EASY ANSWERS TO IMPORTANT QUESTIONS
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EASY ANSWERS
TO IMPORTANT
QUESTIONS
1
What wrong with Eskom and how to
fix it - Easy answers to important
questions
Published by the Alternative
Information & Development Centre
(AIDC)
Cape Town, South Africa
May 2021
Authors
(in alphabetical order)
Bruce Baigrie
Jaco Oelofsen
Jeff Rudin
The authors acknowledge the
contribution that other AIDC staff have
made as well as previous research
undertaken with Trade Unions for
Energy Democracy and the
Transnational Institute through the
Eskom Research Reference Group.
Without these contributions, this
publication would not have been
possible The AIDC is grateful to the
Friedrich-Ebert-Stiftung (FES)
Office in South Africa for its
generous and continued
Graphic designer
financial support.
Lisa Nelson
Editor
Roger Etkind
2 3
TABLE OF Eskom’s finances
18. Is Eskom Bankrupt?
19
19
CONTENTS 19. Why is debt such a big problem for Eskom? 19
20. Where did this debt come from? 19
21. Why doesn’t the government deal with the corruption? 19
GLOSSARY 8 22. Don’t municipalities also owe Eskom lots of money? 20
INTRODUCTION 10 23. Why doesn’t the government deal with the corruption? 20
24. Is corruption the only source of these problems? 20
THE PROBLEMS WITH ESKOM 13
25. How is Eskom ‘commercialised’? 21
Producing and distributing electricity 13
26. Why has commercialisation ruined Eskom’s finances? 21
1. How is electricity made? 13
27. Can’t a commercialised Eskom just make more money instead? 21
2. What is load shedding? 13
3. Why is it called load shedding? 13
THE PROBLEMS OF THE ENVIRONMENT 23
4. Why does Eskom need to shed load? 14 27. What is the climate crisis? 23
5. Why are we not producing enough electricity? 14 28. What is global heating? 23
6. Why did Eskom not build new power plants? 14 29. What are greenhouse gases? 25
7. Why was maintenance neglected? 14 30. How do greenhouse gases heat the world? 25
8. What is Eskom doing now about this neglect? 15 31. What is the problem with climate change? 25
9. What is the national grid? 15 32. Doesn’t Eskom burn coal for its electricity? 25
33. There are other problems with burning coal, right? 25
The cost of electricity 16
Climate risks 26
10. Is electricity becoming more expensive? 16
Renewable energy and how it is produced 28
11. What is NERSA? 16
34. But there are alternatives to coal aren’t there? Renewable energy? 28
12. What is the link between “full cost recovery” and price increases? 16
35. Why is renewable energy important? 28
13. Why is full cost recovery such a problem? 16
36. Does South Africa have renewable energy? 28
14. Why do poor people have prepaid meters but not the rich? 16
37. So who is producing this renewable energy? 28
15. What is energy poverty? 18
38. How do IPPs work? 28
16. What about Free Basic Electricity (FBE)? 18
39. Aren’t the IPPs very expensive? 28
17. Surely this means we need to rethink the system? 19
40. But at least IPPs are helping to stop climate change, right? 30
4 5
41. Will the investment in renewables continue and grow? 30 HOW WE SHOULD FIX IT: ESKOM
42. So is it possible for the Government to stop the climate crisis via the private TRANSFORMED 43
sector and programmes like the REI4P? 30
61. What does ‘just transition’ mean? 43
43. At least renewable energy will bring in a lot of jobs, right? 30
62. What does ‘socially-owned’ energy mean? 43
44. So why don't we manufacture the components? 31
63. But what about for-profit community ownership? 44
45. What are the other problems with the private sector for workers? 31
64. Why is a Transformed Eskom best placed to lead our just transition? 46
THE PROBLEMS WITH GOVERNMENT’S 65. But how can Eskom overcome the problems with renewable energy’s
APPROACH 33 variability? 46
The government’s vision 33 Transforming Eskom 47
46. What does the government mean by ‘unbundling’ Eskom? 33 66. What do we need Eskom to be? 47
How does Eskom work today? 34 67. What about the corruption and mismanagement at Eskom? 47
How will unbundling change Eskom? 35 68. So how do we deal with the corruption and mismanagement? 47
47. Why do they want to unbundle Eskom? 36 69. So what would a transformed Eskom look like? 47
48. What is the government’s vision for Eskom? 36 Financing a Transformed Eskom 54
49. What does it mean to create an ‘energy market’? 36
69. Won’t transforming Eskom be very expensive? 54
50. Why does the government want an energy market? 36
70. Is there money to fund this Transformed Eskom? 54
51. Does this mean that the government wants to privatise Eskom? 36
71. How can an Eskom Transformed be funded? 54
52. How does a ‘bundled’ Eskom stand in the way of an energy market? 37
72. Won’t using the GEPF put workers’ pensions at risk? 56
53. How would an unbundled Eskom work? 37
73. Can Eskom really be trusted with this money? 56
54. What is the role of the unbundled Eskom Generation in this energy market? 37
Electricity as an essential public good 56
What’s wrong with THE government’s vision 38
74. How would electricity be sold under a transformed Eskom? 56
55. What would the real cost of renewables be? 38
75. What is the difference between a commodity and a public good? 57
56. What do these other costs mean for Eskom Transmission? 38
76. What are the benefits of making electricity a public good? 57
57. Won’t the result be the same as Eskom’s death spiral? 38
77. Won’t this be more expensive for Eskom? 57
58. We can see the problems for Eskom Transmission. But will unbundling at least
78. Won’t municipalities be affected by making electricity a public good? 57
fix Eskom Generation? 40
Electricity as a public good 58
59. If Eskom Generation can’t stand on its own feet, why shouldn’t we let the IPPs
take its place? 40 79. Alright, we’re convinced, we need to stop climate change and transform
Eskom! But where do we begin? 60
60. Is unbundling a dead-end? 41
Priorities for solving the crises! 62
6 7
GLOSSARY
Baseload Power: The basic, stable Generation: The process of turning
supply of electricity needed to meet energy sources like coal, gas, or wind
the country’s minimum demands over into electricity.
a 24-hour period. This is currently
overwhelmingly provided by coal and Grid: The national network that
nuclear power. transmits, electricity by overhead
pylons.
