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Eskom is looking to the future – at last

Defend Truth

Opinionista

Eskom is looking to the future – at last

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Toby Shapshak is publisher of Stuff (Stuff.co.za) and Scrolla.Africa.

Eskom CEO André de Ruyter has a philosophical – but not naive – approach to the SOE’s challenges and is seeing beyond South Africa’s coal addiction to new, appropriate technologies and smarter investment strategies

First published in the Daily Maverick 168 weekly newspaper.

André de Ruyter is the most important businessman in South Africa today. If the Eskom CEO can’t deal with its debt, its notorious inefficiency and the load shedding problems, the whole country will suffer. It wasn’t helped by an explosion in Medupi this month, which caused an estimated R2-billion in damages and will take two years to repair.

De Ruyter is planning to evolve Eskom into a modern power utility, lessening its dependence on coal and embracing cheaper technologies in renewables, while keeping an eye on the upcoming EU carbon border tax.

Faced with an enormous R400-billion debt from State Capture and 66% overstaffed, according to a 2016 World Bank policy research working paper, Eskom is in a deep financial hole – one that threatens to pull the country down with it.

De Ruyter, according to The Sunday Times, said yes to the most poisoned chalice of a job in the country – even more so than the Bafana or Springbok coach – after 27 black executives were asked to apply for the job but declined. He must have known he would be vilified and his reputation could be damaged, but he took the job anyway.

But De Ruyter is strangely optimistic about what can be achieved with Eskom.

“I think we are in a fortunate position that we are faced with an array of power stations that are rapidly approaching their end of life. They’ve had a very hard life, they’ve been run far harder than norms would dictate, and they haven’t been maintained properly,” he told me in a wide-ranging podcast about Eskom’s future.

The “incredibly expensive” estimate to bring them into full compliance from an environmental point of view is about R300-billion. “And of course, you earn no return on that money. You don’t get any new-generation capacity.”

Even more concerning, the costs of coal are now going to become more expensive because of the environmental abatement costs and increasing costs of carbon emissions. Meanwhile, competing technologies are becoming increasingly affordable.

“And if you’re a businessperson, which I think I am, you look at this, and you say: well, do we invest R300-billion in environmental compliance costs? Do we spend more time on extending the life of our existing fleet? Or do we see this as an ironic opportunity to pivot the industry away from carbon to a cleaner, greener future?

“And, by the way, in the process attracts significant concessional funding – from international lenders who are very concerned about climate change.”

Even more disastrous is that insurance firms are increasingly less willing to insure fossil fuel polluters, even if Eskom could secure funding.

Meanwhile, the cost of renewable energy and battery storage plunged 60% from 2015 to 2020 and is expected to decrease another 30% by 2025.

International funding opportunities abound. De Ruyter quotes figures of $40.5-trillion in total global so-called environmental, social and governance assets under management in 2020. This is part of Eskom’s Just Energy Transition Plans proposal presented to the Presidential Climate Commission in July.

De Ruyter may seem philosophical about Eskom’s seemingly insurmountable challenges, but he is clearly not naive.

“Great challenges in human history have often given rise to great opportunities and great developments. If you look at the Second World War, it gave rise to a whole bunch of technological innovations that we still benefit from today. The same with Covid. The same with the energy crisis in South Africa.

“If we had built the power stations that Eskom had suggested 15 years ago, we would still be bound to coal for an extended period of time, because we would probably operate those power stations until the end of their lives,” he said.

“But now, because ironically we didn’t invest, we have load shedding, and we have a shortage of generation capacity that coincides with this opportunity of ‘let’s see what we can do to turn this challenge into an opportunity’.”

He added: “And that’s the great thing about the challenge that we currently face.”

If there is one person in South Africa who should be this optimistic, it should be the CEO of Eskom.

South Africa needs the vision and commitment to move past coal and into a greener, more sustainable future. Thankfully, André de Ruyter gets it. DM168

Toby Shapshak is the publisher of Stuff.co.za and Scrolla.Africa.

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

 

 

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All Comments 6

  • Wind and solar cannot do it. They need 100% backup for when there is no wind or sun. So you double up on infrastructure where half of your investment is idle: when the wind blows and the sun shines, the backup is idle and when the wind drops or the sun doesn’t shine, the backup kicks in and the “renewables” are idle. It is this doubling of infrastructure which causes Germany to have the highest cost of electricity in the world. Before Eskom was gutted, we had cheap electricity without “renewables”.

    • That is not true. Wind and solar complement each other quite well, in seasonal/diurnal terms. The highveld for example has very sunny winters – when heating demand is highest. The need for base load power – relying on sources that can be easily stored like coal, oil or gas – is thus not so very large, and nothing like “100% backup”.
      Germany has expensive energy for other reasons – not least, that they have been “going renewable” in a proactive way, even when renewable have been far more expensive than coal, gas or oil. As well as their very strict, i.e. expensive, environmental requirements on facilities using fossil fuel.
      There is a further form of renewables that has been less considered but is also fully storable as base load: namely the various forms of biomass energy. Firewood is the obvious simplest example, it is just another form of combustible carbon; but of course few countries can supply huge quantities of wood. But other forms of “energy crops” and energy forestry are fast developing and expanding in some parts of the world. Sweden calculated that up to one third of total energy demand could be provided by energy crops (crops that do NOT compete with food production, as US ethanol programs have often done).
      Finally one must shift far more attention to the demand side. Energy efficiency is often cheaper (and provides far more jobs) than increasing energy supplies. Energy conservation (NOT the same thing as energy efficiency!) is another huge field.

    • Hey
      Not quite sure whether you mean I make pivotal i.e. important points, or that I should pivot i.e. turn on my heels cos you think I’m going in a totally wrong direction – ??!
      I do have 40+ years in energy planning, Nordic and internationally … with particular focus on energy efficiency, renewables, low emission solutions and decarbonisation pathways …
      A final word on deregulation and “unbundling” the energy sector into three entities. Experience in many countries showed that this initially led to lower prices with increased competition and efficiency, but that soon bottomed out. So it needs to be designed carefully. A further question in SA’s sad context, is whether it would not simply lead to three corrupt and mismanaged entities replacing one.

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