Grim Reippp(er) — undoing the choke-hold on SA’s renewable energy programme

26 Sep 2022

Its initialism is REIPPPP (that’s right, four P’s), but don’t let that deceive you — on paper, South Africa’s renewable energy programme is one of the most progressive in the world. The problem, in a nutshell, is the chilling effect of the ongoing love affair between the entrenched coal lobby and the agents of State Capture. We document the history of the affair and what life would be like in South Africa when (or if) it ended.

I. How we got here

‘In May of 2016, Eskom’s erstwhile CEO Mr Brian Molefe addressed Parliament.”

At the time that this sentence was written, Molefe’s arrest for his involvement in State Capture was more than five years in the future. The words were published in early 2017, when we were still relatively innocent about the decimation of our public institutions. The #Gupta Leaks, which would lift the scales from our collective eyes, would only begin to drop in the winter of that year.

But many of us, thanks to the work of whistle-blowers and investigative journalists, knew that something devastating was afoot. And at the top of the list of those who were attempting to avert the catastrophe was Outa, the Organisation Undoing Tax Abuse.

Outa’s complaint, a heavily referenced document delivered to the Competition Commission on 17 February 2017, alleged that Eskom was wilfully abusing its market dominance. At the core of the allegation was the fact, backed up by reams of evidence, that the state-owned power utility was “unlawfully” favouring its legacy coal-fired fleet at our (the taxpayers’) expense.

In the summary of the complaint, Outa pointed out that electricity prices had risen dramatically over the previous decade, partly a result of new-build coal plants that had run “severely over budget” — by which was meant Medupi and Kusile, the largest and dirtiest of their kind on Earth — and partly a result of maladministration.

“At present,” noted Outa, “power from independent power producers and especially renewable energy is considerably cheaper than new Eskom power and in many cases, cheaper than Eskom’s average selling price of electricity. Indeed, the cheapest renewable energy may soon be cheaper than Eskom’s average cost of production.

“This situation is likely to be exacerbated in the next few years as Eskom is allowed by [energy regulator] Nersa to again raise its price considerably in order to recoup sunk costs.”

Looking back, Outa’s submission to the Competition Commission was nothing short of prophetic. This was mainly because in late September 2022, by which date the catastrophe had fully materialised, Outa would once more complain about Nersa’s price hikes — except this time, with a third of the country without power for at least a third of every day, the regulator would unashamedly call for a 38% increase.

Also, there was that little bit in the original submission about “unlawfulness”.

“The complaint,” Outa noted, “is that Eskom is refusing to sign Power Purchase Agreements with Independent Power Producers (IPPs) which have been appointed by the Department of Energy (DoE) as Preferred Bidders in the DoE’s Renewable Energy IPP Procurement Programme (REIPPPP) (Tender No: DOE/003/13/14), in defiance of Government policy and international conventions signed by the Republic of South Africa, and in attempt to retain its historical electricity generation monopoly for the long term and to squeeze out new market entrants…”

In a nutshell, to read between the initialisms, although the government had decreed that Eskom was obliged to procure power from independent providers of renewable energy — a programme that had been recognised at its launch in 2011 as one of the most progressive in the world — the “coal lobby” was having none of it, particularly because mining and transportation contracts had become the sinecures by which ANC party loyalists were rewarded.

Of course, while Outa couldn’t say this outright (again, the #Gupta Leaks were still a few months in the future), they could refer to the employment of “selective facts” by senior Eskom executives.

As it turned out, back when Molefe had addressed Parliament in May 2016, he’d informed the House that renewable energy had “disappointed”. The technology would only be reliable “in about 10 years,” he’d complained, comparing it to a decade-old mobile phone. Further, ignoring the fact that some renewable technologies had already achieved a net zero cost for Eskom, its then CEO lamented that the utility would just have to “battle through”.

Outa’s citation of these “duplicitous statements” appeared near the bottom of its 2017 submission, just below the sub-section entitled “Eskom’s loan from KFW”.

Here, the reference was to the R4-billion that the utility had recently secured from Germany’s leading development bank, for “the express purpose of upgrading the national electricity grid in order to evacuate greater amounts of renewable energy”.