Bureaucracy: Non-elected
government administration including Illicit financial flows: Money that is
officials that oversee policies and illegally transferred from one country
procedures. to another, usually to either escape
taxes and avoid paying workers more
Capacity: The theoretical amount of in wages.
electricity that a power plant can
produce in ideal conditions. Kilowatt-hour (kWh): Basic unit of
electricity equal to one kilowatt of
Supply: The amount of electricity that power for one hour.
is actually produced.
Maintenance: Work that is done to
Demand/Load: The amount of keep something working as it is
electricity that is needed by the supposed to.
country at a specific time.
REI4P: The current government’s
Distribution: Taking the electricity program for buying renewable
from transmission, reducing its electricity from private companies.
voltage and delivering it to the
consumers. Transmission: The process of moving
very high-powered electricity from
Energy: Power which comes from where it’s generated to where it will
using physical or chemical resources. be distributed for use (see the grid).
Burning coal delivers energy. So does
using wind to turn a turbine. Utility: An organisation that manages
the large-scale supply of an essential
Electricity: a special type of energy service or good for the public.
which we use to power most things.
8 9
INTRODUCTION No South African can avoid coming In the past few years, the government If you share the concerns of the We hope to put to rest the idea that face to face with the crisis at Eskom. has begun pushing forward with what unions and movements, if you are on our only choice is between the current Load shedding puts a stop to daily is known as “unbundling”, a the fence, if you think that there is no broken Eskom and the proposed life, closes businesses, and in the end foundation for their planned changes alternative, or even if you are just unbundled Eskom. There is another cuts jobs, while the high price of to Eskom. You may know that many trying to understand what is going on, alternative - a vision of a transformed, power weighs on every household. unions and movements, maybe even then this booklet is for you. In the worker-led Eskom that puts the needs Eskom’s debt gives the government your own, are against the following pages we will answer some of communities, workers and the another excuse to cut their budgets, government’s plans. They say that the of the biggest questions around environment above profiteering and resulting in even more unemployment, government's solution will be one that Eskom’s crisis, unbundling, and the investment. The ultimate task of this fewer nurses in clinics, fewer teachers favours businesses over workers, future of the government’s plan for booklet is to outline this alternative, in schools, and fewer roads and profits over people, and closed board Eskom. These answers will draw from how it can be achieved, and why we houses being built. If you live near a rooms over democratic consultation. a much bigger research document put believe that it is worth fighting for. power plant or drought-stricken area, However, government and its allies together by progressive researchers, then you have also no doubt seen the have called these unions and activists, and unionists, called Eskom results of Eskom’s pollution in the movements reactionary and short- Transformed. rivers and the air, or in the climate sighted. They say that the choice is that is changing for the worse between a broken and corrupt Eskom, every year. and a working unbundled Eskom. 10 11
THE PROBLEMS
WITH ESKOM
PRODUCING AND DISTRIBUTING
ELECTRICITY
A
1. How is electricity made? parts of the country, sometimes for
several hours per day. Let’s be clear,
Almost all electricity is produced by
these are power cuts! All of us have
rotating turbines – big propellers. To
experienced load shedding and
rotate these turbines, fuels like coal
continue to do so.
and gas can be burned. They produce
heat which creates steam. This steam
3. Why is it called load
then rotates the turbines. Wind and
water can also be used to rotate the
shedding?
turbine. Finally, sunlight can also be In power (electricity) systems, “load”
converted into electricity. refers to things which use electricity,
such as the appliances and lights in
2. What is load shedding? our homes. By cutting off access to
electricity, Eskom essentially “sheds”
Load shedding is when Eskom takes
(removes) “load” (demand) for
turns cutting electricity to different
12 - The Problems with Eskom The Problems with Eskom - 13
electricity. It uses this unnecessary 6. Why did Eskom not build 8. What is Eskom doing 9. What is the national
technical language to confuse us.
new power plants? now about this neglect? grid?
4. Why does Eskom need to Eskom warned about the need for The current Eskom management is The National Grid is the network that
new capacity (from power plants) as doing planned maintenance. This is delivers electricity from where it is
shed load?
far back as 1998. However, the different from the unplanned repair of produced to where it is consumed. It
Because it can’t produce enough government stopped Eskom from simply fixing plants after they break consists of the following components:
electricity to meet the expected need. building more capacity because it down. This means that Eskom will
The supply of electricity must always wanted to get the private sector deliberately, but temporarily, shut off • Power plants where the
match the need. We will refer to this involved. But the price of electricity power plants to maintain them. electricity is generated
as balancing the grid. So if Eskom was far too low to provide the level of
doesn’t do this, the whole electricity Eskom claims this maintenance will • Transmission lines for carrying
profit to attract the private sector.
system would automatically shut start delivering benefits from April the electricity
down. The resulting national blackout When Eskom did start to build new 2021, with a meaningful reduction in
would be considerably worse – and • Substations for receiving the
capacity it was far too late, and there load shedding from September 2021
more expensive – than what we electricity from the transmission
have been huge problems with the onwards. This planned maintenance
experience as ‘load shedding’. lines and delivering it to the
new capacity that has been built. cost around R14 billion in 2019.
customers.
However, load shedding will not be
5. Why are we not 7. Why was maintenance eliminated entirely and will likely get
producing enough neglected? worse before it gets better. Eskom still
electricity? expects around 28% of lost capacity –
Maintenance costs money. This
called energy availability (EA) -
There are two main reasons: expenditure and the temporary shut-
through breakdowns over the next
down of power plants would have
three years. An EA loss of 20% is
• Eskom failed to build new power negatively affected the financial
considered normal for power stations
plants to meet our increasing performance of Eskom. So, because
around the world.
demand. the bonuses of Eskom’s senior
managers are based on financial
• Eskom neglected maintenance performance, they had an incentive to
and so the power plants we do keep the plants running at all times
have are in poor condition and and neglect maintenance. They
break down frequently. Power profited in the short-term, and Eskom
plants, like cars, need to be suffered for it. In addition, many of
“
constantly maintained. If they are these managers were not properly
not maintained then they shut competent for the posts they
down unexpectedly. occupied.
