Mantashe suggests forming second state-owned power utility to solve energy crisis — Ramaphosa agrees
As the ANC-led government scrambles for solutions to the worsening, 14-year-old energy crisis they’ve markedly failed to arrest, Gwede Mantashe — Mineral Resources and Energy Minister and ANC National Chairperson — has suggested the answer lies in the creation of SOE public utility to compete with Eskom.
As businesses and households continue to be silenced and darkened by the imposition of rolling blackouts, those tasked with ensuring security of supply are scrambling for solutions for the 14-year-old — and ever-worsening — crisis successive ANC-led governments have manifestly failed to resolve.
Most recently, Mineral Resources and Energy Minister and ANC National Chairperson, Gwede Mantashe, has suggested setting up another state-owned electricity public utility to compete with Eskom — something which ANC President Cyril Ramaphosa has said he agrees with.
Addressing the South African Communist Party (SACP) conference in his capacity as ANC president on Friday, Ramaphosa sought to reaffirm the role of the state in the development of the country.
“We should not diminish the central role of the state in coordinating, in planning, in guiding, in enabling the development of the economy. And yes, in setting up companies — state-owned enterprises — through which it will foster the employment of our people. That is what we would want to see the state doing,” he said.
“We need, therefore, comrades, a strong, capable, developmental state with a public sector that has a dynamic and agile private sector that work together and complement each other. If the state is to effectively support growth and development as envisaged in ‘ready to govern’ then it needs to have sufficient capital, skills and must highlight the use of technology as one of the key enablers in modern times. It needs to be efficient, it also needs to be innovative but it also needs to be competitive even if we will have state entities competing against each other.
“For instance”, Ramaphosa continued, “Comrade Gwede Mantashe, in dealing with this problem of energy, has said ‘President, why don’t we set up…another state-owned entity so that we lessen our risk just as they are exposed in one entity,’ and I’ve said I agree with him because the state must continue to play a key role.”
He continued, “our national utility has not only been in a state of distress…for easily 15 years but it has been operating according to a model that is no longer suited to the technology or economic conditions of the present.”
Explaining that Eskom being the sole electricity utility in South Africa was a grave strategic risk, as failure threatened a “spectacular calamity”, Ramaphosa went on to make comparisons with the Chinese approach.
“If we look at other countries like China, for instance, it has a number of state-owned electricity-generating companies that even compete amongst themselves. Compete amongst themselves to even bring prices down. And that is a future that I think we should begin to imagine that yes — we should reduce the risk that the country could be exposed to like right now we are exposed to a monumental risk because the one company that has been generating electricity for 100 years with power stations that are more than 50 years [old]…and that in part is part of the weakness and risk.
“We are today witnessing, the great risks associated with placing sole responsibility for electricity generation in one company and that is why when comrade Gwede flighted the idea of saying ‘why not a second one [power utility] which can be owned by the government’ and I said ‘I think that’s not a bad idea.’”
The revelation comes a few days after Ramaphosa, in his capacity as President of the Republic of South Africa, said at the tail end of his weekly newsletter that he has over the past two weeks “been working with the relevant ministers and senior officials on a range of additional measures to accelerate all efforts to increase our electricity supply. The message is clear: this is no time for business as usual. We need to act boldly to make load shedding a thing of the past.”
He continued, “We will soon be completing the detailed work and consultations needed to finalise these further measures. We will then, in the coming days, be able to announce a comprehensive set of actions to achieve much faster progress in tackling load shedding,” adding that “there are no easy solutions to our electricity crisis but we are committed and determined to explore every avenue and use every opportunity to ensure that we generate enough electricity to meet the country’s needs.”
What these measures and set of actions might be is unknown at this stage but there are some indications as to what they might include.
When asked by Our Burning Planet on his thoughts about the proposal on Friday, Chris Yelland, energy analyst and Managing Director at EE Business Intelligence, with a chuckle said “this cannot be considered a solution to the load shedding of today,” adding that the idea of establishing a state-owned company to resolve the issues created by another failing state-owned company seemed foolhardy. “I just don’t get it.”
Earlier in the week Gaylor Montmasson-Clair, a political scientist and Senior Economist at Trade & Industrial Policy Strategies (Tips) — an independent, non-profit, economic research institution — shared some of his ideas for how South Africa might more rapidly resolve the power crisis with Our Burning Planet.
Montmasson-Clair posited that an avenue to rapidly bring additional electricity generation capacity in South Africa would be to further enable the development of distributed generation.