While Outa couldn’t determine whether Molefe’s words to Parliament constituted a legal breach of the contract with KFW, what the organisation could say was that the CEO’s campaign against renewables had only just begun.

In July 2016, as Outa reminded the Competition Commission, a letter from Molefe to the Department of Energy was leaked to the media. In it, the former CEO stated that he would not support projects beyond the fourth bidding window of the REIPPPP — which, Outa alleged, happened to be the very same bidding window that he wasn’t supporting anyway.

In return, the finance minister at the time, Pravin Gordhan, made it clear in the press that it wasn’t Molefe’s job to decide on energy policy, while the Department of Energy assured the market that the REIPPPP would continue. But Molefe, backed by Matshela Koko, Eskom’s then head of power generation, simply doubled down.

“Koko’s tweets often move in concert with Molefe,” Outa claimed, “suggesting an orchestrated and carefully considered campaign”.

As an example, Outa cited a tweet by Koko dated 23 August 2016: “If I had the privilege of being a director of @Eskom_SA and exercising my fiduciary duties, I will not sign these IPPs now. There is no logic.”

Unfortunately for South Africa’s taxpayers, if this was the definition of logic, there were a few more logic-defying events in the pipeline. Koko, who would be promoted to acting CEO of Eskom in December 2016, would, by the winter of 2022, be recommended for criminal prosecution by the Zondo Commission. According to Chief Justice Raymond Zondo, he had been instrumental in paving the way for the Gupta family’s purchase of the Optimum Coal Mine on Eskom’s dime.

And yet, with the arrival of the catastrophe in September 2022, there would be those — including former statistician-general Pali Lehohla — calling for Koko to be reinstated as Eskom CEO.

II. Where we’re going

In a report released in June 2022, entitled “Resolving the Power Crisis Part B: An Achievable Game Plan to End Load Shedding,” consultants Meridian Economics laid it all out in unemotional terms.

“Due to a range of political, institutional, rent-seeking and corruption-related factors,” the firm noted, “South Africa has now seen a delay of seven years since a concluded IPP Office procurement round has resulted in new capacity being connected to the grid. This despite ongoing load shedding over this period that, according to our 2021 analysis, would have been almost entirely avoided had the REIPPPP process not stalled in 2016.”

In other words, it was thanks to the campaign against renewables, orchestrated in the main by Molefe and Koko, that we were where we were. Which begged the question: what was the place of Meridian Economics in the mix?

As Daily Maverick readers may recall from our in-depth feature on the renewables solution published in October 2019, the firm’s lead consultant, Dr Grové Steyn, had just been appointed to President Cyril Ramaphosa’s eight-member Eskom Sustainability Task Team. Run under the header “Ramaphosa’s $11bn climate fund, or, how the smart money could turn Mpumalanga into the envy of the world,” our feature focused on a complex yet feasible strategy to turn the Mpumalanga coalfields into one of the largest renewable energy generators on Earth.

In the piece, we referred to the reality that 75% of Eskom’s ageing coal-powered fleet would reach end-of-life by 2040, and that — thanks to the climate crisis — the international funding to replace these plants would almost certainly not be for new coal. Instead, with global investment in new renewable capacity already three times the amount sunk into new coal and gas (again, this was back in 2019), the Eskom task team was punting a “climate finance investment vehicle”.

The idea, with Steyn and the members of the task team at the helm, was to upgrade the Eskom infrastructure for wind and solar. The rest of the $11-billion would then be split into two flows: the first to help pay off Eskom’s debt, conditional on accelerated decommissioning of the coal fleet; the second into a “Just Transition Fund” to secure employment for workers whose jobs might be lost.

In the event, nothing came of the plan. Eskom’s debt would be pushed on to the taxpayer yet again, and the coal workers would keep their old jobs. And so, with the REIPPPP likewise held hostage by corruption and the coal lobby, it was becoming increasingly likely that the country was heading for a spate of rolling blackouts the likes of which it had never seen.

“Load shedding in 2021 was the worst on record, with 2022 fast becoming as bad or worse,” Meridian Economics declared in the above-mentioned report. “As the reliability of the existing fleet of generators continues to decline and delays with procuring and connecting new capacity to the grid continue to mount, South Africa now faces the very real prospect of a return to level 6 or even level 8 load shedding in the foreseeable future.”