This means that Eskom can’t deliver
Eskom warned about the
the amount of electricity needed.
need for new capacity
from power plants
“
as far back as 1998.
14 - The Problems with Eskom The Problems with Eskom - 15
Photo credit : Gerhard Roux, per GFDL and CC-BY-SA
THE COST OF AVERAGE PRICE
regarded as citizens with basic rights.
We are customers, just like
ELECTRICITY supermarket customers. We can buy
10. Is electricity becoming
as much electricity as we like,
provided only that we pay in full for
OF ELECTRICITY
OVER TIME
whatever we ‘consume’. See more
more expensive?
about this in Question 48.
Yes. Eskom has dramatically increased
the price of electricity from around 13. Why is full cost
0.23/kWh in 2007; in April 2021 the recovery such a
price will be R1.34/kWh. If Eskom
problem? Loadshedding begins
could have its way, the price would be
150
even higher at R1.50kWh, but NERSA It is not a problem if you’re privileged
has prevented this. enough to be rich. But most South
Africans are poor, many very poor.
11. What is NERSA? We’re notorious, after all, for our
world-beating inequality. The poverty
The National Energy Regulator of
of most South Africans makes
South Africa (NERSA) regulates the
electricity unaffordable. There is no
energy industry (electricity, gas and
way Eskom can provide electricity at 100
petroleum) in accordance with
an affordable price and still recover its
Average price C/kwh
government laws and policies. NERSA
costs. Eskom is consequently left as a
regulates the prices Eskom can charge
private company burdened with selling
its customers. It has the power to
a commodity that is unaffordable to
approve Eskom’s proposed tariffs
most of its customers. The size of
(price increases) or to lower them. In
household debt owed to Eskom is a
February this year (2021), NERSA and
measure of the problem.
Eskom agreed to further increase 50
(See Question 21)
tariffs by 15.63%.
14. Why do poor people
12. What is the link
have prepaid meters but
between “full cost
not the rich?
recovery” and price
Prepayment meters enforce the ‘user
increases?
pays’ principle by taking it to a higher
Eskom is a state-owned company (i.e. 0
level: there is no credit for poor
one that all of us own through the households. If you are rich, you 1994 1999 2004 2007 2009 2014 2019 2021
government). Its job is to provide receive your electricity first and pay
something that is essential. Yet for it afterwards. But if you are poor,
Government policy requires Eskom to you have to pay before you can use it. YEARS Price adjusted for inflation Average price
act as a normal private company. That No up-front prepayment means no
means that Eskom has to recover its electricity, regardless of your needs or
full costs from us. We are not whatever emergency you might have.
16 - The Problems with Eskom The Problems with Eskom - 17
Pre-paid meters are very good at 16. What about Free Basic 17. Surely this means we City of Johannesburg’s entire budget
controlling electricity debt. But for for 2020! In order to pay back these
Electricity (FBE)? need to rethink the
users they mean energy poverty. loans, Eskom now has to borrow even
Government policy is that every system?
more money. Taking new loans in
15. What is energy poverty? household should get 50kWh per Yes, but that’s not what’s happening. order to pay old loans is a classic
month of free electricity. But there are Instead, Eskom is cutting off areas ‘debt trap’ - a cycle that only gets
Energy poverty is a lack of sufficient
four major problems with this: with illegal power connections, and worse each year.
energy to meet basic needs. It is a
even cutting off entire municipalities
sign of inequality that there is energy 1. You must be a recognised
poverty in a rich and industrial country
which owe it money. As we know, 20. Where did this debt
customer of either Eskom or a Eskom is also trying to recover its come from?
like South Africa in 2021. There are municipality. This excludes the cost by increasing the price of
three main causes of energy poverty: households who aren’t on the grid One simple cause of the debt crisis is
electricity. But this doesn’t even work
and those who have been that Eskom has had to borrow in
• You are not connected to the grid: particularly well, because of course as
disconnected. recent years to pay the rising price of
government policy is to provide the price rises, people use less
coal to keep the power plants running.
electricity to everyone living in electricity . It’s a vicious circle - the
2. Like Free Basic Water, the amount However, corruption and
South Africa. This means less it sells, the higher the tariff it
is very far from being sufficient mismanagement have also played a
ensuring that every dwelling in wants, and the higher the tariff, the
for basic needs. Like water, it huge part. It has long been known
South Africa is connected to the less it sells. This is the main driver of
needs to be increased four-fold that Eskom is a hub of “irregular and
Grid. Almost without publicity, what is called the Eskom “Death
before it begins to approach a wasteful expenditure”, but recently a
Eskom abandoned this Spiral”.
realistic amount. staggering R178 billion in contracts
development as being were found to be dodgy (R178 billion
unaffordable. That is why large 3. It is intended only for houses could vaccinate the whole of South
rural areas of the country are not fitted with basic wiring. That ESKOM’S Africa 20 times over) This means that
FINANCES
connected. So-called ‘informal severely limits which appliances Eskom has been paying outrageous
settlements’ also remain without can be used at the same time prices on tendered contracts or
a (legal) supply of electricity. before the current trips. bonuses.
18. Is Eskom Bankrupt?
• You can’t afford to pay for 4. FBE is now only for the so-called
Yes, if government assistance or 21. Why doesn’t the
electricity: there is a large – and poorest of the poor. You have to
ever growing – number of describe yourself as ‘indigent’
bailouts are excluded. Eskom spends government deal with
more money than it earns. This leaves the corruption?
households who are plugged into (poor). You have to be prepared to
Eskom in debt which it is unable to
the national supply but can’t bear the stigma of that degrading The current government is trying to do
pay back - making government
afford to pay for all (or even any) label and succeed in beating a more about corruption than the
bailouts essential.
of the electricity they need. bureaucracy well known for being previous government led by Jacob
difficult. Zuma which oversaw most of the
• You have been disconnected: 19. Why is debt such a big
looting at Eskom and other state-
these are the households which problem for Eskom?
owned companies. The current Eskom
have been disconnected because
Eskom currently owes around R480bn leadership got at least R2.85 billion
of unpaid electricity debt.
in debt. This means Eskom needs to back from ABB, McKinsey and Deloitte,
pay back around R31.2bn every year and are in the process of recovering
Although the exact number is
just to cover debt-related costs like more than R700m from the Gupta-
unknown, we know there are millions
interest. That number is about half the linked Trillian and from PwC. They are
of people experiencing energy poverty.
