial point of view, what is the value of the loss of 6,000 jobs that put food on the table for 30,000 citizens? This kind of question keeps me awake at night.
One thing is very clear. We are going to need to retrain and reskill a large cadre of coal workers to enable them to take advantage of new opportunities in the renewables sector. The independent power producers (IPPs) are not state-owned companies, they are mostly foreign-owned. We are going to have to find the ways and means to get them to help us.
Then there’s the question of affordability and cost. Our IPP programme was conceived at a time when SA’s economy was expected to expand at a rate of 5% and electricity demand outstripped supply.
But our economic growth has not met those expectations, and we are now generating a surplus of electricity.
There is a real risk of excess capacity; take-or-pay agreements commit the government to long-term purchasing even when power is not required, as is the case currently. We have an average surplus of 5,600MW, including operating reserve, on any given day. Excess capacity can lead to stranded assets, which would translate into rising energy costs and undermine medium-to long-term growth.
The price of "going green" will come down as new technologies are invented and perfected, but in the meantime the majority of SA’s people can’t afford to pay more than they already do for electricity.
— “Reduced energy demand has left the regulator no choice but to close down ageing power stations.”
Eskom posted a net profit of R4.6bn in the 2015-16 financial year and is projected to post a profit for the financial year ending in March.
It estimates it will need to spend R340bn to meet environmental compliance obligations, placing significant upward pressure on the overall electricity price. For Medupi Power Station alone, there is additional cost of R40bn for flue gas desulphurisation installation.
That humankind has yet to invent affordable technology to store power generated by the sun and wind that can meet demand when the sun is not shining or the wind is not blowing is another complicating factor. It again mitigates for a sensible energy mix.
As of January 2017 Eskom had connected 62 IPP projects as part of the Department of Energy’s Renewable Energy Independent Power Producer (REIPP) and Peaker programmes. These 62 projects have cumulatively added 4,200MW of generation capacity to the grid.
Another 620MW is expected to be added to the grid in 2017-18 as the third bid window of REIPP projects are integrated into the national grid.
But SA is not about to turn its back on coal. If it were, someone would have told Eskom to stop building new coal-fired power stations.
Electricity supply is not a short-term game. We are not looking to 2020 or even 2030. We look 30 and 50 years into the future, and we see a new era in which we are not totally reliant on coal, renewables, gas, nuclear or anything else.
• Brown is the minister of public enterprises.
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