Opinion

Dirty business as coalition of the sidelined distorts the clean energy debate

Greedy and disgruntled players peddle fallacies about SA's power plan

28 October 2018 - 00:00 By ANTON EBERHARD


It's time to call the bluff of those who oppose private investment in renewable energy independent power projects (IPPs) and the transition away from coal and nuclear set out in SA's new electricity road map, the integrated resources plan (IRP).
It is clear that some are frustrated and angry that they will no longer have access to special deals with Eskom or the coal and nuclear industries. Others may feel marginalised and alienated from President Cyril Ramaphosa's new political dispensation, but their false narratives should not cloud our choices. Hard facts and economic analysis must guide public debate.
Yet it is a coalition of the recently sidelined and embittered that is dominating many platforms, inciting resentment and opposition. It includes elements from the Zuma wing of the ANC, the EFF and other actors with vested interests in nuclear energy and coal, such as the Nuclear Industry Association of SA and the Coal Transporters Forum, metalworkers union Numsa and NUM, a small minority of energy professionals (including some former board members and managers accused of corruption at state-owned enterprises), the notorious Black First Land First and a collection of recently formed advocacy groups such as Transform SA and the SA Energy Forum.
Bizarrely, this coalition of the disaffected has been joined on social media by individuals who deny anthropogenic climate change, as well as some Free Market Foundation members who apparently believe that government-backed coal and nuclear power projects, with a record of massive cost and time overruns, are preferable to SA's highly competitive IPP programme, which has attracted more than R200bn in private investment in projects that have been built on time, within budget and, in the most recent bid round, without subsidies.
The anti-IRP and -IPP advocacy is founded on four fallacies: they argue that solar and wind energy are unreliable and expensive; that the IRP does not adequately take into account the impacts and costs of renewable IPPs on the rest of the electricity system; that these IPPs don't promote local industrialisation or create enough jobs; and that the procurement of IPPs has been corrupt. Each of these arguments is without substance.
Though solar and wind energy were costly in the past, innovation and expanding global markets have led to dramatic cost reductions. The most recent bid rounds in the renewable energy IPP procurement programme yielded prices that are a third lower than Eskom's average cost of supply.
Others claim the IRP ignores the costs of backup and ancillary power services. In fact, the objective of the IRP is the least-cost mix of power sources that delivers an acceptable reliability standard. The Plexos computer model, which underpins the IRP, is the industry gold standard and is used by a large number of utilities and countries around the world. It shows that gas (or equivalent flexible resources) complements the variability of solar and wind energy and, together, their weighted average cost is less than either coal or nuclear power stations.
As for the argument that IPPs don't create jobs, though there is a need for more data and analysis, it is undeniable that renewable energy contributes to local manufacturing and jobs and has potential to do much more. Department of energy data shows that localisation in the renewable energy IPP programme is above 45%. Local equity ownership has exceeded 50% for many projects and more than 80% of debt financing has been from local banks.
The benefits to SA are clear, though there may be room for policy adjustments that ensure that these are distributed more equitably. But on a like-for-like, jobs-per-kilowatt-hour-produced comparison, there is incontrovertible evidence that renewable energy generates more direct jobs than coal or nuclear.
As for conspiracy theories about corruption, the IPP procurement programme has been exemplary in its transparency, competitiveness and fairness.
There have been more than 400 bids over five procurement rounds in which about 92 projects have been awarded under conditions of fierce competition. Bid evaluations and awards have been undertaken under the strictest security, with independent and transparent auditing.
The propaganda techniques used by critics of the IPP programme mimic those of US President Donald Trump. Inconvenient programme attributes are labelled "fake news". This is not coincidental. Members of this coalition have let slip their admiration for Trump's promotion of coal and nuclear energy while ignoring data that shows the decline of both industries in the US.
Facts and logic are probably not sufficient to win the argument for more private investment in renewable energy technologies. Nevertheless, Ramaphosa's administration needs to expose the untruths and cynical agenda of those who seek to make the IRP and IPPs a political football.
IPPs currently contribute less than 5% of SA's electricity. Their costs are transferred directly to consumers through regulated tariffs. Eskom's finances or jobs are not yet directly affected by IPPs. Neither are jobs in coal mines. But it is coming.
Already work has started on a just transition whereby those most affected by job losses might be empowered by opportunities in new energy industries. Now is the time to chart SA's energy path, not only in our energy mix, but also in Eskom's structure and the growth of competition.
The economics of the energy transition to low-cost renewable energy, private investment and increased competition are inexorable.
Ramaphosa and his ministers need to take the lead and embrace global innovation in energy markets, which can provide competitively priced, reliable and clean energy for economic growth and prosperity for all.
• Eberhard is a professor emeritus and senior scholar at the University of Cape Town's Graduate School of Business

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