18 - The Problems with Eskom The Problems with Eskom - 19also trying to end dodgy contracts 23. Why doesn’t the and if reliable and experienced people same time, it is supposed to make up
with companies like EconOil. However, were put in charge, Eskom would still for these costs itself and finance itself
government deal with
many of the corrupt people inside and run into trouble! through its own profits.
the corruption?
outside Eskom remain politically
connected to the ANC and The current government is trying to do Eskom’s crises are driven by the way This contradiction, between Eskom-
government. Better or more ethical more about corruption than the Eskom is organised and run. We have as-business and Eskom-as-public-
leaders in government will not be previous government led by Jacob to look past corruption and utility, means that social costs, like
enough because the problem is now a Zuma which oversaw most of the understand that Eskom is run as a extending electricity supply
systemic one. To solve it there will looting at Eskom and other state- commercialised public utility. throughout the country, are put on the
need to be pressure from outside of owned companies. The current Eskom shoulders of Eskom alone. This cannot
government and the ANC. leadership got at least R2.85 billion 25. How is Eskom be fixed by changing how Eskom
back from ABB, McKinsey and Deloitte, ‘commercialised’? works or by changing who runs
22. Don’t municipalities and are in the process of recovering
We often talk about Eskom as if it is a
Eskom. It can only be fixed by
more than R700m from the Gupta- changing what Eskom is.
also owe Eskom lots of government department or public
linked Trillian and from PwC. They are
money? utility, but in reality Eskom has been
also trying to end dodgy contracts 27. Can’t a commercialised
‘corporatised’ since 2002.
Yes! In 2020, municipalities owed with companies like EconOil. However, Eskom just make more
Corporatisation is the organisation of a
Eskom R46.1bn. There are a few many of the corrupt people inside and
publicly-owned entity in the same way money instead?
reasons for this. Often, this is due to outside Eskom remain politically
as a private company. So Eskom has a There are only two ways for a
corruption within those municipalities: connected to the ANC and
CEO and a board of directors, and is commercialised, full cost recovery
we know that many local governments government. Better or more ethical
expected to make a profit, just like a Eskom to get more income: it can sell
use up their budgets on suspicious leaders in government will not be
private company. Its costs need to be more electricity, or it can raise the
contracts or bonuses, leaving nothing enough because the problem is now a
paid for by its own income, and it price of the electricity it sells. Most
for service delivery - never mind systemic one. To solve it there will
needs to make a profit or borrow South Africans today are struggling to
paying Eskom back. Another reason need to be pressure from outside of
money if it wants to expand its make ends meet, and so they are
for this municipal debt is the fact that government and the ANC.
operations. The only thing that makes trying to use less and less electricity
a lot of people don’t have the money
Eskom ‘public’ is that the government in order to save money. For Eskom,
to pay their municipal electricity bills. 24. Is corruption the only
is the only “shareholder”. this means that it can’t really sell
Finally, sometimes municipalities don’t
source of these
get enough money from the more electricity because it has no one
problems? 26. Why has to sell it to. And load-shedding
government to fulfil all their tasks, so
they use the money from electricity It is easy to look at these problems commercialisation doesn’t help – every hour of load-
sales on other services. and think that they would be solved if ruined Eskom’s shedding means less income for
corruption were to disappear. But this Eskom. And, as we saw earlier, if it
finances?
However, although this is a lot of would be a mistake. In a world raises the price, it reduces the
money, it would be wrong to blame Eskom is treated like a private amount used. So in fact there is really
without corruption, Eskom would still
Eskom’s problems on municipalities company but it is expected to work no way to get more income.
be struggling financially. In other
alone. The R46.1bn they owe Eskom is like a public utility, and a public utility
words, even if Eskom only took the
less than 10% of Eskom’s total debt is expected to do things a business
cheapest contracts from reliable
owed to others. In reality, there are isn’t. So Eskom has a mandate to
suppliers, if the excessive bonuses
deeper issues at play. provide affordable and reliable
and salaries of those at the top were
electricity for the nation, even when
cut, if municipalities paid their debts,
doing so won’t make a profit. At the
20 - The Problems with Eskom The Problems with Eskom - 21THE PROBLEMS OF
THE ENVIRONMENT
The climate crisis and Eskom’s contribution
27. What is the climate 28. What is global heating?
crisis?
Global heating, or global warming, is
You’ve probably heard of climate the process of the earth getting hotter.
change, but if not, do have a look at This is an on-going and accelerating
our Climate Change and Climate Jobs process. It is happening because there
question and answer booklet. It can is too much of certain ‘greenhouse-
be found at the following link http:// gases’ in our atmosphere (the
aidc.org.za/download/climate-change/ atmosphere is the air around the earth
aidc_website.pdf. But don’t worry, that is kept next to the earth by
we’ll briefly explain the core issues. gravity).
The first one is global heating.
22 - The Problems of the Enviroment The Problems of the Enviroment - 23STATE OF THE 29. What are greenhouse • The melting of sea-ice: this will
eventually result in the sea rising
gases?
to a level which could flood all
CLIMATE CRISIS Greenhouse gases occur naturally in
our atmosphere. In fact we need them
coastal cities around the world.
These include many of the world’s
- they keep the earth warm enough to major cities.
2100 WARMING PROJECTIONS
sustain life. However, over time too
Emissions and expected warming based much has been added to these
• The extinction of many species of
animals and plants.
on pledges and current policies greenhouse gases by the burning of
fossil fuels such as coal, gas and
• Heat stress and disease: rising
petrol. The most important
heat affects our bodies directly,
200 greenhouse gas is carbon dioxide or
as well as spreading diseases
Warming projected by 2100 CO2.
such as malaria.
30. How do greenhouse
32. Doesn’t Eskom burn
gases heat the world?