He noted that “Since 12 August 2021, the licensing exemption threshold has been increased to 100MW. Projects under 100MW are exempted from licensing but must be registered with the regulator. Projects larger than 100 MW remain out of this dispensation and must be enshrined in the IRP or obtain a ministerial deviation,” and suggested that “the application and definition of the 100MW licensing threshold should be revised.”
Our Burning Planet, accordingly, sought to get the official position on these recommendations by the delegated authorities.
In a webinar on Thursday held by the Presidential Climate Commission (PCC) in conjunction with officials from the Department of Mineral Resources and Energy (DMRE) as well as the Council for Scientific and Industrial Research (CSIR), some descriptions of what measures and actions the President could and might take to ameliorate the impact of Eskom’s capacity shortfall were laid out.
When asked by this reporter in the webinar about the 100MW threshold and whether it posed an impediment to more rapidly dealing with the current power crisis, Crispian Olver, the PCC’s Executive Director responsible for running the Secretariat of the PCC and its various policy and research programmes, responded that “The National Planning Commission [NPC] has recommended that the 100MW be done away with completely. This may well form part of the package of measures that the President is going to announce.”
Business Maverick has previously reported that the NPC — chaired by Minister in the Presidency Mondli Gungubele — put forth a number of proposals including, but not limited to, removing the 100MW ceiling “because Eskom’s grid code and grid connection authorisation process is sufficient to regulate this growing market.”
Another one of the measures government has tried to implement to arrest the worsening crisis they’ve overseen for more than a decade was announced by Ramaphosa when in 2020 he announced an Amendment to the Electricity Regulation Act 4 of 2006 (ERA) allowing municipalities in good financial standing to procure their own power.
However, Montmasson-Clair explained to Our Burning Planet, “the process is stalled due to some legal confusion on the need for municipalities to apply for a ministerial approval.”
When asked in the webinar about this, Olver said that “The National Planning Commission and the AMEU [Association of Municipal Electricity Utilities] have both proposed a substantial relaxation of the regulations holding back municipal self-generation, including removing the requirements for a Ministerial determination.”
Speaking to the crisis and the need to shake off the lethargy that has plagued the DMRE, Jacob Mbele — the recently appointed Director General in the department — in Thursday’s webinar said, “It is common knowledge that the power system is currently constrained and Eskom has indicated that the outlook is unlikely to improve in the near future.
“This is also confirmed in the medium-term system outlook that was published by Eskom and Nersa last year, which indicated the system will likely remain constrained for a period longer than it was envisaged in the IRP 2019.”
Mbele continued that “we understand and we all know the main drivers of these constraints to be obviously the lower energy [availability] factor of existing…coal feed plants and the delays with the interventions that had been…undertaken to date to bring additional capacity on the grid. I am aware that there is a general view out there that the 2019 IRP is outdated and before I provide progress, I want to put a counter view and argue that it is actually not outdated, it is still relevant.”
The Integrated Resources Plan (IRP 2019) is South Africa’s energy blueprint. The DMRE has faced criticism for not updating the IRP sooner, as the introduction to the 2010 IRP (the last one to come out before the 2019 IRP), states:
“The Integrated Resource Plan (IRP) is a living plan that is expected to be continuously revised and updated as necessitated by changing circumstances. At the very least, it is expected that the IRP should be revised by the Department of Energy (DoE) every two years, resulting in a revision in 2012.”
The updated IRP is expected to be released for public comment in 2023.
Mbele, in the webinar, continued to defend the IRP 2019 saying that “The challenge with the IRP 2019 is that it does not make sufficient provision for additional capacity because of the assumptions that we had made. But it does not make the proposals of the energy mix in the IRP irrelevant.
“We are proceeding with the implementation and rollout of the rest of the capacity seen in IRP 2019…What is there is not irrelevant. We just need more of it,” he said.
Eskom, which has been forced to implement rolling blackouts, previously told Our Burning Planet that, “The two primary reasons for load shedding are the unreliability and unpredictability of Eskom’s generation fleet, resulting in low availability as measured by the energy availability factor (EAF), and a lack of generation capacity in the country.
“To stop, or significantly reduce load shedding requires both of these issues to be addressed — critically the addition of 4,000MW — 6 000MW of new generation capacity to the national grid.
“The Department of Mineral Resources and Energy is responsible for procuring additional capacity, which will both provide direct capacity to reduce load shedding but also provide Eskom with the capacity or “space” in which to perform the deep, reliability maintenance that is essential for improving the reliability and predictability of the generation fleet.” OBP/DM