South Africa

Op-Ed: The coming renewable energy transition

By Dirk De Vos 20 March 2018

One has to put it in the starkest terms: large numbers of people working in our fossil fuel-based energy sector are going to lose their jobs and it will happen in the near term. By DIRK DE VOS.

Last week, the National Union of Metalworkers SA (Numsa) teamed up with a shady and unknown entity, TransformSA, to launch an interdict preventing the signing of the outstanding Independent Power Producers (IPPs) power purchase agreements (PPAs). The National Union of Mineworkers (NUM) chimed in that they opposed Eskom being the guaranteed off-taker of privately owned power generators that lock-in the profits of the qualifying IPPs.

Both unions, correctly, suspect that increasing amounts of renewable energy in the system will impact on the jobs of their members either in coal mining or in Eskom itself. The unions do not say that they are against renewables but rather that they are opposed to the creeping privatisation of the energy sector and that IPPs are some sort of Trojan Horse for just this.

Actually, it is far too late to talk about halting privatisation. Since 2006, Eskom has taken on enormous amounts of debt, about half a trillion at present, and needs to take on a lot more. One could say that debtholders from the private sector are already calling the shots. The reconstitution of the Eskom board, the appointment of its new CEO, the firing of the corrupt former CEO, Matshela Koko, interim CEO, the acting CEO Sean Maritz and Gupta-linked former CFO were very significantly about satisfying the minimum requirements of these “investors” on governance and operational matters.

Going forward, Eskom has no choice but to embark on wide-scale job retrenchments if it is to have any chance of survival. Moreover, many generators and the collieries that service them will have to be closed in the next decade.

Prices for new solar PV generated electricity in other sunny countries such as Mexico are now just 24c/kWh, well below Eskom’s own existing generating costs and almost as low as just Eskom’s current coal costs measured on a per kWh basis. It is simply impossible to avoid the transition to renewables – purely on a cost basis.

The rather unusual nature of the South African electricity supply system is rooted in the history of Eskom being created to support the mining sector and then using its excess power to expand into the country’s cities, towns and even its rural areas and become a vertically integrated monopoly and one of the largest electricity utilities in the world. So far, nearly all independent power is provided via privately owned and operated IPPs. As such, IPPs have also come to be seen as threats to the public ownership of the electricity system and opposed on that basis.

The truth is that there is nothing inherent in renewables that means that they have to be privately owned and, likewise, large coal-fired power stations don’t have to be publicly owned. South Africa’s choices are a unique set of circumstances compared to the range of options used elsewhere.

However, it is worth exploring the debate about whether technology choices are in fact value neutral on a political economy basis. It is one of the more interesting philosophical questions right now. In the US, following a never-ending series of shootings, there are increasingly pressing calls to limit access to firearms. The response from the guns lobby comes down to this: “Guns don’t kill people, people do.” The argument is that a technology (in that case, a firearm) is value-neutral but the people that use them are not. There are the same arguments about smartphones and other technologies.

Philosophers such as David Morrow argue differently. He argues that technologies are necessarily value-neutral because they change the costs of certain options. The cost-benefit analysis changes and that has an impact on society as a whole.

Consider the land debate in South Africa and the difficulty of introducing new black farmers into the sector. Morrow looked at an example provided by the technology theorist, Langdon Winner: the effect of the introduction of tomato-harvesting machines.

Unsurprisingly, these machines mainly benefit larger farmers who could afford them and who were able to use them to harvest many more tomatoes than before. The increased supply of tomatoes in the market reduced the market price of tomatoes to all farmers but the increase in production by larger farms using the machine more than offset the reduction in tomato prices. There were, however, significant losses to small farmers who had to harvest more tomatoes, with their limited technology resources, to achieve the same income they had before.

According to Morrow, new technologies introduce two types of problems.

First, a collective action problem. This describes scenarios in which individuals can choose to co-operate with their fellow citizens or defect. It is an individual decision. At what point does the individual benefit provided by defecting to a new technology outweigh the individual benefits of co-operation? An example of this might be high income individuals whose electricity consumption cross-subsidises poor customers defecting from the grid in favour of rooftop solar.

The second problem identified by Morrow is the delayed gratification problem or the choices between short-term and long-term rewards. Lowering the costs of instant gratification, as consumer focused technologies often do, makes it more difficult to prioritise long-term rewards. On a collective basis, social capital is eroded if society is not giving enough attention to the long term.