150 coal for its electricity?
Global greenhouse gas emissions GTCO2e/year
The sun’s heat is able to pass through
Yes. Eskom generates over 91% of its
the atmosphere, but the greenhouse
energy from coal. Burning coal
gases prevent that heat from leaving,
produces more greenhouse gases
100
which would be the normal cycle. The
than any other fossil fuel. This is a big
build-up of greenhouse gases turns
part of why South Africa’s economy is
the atmosphere into a thick blanket
one of the most carbon-intensive in
around the earth. This disrupts the
the world. Coal produces more carbon
normal cycle. It’s like closed car
than any other fuel for each unit of
50 windows on a hot day. The blanket
energy it generates.
results in global warming.
Historical 33. There are other
31. What is the problem
problems with burning
0 with climate change?
coal, right?
As the climate gets hotter, we
Yes. Coal power plants release a lot of
experience serious crises across the
air pollution which affects those living
world. These crises get much worse
near them. Local communities can
-50 as the earth gets warmer and warmer.
suffer from cancer and lung problems.
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 A few examples are:
This results in over 2,000 premature
• Severe heatwaves and droughts deaths per year.
Current 2°C 1.5°C as well as storms and floods:
Baseline Pledges & Optimistic net
4.1-4.8 °C policies Targets zero targets Consistent Consistent these are devastating for
2.7-3.1 °C 2.3-2.6 °C 2.3-2.6 °C 1.6-1.7°C 1.3°C agriculture.
24 - The Problems of the Enviroment The Problems of the Enviroment - 25CLIMATE RISKS SEA-LEVEL RISE
1.5°C VS 2°C GLOBAL WARMING
46 Million 49 Million
EXTREME WEATHER people
VS
people
100% VS 170% Impacted by sea-level
rise of 48cm by 2100.
Impacted by sea-level
rise of 48cm by 2100.
Increase in Increase in
flood risk. flood risk.
SPECIES
WATER
6% of insects, 8% of 18% of insects, 16%
AVAILABILITY plants and 4% of of plants and 8% of
VS
vertebrates will be vertebrates will be
350 Million affected. affected.
Urban residents
exposed to severe
drought by 2100. FORCED MIGRATION
FOOD Sub-Saharan Africa,
VS South Asia and Latin
Every half degree America could see
410 Million warming will more than
Urban residents consistently lead to
exposed to severe lower yields and 140 million
drought by 2100. lower nutritional people move within
content especially in their countries’
tropical regions. borders by 2050.
26 - The Problems of the Enviroment The Problems of the Enviroment - 27RENEWABLE 37. So who is producing
this renewable energy?
ENERGY AND
HOW IT IS This renewable energy comes almost
entirely from private companies called
PRODUCED Independent Power Producers (IPPs)
because the government doesn’t want
34. But there are to use the term "private”.
alternatives to coal
38. How do IPPs work?
aren’t there?
Renewable energy? The government puts out a tender to
produce a certain amount of
Yes. There are sources of energy that
electricity and private companies
don’t get used up. They’re called
compete for the contracts. The tender
‘renewable energy’ because like the
process is called the Renewable
sun and wind, they are always with
Energy Independent Power Producer
us.. Why is renewable energy
Procurement Programme (REI4P). The
important?
contracts are for companies to
produce electricity using renewable
Think of renewable energy as clean
sources, at a fixed price for an agreed
energy. It doesn’t release any
number of years. The tenders are put
greenhouse gases because it doesn’t
out in “bid windows” and there have
use fossil fuels.
been four between 2011 and 2015 with
the 5th one occurring this year in
35. Why is renewable
“
2021.
energy important?
39. Aren’t the IPPs very
Think of renewable energy as clean
energy. It doesn’t release any
greenhouse gases because it doesn’t
expensive?
The cost of renewable
use fossil fuels: just, mainly, the ever
renewable sun and wind (for the next
Initially the electricity the IPPs
produced was very expensive. On energy has come down
few billion years). This is also where
the name ‘renewable energy’ comes
average they produced electricity at
R2.02/kWh, where new coal power enormously. It is now
from.
would have cost just over R1.00/kWh.
However, the cost of renewable energy R0.70/kWh, cheaper
36. Does South Africa have
has come down enormously. It is now
R0.70/kWh, cheaper than electricity than electricity “
renewable energy?
Yes. But despite all the talk about
generated by new coal-fired power
stations. However, Eskom signed generated by new coal-
renewable energy, it accounts for just
2% of electricity in South Africa.
contracts over the last few years at
fixed prices, so it has to pay those fired power stations
28 - The Problems of the Enviroment The Problems of the Enviroment - 29prices. Some of these contracts are profits. If the price is lower, then energy and jobs. There are a lot of 45. What are the other
for 20 years and the current cost of all they make less profit. But profit jobs in renewable energy, but they
problems with the
IPPs already producing electricity is maximisation is the reason for mostly come from manufacturing the
private sector for
R2.48c/kWh, far higher than the cost capitalist investment in parts for it. Some estimates find that
of electricity. Like any business, IPPs renewable energy. for every 100 jobs in manufacturing workers?
exist to maximise profit rather than renewable energy components there
• So insufficient profit means a fall To maximise profit, private companies
meet essential needs. The price will are 25 jobs in building renewable
in the rate of investment in look for cheap inputs and cheap
always reflect that profit, rather than energy power plants and 7 for
renewable energy. This is the labour costs. There’s often a notion
just the cost of producing the energy. operating them.
third and final fall of the three-fall that because something is ‘green’ - i.e.
