GEORDIN HILL-LEWIS: The power crisis is solvable — 10 things the government can do immediately

Eskom’s latest barrage of blackouts began more than three weeks ago, on June 20. Throughout this period — even as we were experiencing stage 6 load-shedding and the looming risk of stage 8 — there was almost total silence from the national government.

To borrow one commentator’s understated descriptor, this silence was puzzling — load-shedding to this degree is an unmistakable socioeconomic crisis, and one the national government is best positioned to solve.

On Monday President Cyril Ramaphosa broke his silence (even if just with a murmur) in an opinion piece that referred to a “comprehensive set of actions” that will be announced “in the coming days”. “There are no easy solutions to our electricity crisis,” the president concluded.

On the contrary, energy experts often express frustration to me that SA’s energy crisis is — on the level of policy and regulation, at least — an undoubtedly solvable one. Of course, implementing the interventions needed to achieve energy security may not be politically expedient. Big coal means big tenders, and anything perceived as a threat to its dominance will be fought with every available weapon by its beneficiaries, including sabotage of Eskom’s assets.

Once the president has made his choice between maintaining good relations with the coal mafia and ensuring the socioeconomic wellbeing of the entire nation, the policy decisions are straightforward. This is because several municipalities, as the constitutionally mandated reticulators of electricity, are ready to purchase electricity from independent power producers (IPPs), store it, and sell it on to residents, alleviating Eskom’s generation burden and ending load-shedding over time.

In Cape Town we have already begun to procure additional capacity from IPPs. But the process required by legislation in respect of these contracts is highly complex and time-consuming. By addressing this issue (and others), the government could help us (and other municipalities) help the country by bringing more capacity online quicker.

I have urged Ramaphosa to announce a list of 10 decisive actions, which I believe can help alleviate the power emergency as soon as possible:

• Abolish the 100MW licensing threshold for embedded generation and ensure a registration period for IPPs not exceeding 14 days. Not only is this threshold arbitrary, but it makes little financial sense. Due to economies of scale the optimal size for new energy projects is probably far larger than this, and larger projects offer cheaper electricity per unit. The market should be left to decide what the optimum size for a project is and producers in the market should bear any risk of oversupply;
• Implement an income tax write-off for capital investment into small-scale generation and battery-storage projects (similar to the erstwhile section 12J incentive that was brought to an end by the Treasury in 2021). A similar mechanism could also be used to subsidise and incentivise home installations of solar photovoltaic and battery storage, making home generation affordable to more South Africans;
• Exempt financially healthy municipalities from all unnecessary legislation and regulations (including those governing municipal procurement) that will delay bringing new generation capacity online. While it is designed, in its rigour, to deter corruption, this legislation greatly delays municipal procurement of all kinds. We simply cannot afford such delays in this instance. National government can help municipalities with clean governance track records to bring more capacity online quicker by cutting red tape and substituting a minimum-compliance approach in respect of municipal power contracts;
• Declare in clear and unequivocal terms that municipalities do not require approval from mineral resources & energy minister Gwede Mantashe for electricity procurement. While the minister has informally expressed the view that a determination in terms of section 34 of the Electricity Generation Act is required for municipalities to procure additional capacity (a requirement that would introduce substantial hurdles and delays) this position has been contradicted in official communications from the Treasury. A simple, formal commitment that the department of mineral resources & energy has no role to play in approving municipal procurement would greatly aid municipalities’ power plans;
• Offer Treasury guarantees in respect of any borrowing — by municipalities and private entities — necessary for IPP generation projects and municipal own-generation projects;
• Waive the department of trade, industry & competition’s local content requirements on solar PV modules until energy security is achieved;
• Exempt electricity traders from the onerous licensing requirements, substituting a registration process in which traders must demonstrate compliance with a basic list of requirements only designed to protect public distribution networks;
• Remove the substantial red tape on the establishment of natural gas imports and transport in the Western Cape, unlocking the use of natural gas-powered turbines. These would be far cheaper than the diesel and jet fuel turbines currently in use, and less damaging to air quality;
• Convert Eskom’s Ankerlig plant in Atlantis, Cape Town, to natural gas and run the plant on a mid-merit basis, with dynamic output adjusted according to fluctuations in demand; and
• Immediately establish a Power Crisis Unit in the Treasury, with representation from municipalities and technical experts as well as the finance minister, with the mandate of expediting all interventions that could end the power crisis. Among other measures the unit should locate and simplify all unnecessary bureaucratic processes delaying these interventions. To guard against the unit being just another useless government task team, it must have the power to make regulatory decisions or strongly recommend them to a willing minister.

The past two weeks’ stage 6 load-shedding cost the national economy R4.2bn per day. Unless the government’s approach changes boldly and fundamentally, we stand to lose even more than the 125,000 jobs that load-shedding destroyed in 2019 alone. Tens of millions of current and potential livelihoods are at stake.

Fortunately, the problem can be fixed. But it requires clear and decisive leadership, and a willingness to do things differently. I remain hopeful that we can achieve reliable and affordable energy for all in SA in the next few years. Now is not the time to meekly accept our fate; it is the time to think big, to be decisive and to make a real difference.

• Hill-Lewis is mayor of Cape Town.