In a 2014 essay, Bloomberg Energy founder Michael Liebreich discussed the nature of the coming energy transition. In it he looks at what it might look like beyond the tired old debates between those wanting to keep the status quo as it is and proponents of climate change. He also goes beyond the more nuanced, second-level discussions about the benefits of clean energy, improved air quality, locally based jobs, technological breakthroughs, economic resilience, public health, geopolitical issues and global military spending, exposure to commodity prices and so on.

There is, Liebreich suggests, a third level that looks at the very social structures in which we live. Fossil-fuel based energy is not value-neutral, it lends itself to scale and centralisation; both physical centralisation of huge oil, gas and coal-fields, massive power stations, universal grids, pipelines, refineries and the like, but also political and economic centralisation.

Liebreich sketches out a fossil fuel systems diagram in which one of the causal loops would see the fossil fuel industry gorging on subsidies and externalising substantial costs onto others, generating profits used substantially in lobbying, physical protection, community compensation and bribery.

These, in turn, secure political access and entrenched economic advantage. He sees these characteristics being as much a part of the old energy system as any pipeline or power station.

Against that, clean energy is inherently more local, more distributed, more accountable. Whether one finds wind farms a blight on the landscape or otherwise, they force us to talk about the trade-offs needed to generate electricity which few confront when discussing, say, the open-cast coal mines and polluting power stations in far-away Mpumalanga of the Waterberg and their impacts on the health of people who work and live there.

As transportation becomes electrified, cities will become more livable as we shift to electric vehicles, public transport, walking and cycling, shared ownership and other, cleaner options. As the energy system goes clean, Leibreich argues, so it will become more local, more accountable, more human in scale and more socially inclusive.

By socially inclusive, Liebreich means representative of other races (than one’s own), sexual orientation and particularly women. At present, he says that the energy sector is probably the most socially conservative industry in the world. He correctly points out that women are disproportionately disadvantaged by energy poverty, bearing the extra workload and health impacts of cooking with traditional biomass.

Access to modern energy is essential for women to enjoy basic healthcare, particularly during childbirth, and for girls to have time to study. Also correctly, getting more women into the sector is not merely about fairness but about effectiveness. Women form a huge part of the market. A growing body of research shows that companies with diverse management teams outperform those that do not.

For the outlines of what a future energy system might look like, Liebreich points to other sectors that have thrown off centralised, state-dominated models and become less macho – such as telecoms, media and the airline industry. New clean technologies and distributed generation ought to introduce a democratisation of social as well as electrical power.

At the same time, the world is entering into what is now described as the fourth industrial revolution driven by emerging technologies in Artificial Intelligence, nanotechnology, robotics, 3D printing and other advancements which will have enormous impacts on the way industry manufactures almost anything.

Yet what do we see happening in South Africa? In a recent survey measuring 114 countries’ readiness for the coming energy transition, South Africa comes in at 113, beating only Zimbabwe. This is in a country that has a significant comparative advantage to other countries that are not as blessed with our climate. Falling renewable energy prices elsewhere certainly means that South Africa begins to lose the advantages it would otherwise have against countries that have chosen to embrace the energy transition.

For its part, Numsa appears to sort-of understand the basics of the energy transition and the need for a just transition to renewables. They take the view that renewables should be brought under public and community control, requiring a reinvention of regulatory bodies and the establishing of mechanisms for meaningful public involvement and democratic decision-making.

However, they also want to overthrow the “… capitalist mode of production produces and reproduces human misery, disease, underdevelopment, joblessness, poverty and inequality all the time” and oppose the capitalist capture of renewable energy in favour of a socially owned and democratic alternative.

The truth is that renewables as a technology and the energy transition don’t favour socialist centralised planning – it does the opposite. This means that the government and the energy sector workers’ unions cannot spend any more time discussing their ideological preferences. That is pure self-indulgence.

One has to put it in the starkest terms: large numbers of people working in our fossil fuel-based energy sector are going to lose their jobs and it will happen in the near term.

The mismanagement and over-staffing of Eskom is the immediate cause but the march of renewables makes it inevitable in any event. Not stating this clearly enough is a dereliction of duty to those who will become unemployed and their dependents. DM

Photo: Members of the National Union of Metalworkers of South Africa (Numsa) march through the Durban central business district, September 12, 2013. Photo: REUTERS/Rogan Ward

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