Opinionista Saliem Fakir & Ellen Davies 23 May 2017

Eskom risks obsolescence in the energy technology race

Poor governance at Eskom is overshadowing an issue that should be of much greater concern to the utility and policymakers: the rapid development of new technology in the energy space.

The overwhelming focus of commentators in the energy sector over the past year has been on questions of governance and financial mismanagement at Eskom.

And indeed the questionable comeback of CEO Brian Molefe serves to illustrate how bad things have become. Molefe’s return flies in the face of damning allegations made against him in the State of Capture Report and most recently by the former Minister of the Department of Mineral Resources, Ngoako Ramatlhodi.

While these issues are critical, our exclusive focus on them over the past year or so means that we have lost sight of a more fundamental challenge facing the utility. The future of Eskom hangs in the balance, not because of poor governance and financial mismanagement, but because of the rapidly changing nature of the energy landscape and Eskom’s inability or unwillingness to remain on top of this.

The increased spotlight on governance at the utility and public pressure for Eskom to sort out its house will undoubtedly lead to better management. But while we continue to focus exclusively on this, disruptive technologies are completely reshaping the energy landscape, and Eskom is falling further and further behind.

Even the most optimistic commentators could not have predicted the rate at which these technologies, and in particular renewable energy technologies, are changing the shape of our energy future.

It seemed beyond the realm of imagination that clothes and watches would be able to capture the mechanical energy that is generated by the movement of people’s bodies. But this is now available.

At a micro scale it gets even crazier than this. Scientists at MIT and Harvard have developed technology that can capture the energy produced in the inner ear to power small sensors. This they hope will be able to power medical devices, such as Pacemakers, eliminating the need for batteries.

At a more macro scale, technology now exists that can capture energy on roads from the weight of trucks, cars and pedestrians. Renewable energy technologies like solar photovoltaic, wind energy and concentrated solar power are not only continually improving but are also coming down in cost.

We are in the midst of an energy revolution that is completely reshaping the way in which we view energy – from how we source it to how we will use it in the future.

If one looks at global spend on research and development, the movement of investment, the level of open source entrepreneurship and innovation, and the global expansion of cleaner technologies, it is clear that these innovations will continue to accelerate at a rapid pace.

Our ability as a country to guard against and also leverage the rapid technological transformations taking place, not only in the energy space, but more generally within what the World Economic Forum refers to as the Fourth Industrial Revolution, will be based on the ability of our policymakers to look beyond our immediate concerns and plan for the future.

Given the rapid changes taking place in the energy sector, the question we should be asking ourselves is: What will energy production, distribution and consumption look like in 10 or 20 years and, given this, how can Eskom ensure its longevity?

The sad reality is that this energy future is simply not top of mind for our policymakers. The Integrated Resource Plan (IRP) is a prime example of this. Stuck in the paradigm of least-cost options and mega-infrastructure builds, the IRP falls woefully short. It remains uninformed by global and domestic trends and inflexible to the changing nature of energy production, transmission and distribution.

The unintended consequence is that Eskom is being pushed further and further into obsolescence. Instead of exploring how Eskom can leverage new opportunities, policymakers and the utility itself remain strangely committed to maintaining the status quo and stuck in an outdated model of energy supply.

Increasingly, consumers of energy are becoming producers. The conventional business model that vertically integrated utilities like Eskom continue to rely on ignores this reality. Ironically this opens up a much bigger space for the private sector.

Eskom has and should continue to have a key role to play in energy provision. Energy is a public good which should be provided by the public utility. But unless it can adapt, questions of financial mismanagement and poor governance may well be the least of its problems. DM

Saliem Fakir and Ellen Davies are based at the Policy and Futures Unit at WWF South Africa.

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