By Daily Maverick’s reckoning, this assessment was easily as prophetic as Outa’s submission to the Competition Commission in 2017. Meridian Economics knew what was coming, and they told us. But perhaps more importantly, as published in Part A of their series, they had laid down an empirical foundation for the resolution of load shedding in its entirety.

“In that [first] report,” Meridian noted, “we quantified the impact that additional generation capacity would have had on load shedding if it were already operational in 2021. To perform this ‘what if’ test we focused on the shortest lead-time and cheapest sources of generation — wind and solar. Confirmed by two separate modelling methods, the results are startling — an additional 5,000MW of wind and solar capacity (the approximate capacity of two IPP Office REIPPPP bidding rounds) would have allowed Eskom to eliminate 96.5% of load shedding in 2021.”

Revealingly, since it was at least two lost bidding rounds that the delay of 2016 caused, Koko would publicly respond to Meridian less than a week after Stage 6 hit. Published on IOL on 21 September 2022, his piece would take the form of an “open letter to Minister Gwede Mantashe”.

Koko must have known that Mantashe was familiar with Meridian’s report, because he appealed to the mining and energy minister in his capacity as “the electricity supplier in the last resort” (ie, the place where the buck stops). For Koko, an engineer by training, Meridian had failed to take into account something called the “total inertia” of the power system, which — according to certain quoted scholars — would yield higher kinetic energy the bigger it got.

More inertia, Koko claimed, was a good thing; for him, it was the only thing — along with nuclear — that would save the grid before 2035. The unfortunate “fact” about going with “variable renewable generators” to replace the ageing coal plants, he added, was that it would result in an unstable, low-inertia system.

This, of course, was contrary to the view of the country’s leading sustainability academic, Mark Swilling, as outlined in an influential op-ed that ran in this publication in May. For Swilling and many others, most notably Meridian Economics, there was already a plan in place to not only end rolling blackouts by 2024 but also to wean South Africa off its reliance on coal by mid-century — a plan that included the REIPPPP and an $8.5-billion version of the climate finance model described above (which Ramaphosa, back in February, had placed in the hands of Daniel Mminele, Absa’s former CEO).

The stability of the grid, in the eyes of the local and international experts who supported this plan, was not an unsolvable issue — increased battery storage and the transitional use of gas as a backup power source were a core part of their thinking. The actual issue, it seemed, remained the politics.

“I am persuaded by the literature that there are significant technical challenges to be addressed in low-inertia systems before South Africa can go with the proposal by Meridian Economics,” Koko informed Mantashe. “I hope that you are persuaded too.”

Mantashe wouldn’t take much persuading, Koko might have guessed, mainly because the Cabinet minister had been openly supporting coal since June 2019, when the mining and energy portfolios were inexplicably collapsed into a single department.

Neither, for that matter, would it take much to persuade Deputy President David Mabuza, the head of Eskom’s political task team (as opposed to its sustainability task team), who hadn’t really featured in the debate since taking over the role. When it came to the power utility, it appeared, all Mabuza had achieved was the safety of his own skin — little had resulted from the parliamentary call for him to step aside, following revelations that his foundation had received a R30-million kickback off an Eskom contract with General Electric in 2016.

To South Africa’s taxpayers, then, it was the same old story. Corruption, subterfuge and electricity tariffs that were spiking through the roof. Except that, with the Stage 6 crisis of September 2022, we had reached the end of the rope.

Thanks to the Zondo Commission, South Africans now knew what we had long suspected — the legacy problems of our ageing and dirty power grid had been heavily exacerbated by State Capture. South Africans also knew, if it wasn’t for the agents of State Capture, that our economy wouldn’t be blowing upwards of R1-billion a day.

Ramaphosa, for all his faults, seemed to have the solution in his grasp. Would he be able to navigate the coal lobby and save his party from a defeat at the 2024 polls?

The answer would lie in the power. If we had it — if it was clean power — there was every chance that he would have it too. DM

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South Africa

I. How we got here

II. Where we’re going