Despite the lower price of producing
better for the environment - it is
new renewable energy, there are still effect. 44. So why don't we
necessarily better for people too. But
other big costs that the IPPs won’t manufacture the the ‘green economy’ operates under
pay. See Question 54. 42. So is it possible for the
components? the same principles of profit
Government to stop the
maximisation as the ‘non-green
40. But at least IPPs are climate crisis via the Well private companies are only
economy’. IPPs in South Africa have
helping to stop climate private sector and interested in high profitability and that
been found to overwhelmingly employ
change, right? programmes like the means they want the cheapest inputs
unskilled and temporary workers in
possible. Overseas companies make
REI4P? the construction phase and have tried
Renewable energy is only a very small cheaper parts for renewable energy
to prevent their workers from
part of total energy used in the world than we do, so that means that local
The short answer is NO! To get the unionising. They pay workers less and
as well as in SA. Worse still, companies, regardless of who owns
required high levels of increasing provide less benefits than workers
investment in renewable energy has them, won’t support local
private investment, governments need receive in the public sector.
fallen worldwide because the profit manufacturing. All IPPs from the 4th
to guarantee long term profits.
made from it is no longer sufficiently bid window of the REI4P imported
However, someone has to pay for
high. their solar panels from China.
these required high profits. And that
someone is us, the people. We would
41. Will the investment in
“
have to pay either indirectly, through
renewables continue taxation and government subsidy, or
and grow? directly through higher electricity
prices. This is completely immoral and IPPs pay workers
less and provide less
It’s not so simple. There is a process impossible in a country as poor and
at work which works in the opposite unequal as South Africa. It would also
benefits than
direction. It’s called the “Three Fall be inconsistent with our progressive
Effect”. It works like this: Constitution and its Bill of Rights.
• The first fall is the price. As more 43. At least renewable workers receive in “
and more companies want to
build renewable energy they have
energy will bring in a
lot of jobs, right?
the public sector
to compete with each other
which brings down the price.
Unfortunately there’s a lot of
misinformation about renewable
• The second fall then is their
30 - The Problems of the Enviroment The Problems of the Enviroment - 31THE PROBLEMS
WITH GOVERNMENT’S
APPROACH
C
THE like Koeberg and Komati. This is
where much of Eskom's debt is
GOVERNMENT’S incurred.
VISION • Transmits the electricity: using
the national grid, Eskom is
46. What does the responsible for getting electricity
government mean by from the power stations to
substations in the cities, towns
‘unbundling’ Eskom?
and villages.
Today, Eskom does three key jobs:
• Distributes the electricity:
• Generates electricity: Eskom Eskom, together with
builds and runs power stations municipalities, is responsible for
32 - The Problems With Government's Approach The Problems With Government's Approach - 33HOW DOES ESKOM HOW WILL UNBUNDLING
WORK TODAY? CHANGE ESKOM?
ESKOM ESKOM GENERATION
AND IPPS
are now given equal access to
the grid and put in competition
GENERATION with one another, trying to sell
Electricity is produced by their power to the...
Eskom’s power plants and
connected to power lines TRANSMISSION
controlled by..
ESKOM MARKET OPERATOR IPPS
which is now separated from Eskom,
and acts as the middle man in the
energy market. It buys electricity
from whoever is selling it at the
TRANSMISSION lowest price, and sells it on to...
Which sends this electricity
across the country to.
R R
DISTRIBUTION
which sells it to companies,
municipalities, and individuals.
The income from this goes to
all of Eskom
LARGE POWER ESKOM
USERS DISTRIBUTION
INDEPENDENT
POWER PRODUCERS R R
are for-profit power companies which
the government contracts in order to
send a certain amount of electricity to
the grid. These contracts are the only
way in which IPPs can sell their power.
34 - The Problems With Government's Approach The Problems With Government's Approach - 35getting the electricity from the the consequences of profit maintain the monopoly on natural middleman between power
substations to the users of the maximisation in question 40. transmission and distribution to producers and users. It would buy
electricity. municipalities. But it would be just electricity from power producers, and
49. What does it mean to another competitor in generation. sell it to municipalities, companies or
Unbundling means separating these create an ‘energy individuals.
three parts into three stand-alone
market’? 52. How does a ‘bundled’
companies. Each company would The government’s roadmap has a key
Eskom stand in the way
have its own mandate and directors role in mind for a future unbundled
Think of a different market, let’s say of an energy market?
and be responsible for its own Eskom Transmission. They plan to turn
for food. Supermarkets compete with
finances. From being one, integrated Transmission into what is called an
each other in selling food. In an As it stands now, Eskom controls the
company, Eskom would be broken up Independent Transmission System and
energy market, private companies entire process of making, moving, and
into three new, separate companies. Market Operator (ITSMO). Simply put,
would compete with each other to sell distributing electricity. As long as
its job will be to buy the cheapest
the electricity they generate. Eskom remains ‘bundled’, private
47. Why do they want to companies would have to compete electricity from power producers
unbundle Eskom? 50. Why does the with Eskom’s power plants in order to (both Eskom’s own as well as IPPs).
Then it would transmit that electricity
government want an sell electricity to Eskom Transmission.
The government knows that Eskom’s and sell it to municipalities and
This would give Eskom Generation an
problems will not go away without energy market? individuals.
‘unfair’ advantage. As part of the same
changing the way Eskom works. Their
The main argument for an energy company, Eskom Transmission could
plan for fixing Eskom’s problems is to By being the ‘neutral’ middleman, the
market, or markets in general, is that just choose to pay Eskom Generation
completely change the role Eskom ITSMO creates the energy market that
they produce competition and that it more for its electricity while ignoring
plays in how electricity is made, sold, the government wants.
is competition which produces low private companies. If the government
and managed. Unbundling hopes to
prices. The government says it wants to attract for-profit power
solve these issues by enabling the 54. What is the role of the
believes that private power companies producers, then it will have to promise
competition that is supposed to be them a fair playing field. unbundled Eskom
will provide the cheapest electricity. In
found in the free market.
addition, they say that exposing Generation in this
Eskom Generation to competition will 53. How would an energy market?
48. What is the
somehow make it fix its problems by unbundled Eskom
government’s vision for An unbundled Eskom Generation
forcing it to be as efficient as they work?
