Transition to renewables does not and must not mean privatisation of Eskom

3 May 2023

To survive in a competitive market, capitalist firms are not only compelled to generate a profit, but to maximise their profit. In practice, if energy generation is privatised, this means that to be viable, all energy infrastructure must, over and above the costs, make already rich capitalists even richer.

In the mainstream media discourse, calls to privatise the generation of electricity are growing louder, calls that tap into a climate of growing frustration with rolling blackouts by all sectors of society.

While the progressive decarbonisation of electricity generation is required to address runaway climate change, the public debate is characterised by a pernicious and false assumption being driven by capitalist interests on both sides of the fossil fuels versus renewables debate.

This assumption is that the transition to renewable energy requires the privatisation of energy generation.

This conflation has even distorted the meaning of the concept of a “just transition”, which was developed by the labour movement to ensure the transition results in no job losses and other setbacks for the working class, and envisaged a greater — not a lesser — role for the public sector.

For example, the former CEO of Eskom and proponent of unbundling and increased private sector involvement in generation, André De Ruyter, was allowed to present himself as a champion of the just transition without challenge.

This equation rests on several assumptions. The first is that privatisation of energy generation represents the fastest and cheapest way to decarbonise electricity. There is, however, evidence suggesting the opposite.

Capitalist cause

The Alternative Information & Development Centre (AIDC), for example, has pointed out that the much-heralded Renewable Independent Power Producer Programme (Reipp) has resulted in a very modest additional capacity increase of 8% installed capacity while contributing 30% of energy costs.

Further, it is often forgotten that many IPPs are fossil fuels. There are credible reports of gross profiteering by independent power producers in many countries, and in the case of Kenya, the subject of a present investigation by its Senate.

Audited accounts for the financial year ending 2021 have revealed that while KenGen, Kenya’s Eskom-equivalent, generated 8,443 gigawatt-hours per electricity for around R6-billion, the IPPs under investigation supplied only about a third of this amount for over R7.6-billion.

Why would this be the case? Privatisation, by definition, means energy generation by capitalists who compete in a market and who are compelled to generate a profit to survive. It is human labour that turns the materials that are the input into goods of value for human use over and above the input costs.

This extra value should be used to pay living wages and serve society’s needs for a stable supply of electricity. Profits represent the channelling of a large chunk of the additional created value to the capitalist owners.

In fact, to survive in a competitive market, capitalist firms are not only compelled to generate a profit, but to maximise their profit. In practice, if energy generation is privatised, this means that to be viable, all energy infrastructure must, over and above the costs, make already rich capitalists even richer.

The result is ever-rising tariffs for the working class, such as the 18.49% hike recently approved by Nersa. The impacts on already stretched households are yet to be felt.

Further, the state is deprived of the opportunity to generate income from the most lucrative aspect of electricity supply (generation) through imposing progressive tariffs on intensive energy users (corporations).

A second assumption is that private sector efficiency through competition will improve the electricity system. Additional research from AIDC has shown the root causes of the parlous state of Eskom’s finances and the grid lie precisely in neo-liberal reforms that changed Eskom from a state energy utility tasked with supplying energy in the public interest, to a corporatised entity that has to raise its own taxes and show profitability.

The decision of the ANC government to ignore repeated warnings from Eskom since as early as 1998 was shaped by an intention to privatise Eskom, one that was never implemented due to strong opposition by organised labour.

This has also been demonstrated by the disastrous experiments in the privatisation of electricity in many parts of the world. For example, the privatised and deregulated electricity system in Texas has resulted in an inability to plan for contingencies such as extreme weather, and an unreliable supply of electricity.

Competing companies, each trying to maximise their profits, have no incentive to increase their overheads by investing in additional maintenance and other measures.

No social justice

Further, the push for privatisation ignores the potential for social justice when electricity is removed from the logic of profitability. A greater share of the spend on electricity would be available for working-class households as there would be no need to make already rich capitalist shareholders even richer.

There is also scope for mandating cross-subsidisation by which energy-intensive users who are in a position to pay (big corporations), can pay, while a universal basic supply of electricity is offered that is sufficient to meet all needs of households (cooking, heating, light, food storage and other appliances, etc) and taking into account variations in sizes of households.

If privatisation of energy generation offers a very modestly paced energy transition at a high price, why is it conflated with decarbonisation in the public debate? As Marx taught us, ideas do not exist in the abstract but are shaped by and utilised to advance material interests. Moreover, the dominant ideas are those of the ruling class and its factions. The question to ask is: who benefits from this conflation?

It is in fact very useful to view the two supposedly clashing narratives as linked, not only for proponents of the privatisation of Eskom, but also for the fossil fuel (coal and gas) lobbies and politicians who echo their talking points.

For proponents of privatisation and unbundling (separation of energy generation functions from transmission and distribution), the urgency of reducing carbon emissions provides a novel way to convince the broader public of the need for the privatisation of Eskom that the working class has previously managed to halt through fierce resistance.

For the pro-fossil fuel bloc, the justifiable fear of the impact of privatisation on livelihoods and on working-class households’ electricity costs is used to mobilise support for environmentally unsustainable and expensive projects, including coal-fired power stations and Karpowerships.

Ultimately, the false choices in the mainstream debate reflect the power of competing sets of capitalist interests around the projects of green capitalism, on the one hand, and the minerals energy complex on the other.

Undoing it requires the building of a mass-based climate justice movement against privatisation and for a just transition to renewables driven by an Eskom with a public goods mandate, which is required for sufficient free basic electricity, localisation, and creation of decent work, while guaranteeing work for all who stand to lose their jobs due to the move away from coal.

Building a mass movement linking the daily struggles for economic justice, climate and energy justice and gender justice requires increased collaboration between trade unions, community civics, progressive civil society organisations and others that take up these struggles.

The mass meeting hosted by the Climate Justice Coalition and the Cry of the Xcluded in April 2023 represents an important step towards developing a strategy and set of demands that can build a social coalition for publicly owned green energy. DM

Robert Krause is a PhD candidate and researcher in the Environmental Justice programme at the Centre for Applied Legal Studies at Wits University.

Categories:

Tags:

DM is much better if you are signed in...

South Africa

Capitalist cause

No social justice