Eskom? believe private companies are. would compete with all of the private
power companies to sell its electricity
Electricity can’t just go straight from
In a nutshell, the government thinks to the ITSMO (formerly Eskom
51. Does this mean that the power plants to the customer end-
that Eskom is a dinosaur. They believe Transmission). It would not receive
government wants to user - it needs to pass through the
that there is no place for big public any special treatment, and the ITSMO
power lines and substations
utilities in the modern age, that privatise Eskom? wouldn’t have to buy its electricity if
controlled by Eskom’s Transmission
Eskom should let go of its monopoly private companies are selling theirs
Almost, but not exactly. Unbundling division first. In an energy market,
and allow private for-profit power for less.
will not in itself privatise Eskom - the Eskom’s Transmission would be the
companies to compete with it. In the
government will still have control over
end, they want to create a market
the three ‘unbundled’ parts. Instead,
where electricity is generated for
the aim of unbundling is to open the
profit maximisation, and where Eskom
door for privatising the generation of
is just another generator. We explain
electricity. In this vision, Eskom would
36 - The Problems With Government's Approach The Problems With Government's Approach - 37WHAT’S WRONG All of these necessary functions cost
money. These costs are called system COMPOSITION OF AVERAGE
WITH THE
GOVERNMENT’S
costs. And they will fall on the
shoulders of Eskom Transmission. POWER PRICE IN CENTS(€)/KWH
VISION 56. What do these other FOR A GERMAN HOUSEHOLD
costs mean for Eskom
55. What would the real Transmission? 40
cost of renewables be?
Because the government wants to
When people say that renewables are attract investment, they will make
the cheapest way to make electricity, sure that Eskom Transmission does
they are talking only about the costs not charge private companies for
of construction and maintenance. these costs when it buys the 30
electricity. But Eskom Transmission
The problem is that renewable energy will need to pay for them somehow.
is a bit more unpredictable than coal And the only way for it to do this is to
or nuclear energy. The sun does not raise the price of the electricity that it
always shine on solar panels, and the sells.
wind does not always blow on wind 20
turbines. 57. Won’t the result be the
same as Eskom’s death
This is not such a big problem right
spiral?
now, when renewables make up only a
small portion of our energy supply. But Exactly. Eskom Transmission will start
if the government’s plan goes ahead 10
raising prices to pay for system costs.
and private companies start building People will respond by buying less
lots of renewables, then this issue will power. Eskom Transmission will have
need to be dealt with: to increase its price more, and so the
cycle of tariff increases will continue.
• Storage systems will need to be
This is already happening in some 0
designed and built.
European countries - the price of 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
electricity has gone up as more and
• The grid will need to expand to
more for-profit renewable power Renewable surcharge Grid Fees Other
reach the many new distributed
solar and wind plants. comes online.
As renewable energy was added to Germany’s energy mix, the renewable energy
• The grid will also need to be
surcharge grew, from less than 1 c/kWh (in euros €) in 2006 to more than 6 c/kWh
adapted to balance the constant in 2019. At the same time, the price of electricity rose from 19 c/kWh in 2006 to 30
variability of renewables. cents in 2019. The increase in price was a result of the public having to pay for the
costs of renewable energy rather than private and fossil fuel companies, or the
rich through progressive taxes.
38 - The Problems With Government's Approach The Problems With Government's Approach - 3958. We can see the 59. If Eskom Generation 60. Is unbundling a dead- • Eskom Generation requiring
government support because it is
problems for Eskom can’t stand on its own end?
unable to compete with
Transmission. But will feet, why shouldn’t we
Clearly the answer is yes! Unbundling renewable energy prices.
unbundling at least fix let the IPPs take its
will not lead to cheaper electricity in
Eskom Generation? place? the long run, and it will definitely not
• Private renewable energy
producers making profit on the
fix Eskom’s financial issues either. We
No. There are two reasons for this. The problem is that there is nothing backs of Eskom Generation and
will end up with the following picture:
First, most of Eskom’s debt would that can take its place at a pace fast Transmission.
very likely be allocated to Eskom enough to generate enough power. It • Eskom Transmission requiring
Generation in the unbundling process, will take a very long time before This vision of the government is not in
government support because it
notably the debt racked up through renewable energy can make enough the interests of the masses of South
has to pay for the system costs of
the Medupi and Kusile projects. At the power to provide for the entire Africans.
renewable energy.
same time, its current power plants country. So big power plants like
are expensive to run and maintain. So Eskom’s will still be needed. No
it will be in no position to compete private company will be willing to
with private power companies in an invest in building these big power
energy market. Its revenue will reduce plants, because they are incredibly
even further. expensive to build and not very
profitable to run.
Eskom Generation will still be required
to back up renewable energy through So the government will have to keep
its coal plants. However, these coal bailing out an unbundled Eskom
plants will also need to cut down on Generation - or else risk the entire
supply during periods of high supply power grid.
of renewables (when there is lots of
sun and wind) - this is to keep the
grid balanced and because the
renewable energy will be cheaper. This
constant turning power up and down
again is very uneconomical and
therefore an additional cost for Eskom
Generation and another advantage for
the IPPs. If Eskom Generation is not
financially supported during this
process it will collapse.
40 - The Problems With Government's Approach The Problems With Government's Approach - 41HOW WE SHOULD
FIX IT: ESKOM
TRANSFORMED
D
Eskom must lead our just transition
61. What does ‘just 62. What does ‘socially-
transition’ mean? owned’ energy mean?
A Just Transition is any transition to a Socially-owned means different things
low-carbon economy that secures the to different people. There will need to
future and livelihoods of workers and be more debate to further clarify the
their communities. This means that idea. NUMSA, for example, in its
new jobs must be created to replace resolution on socially-owned
old jobs, with consultation with renewable energy, defines it as: “a
affected workers and communities. sector made up of a mix of energy
It also means there must be suitable parastatals [state-owned companies],
alternate provision if new jobs are not cooperatives, municipal-owned
available. entities and other forms of community
energy enterprises”. Where there is
42 - How We Should Fix It How We Should Fix It - 43consensus is that social ownership is
clearly not private ownership for
profit.
63. But what about for-
profit community GLOBAL NEW
INVESTMENT IN
ownership?
As far as the State is concerned -
We need to be clear about two things:
RENEWABLE ENERGY
whether national, provincial or
firstly, what we mean by a
municipal – it does not have to be
‘community’ and secondly what we
either incompetent or corrupt, let
CAPACITY
mean by community ‘ownership’.
alone both. Far from it. While
Community ownership is not
therefore not denying the enormous
automatically a more democratic
problems we currently face at all
means of energy ownership. Often the
three levels of government, Eskom
communities people are referring to
and municipalities are democratically
are led by ‘traditional leaders’. Many of
accountable to us in a way that
these leaders are completely
private companies can never be. We
undemocratic and privatise their 400
can see how the State of Capture
community’s resources for 12%
Report by the previous Public 2%
themselves. This has resulted in 10% 5%
Protector and the ongoing Zondo
various people taking court cases -7% -11%
Commission have brought about some 300
against their traditional leaders. 20% 21%
transparency and accountability
regarding Eskom. Private companies, But even if a community had -11%
$ Billion
by law and their own agreements, are democratic systems, should they 200 -14%
accountable only to their 30%
make a profit selling electricity at the
shareholders. Eskom is not nearly as expense of working-class people who
accountable or accessible as we want don’t own the means of producing
it to be. But it is still obliged to 100 23%
energy? Community ownership is -6%
account to our democratically elected progressive if it means the community
Government and Parliament. as a whole participates in energy 26%
decisions and benefits from the 0
Part of what makes a transition ‘just’
construction of energy and the 33%
is that it offers an opportunity to
affordable access to it.
deliver energy democracy – where all 45%
people participate in decisions around
energy - through social ownership. But 51%
for Eskom to do this it needs to be
fundamentally transformed.
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
years
Investment in renewable energy has flatlined and
occasionally decreased in recent years.
44 - How We Should Fix It How We Should Fix It - 4564. Why is a Transformed 65. But how can Eskom TRANSFORMING 69. So what would a
Eskom best placed to overcome the problems transformed Eskom
lead our just transition? with renewable
ESKOM look like?
energy’s variability?
For two crucial reasons that account 66. What do we need First, Eskom must be de-corporatised.
for both the ‘just’ and the ‘transition’. As we explained earlier, the electricity Eskom to be? That means restoring Eskom to its
output from most renewable energy is original mandate of supplying the
• In terms of justice, Eskom is of We need an energy utility that can cheapest possible electricity to the
variable. It depends on the sun or the
course best placed to make sure lead South Africa’s just transition to economy and all the people, It means
wind which are not constant. This
that its workers are either moved clean energy, and meet the electricity removing the ‘user-pays’ and ‘full cost
variability needs to be managed. When
to other jobs in Eskom, or that needs of its people and economy. Only recovery’ principles. Second, workers
the output from renewable energy is
those who are approaching Eskom can do this. But Eskom has to must have a greater say in how Eskom
low, the baseload electricity
retirement or can’t be moved to change. is run. Worker councils should be set
(generated by non-renewable energy)
new jobs are paid a living wage up that have power to affect the
will need to be increased. Eskom, as a
until they are due to retire.
single utility, is best placed to manage 67. What about the workplace and participate in the
• On the transition, we know that
this kind of variability. The grid will corruption and appointment of senior management.
Thirdly, Eskom must also be
private sector investment is
need to constantly be balanced mismanagement at
through powering up and down responsive to the broader public that
falling short because renewable Eskom? includes communities affected by its
baseload power plants. Eskom
energy is becoming less
Generation and Transmission, as a operations, environmental groups and
profitable. So public investment, This is a huge problem which has to
single entity rather than being end-users. This can be done through
which isn’t driven by the need to be a priority in transforming Eskom.
separated, can best coordinate this public assemblies where Eskom and
maximise profit, must take its Eskom has suffered, and continues to
balancing of the grid. government officials as well as
place. Eskom is the only existing suffer, from extensive corruption and
parliamentarians must present
entity that can receive and deploy mismanagement.
Eskom can at least do this until 2030. themselves. Such transformations
such public investment into
At that stage, either improvements in would make Eskom truly accountable
renewable energy. In addition, it 68. So how do we deal with
storage technologies, or developments and transparent to the public it
makes sense for Eskom to do this the corruption and serves. Only this Eskom Transformed
in other baseload forms of power that
so it can plan the replacement of
are clean, will be ready for mass
mismanagement? can address the climate crisis. Covid-
its aging and dirty coal plants.
deployment. Neither storage nor 19 should make it clear how serious
By building the power to hold people
other forms of clean energy will be global disruptions will be if we don’t
These are the necessary components accountable. The government is
very profitable. So again Eskom, reduce our emissions.
of a just transition. Only Eskom can divided: either they are involved in and
without the requirement of the profit
deliver them. support the corruption, or they do not
motive, is best placed to deliver it.
want to fix it and would prefer to let
generation at Eskom die so the private
sector can take its place. There are
also managers at Eskom who are
corrupt and do not deserve, or do,
their jobs. Only workers can force the
government to change, get rid of
corrupt managers, and make sure the
right people are employed for the job.
46 - How We Should Fix It How We Should Fix It - 47HOW DO WE FIX ESKOM?
WE NEED TO TRANSFORM ESKOM FROM:
CORPORATION TRUE PUBLIC UTILITY
Socialized: Driven by social need, not profit, while also
Commercialised: Aims to be competitive and profitable.
supporting industrial development.
Prioritises and subsidizes big, polluting, Prioritises and subsidizes poor and rural households and
energy-intensive industries. clean and energy efficient industries.
Needs to achieve “full cost recovery”, take on its Electricity is funded through large energy users and the
own debt. treasury, including taxes on the wealthy.
Provides electricity to “customers” who pay the full price Provides electricity as a basic human need, and at an
of what they use. affordable price to non-polluting industries.
48 - How We Should Fix It How We Should Fix It - 49WE NEED TO TRANSFORM ESKOM FROM:
TOP-DOWN CORRUPTION BOTTOM-UP ACCOUNTABILITY
Outsources everything along with secretive tenders Where in-sourcing is not possible, transparent
and corruption. procurement with worker and public oversight.
Top-down management: narrowly-based board members, Bottom-up management: Worker representation on board
and corrupt political appointments. and on appointment panels for senior management.
Decisions made in secret, public and workers Public involved in decision making and consultation,
informed after. including users’ groups, communities, and unions.
Other than work-related expenses, no payments or perks
Overpaid, “professional” board members.
for being on the board.
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