ESKOM RCA FY 2019 Presentation to NERSA 3 Feb 2020

ESKOM RCA FY 2019

Presentation to NERSA
     3 Feb 2020

OUR VISION
To inspire and mobilise society towards a sustainably
developed and equitable low-carbon future.

OUR MISSION
A change focused organisation aiming to bring about
significant, positive change in the way we, as
humans, engage with earth systems and each other.

Support the involvement of South Africans in a just
energy transition.

Collaboration and information sharing
Energy Governance South Africa

Research and publications

                            https://90by2030.org.za/wp-content/uploads/2018/02/
                            Energy-Sector-Transformation-in-SA-June-2017.pdf

Research and publications

                            https://90by2030.org.za/wp-content/uploads/2018/06/
                            Just-Energy-Transition-low-res.pdf

Young Leaders

Community

Outline
1. Sympathy
2. Good news and bad news
3. Our key message
4. RCA is not working
5. Prudency
6. Just Energy Transition

Sympathy
For current Eskom and Nersa employees

 Image: John McCann/M&G             Image: Grammarly

Even Superman struggles with electricity

               Image: Comic Vine

Good news

  1. This presentation is straightforward:
     based on principles and logic.
     No complicated maths and technical detail.

  2. The Eskom crisis actually presents an opportunity, provided
     there is the political will to do what it required.

Bad news

  1. Most of these comments have been made before, but have
     not been taken up, and the situation has got worse not
     better.

  2. In some areas of energy planning, South Africa is moving
     backwards.

Image: Cartoonstock

Our key message

                  STOP
                  ESKOM BAND-AIDS

                  FIX
                  THE CORE ISSUES

Examples

• Above-inflation electricity tariff hikes

• Recurring government bail outs for Eskom

These do not solve the long term problem

Core issues
  • Eskom debt

Core issues
• Need to accept and urgently act on:

  o Eskom reform/restructuring/unbundling
    (must be consultative)

  o Plan for an energy transition in a fair and
    just manner.

Innovative ideas

Innovative ideas
    Working title: ‘Just Transition Transaction’

    Proposal, being incubated by Meridian Economics

    Assist with Eskom debt and funding for just transition

    Linked to accelerated coal phase-out, increased uptake of
     renewables and Eskom reform

                      Addressing multiple core issues

Recommendation:
      Until such time as a robust plan to reform Eskom is
      set in motion,

      and until government develops and starts to
      implement a credible plan for a just transition to
      low-cost and low-carbon electricity generation,

      further electricity tariff increases are unacceptable
      and must not be granted.

I need real solutions,
not temporary patches

                ….. and temporary patches delay
                action on really grappling with
                the big problems

Why RCA is not working

                     Reward Eskom for:
                     Spending more on making less
Predict the future
                     Punish consumers for:
                     Buying less
                     All by comparisons to an upfront guess

What?!

‘utility death spiral’                             RCA
                         Utility puts prices up   Encourages
                                                  this cycle
                           (above inflation)
                    Customers go off grid,
                  increase energy efficiency,
                   buy less units from utility,
                     businesses close etc.
                   Utility makes less revenue

Evidence as to why RCA is not working

             https://www.poweroptimal.com/2019-update-eskom-tariff-increases-vs-inflation-since-1988-with-projections-to-2022/

https://www.dailymaverick.co.za/article/2019-07-25-south-africas-power-conundrum-a-debt-managers-view/

https://businesstech.co.za/news/finance/332227/eskoms-20-year-road-to-financial-crisis-in-a-nutshell/

Source: CSIR

Prudency

   Ongoing problems at Medupi and Kusile……

Prudency

 Research from 2017 showed that it
 would economically advantageous
 for Eskom to abandon completion
 units 5 and 6 of Kusile.

 So how can any further spend on
 those units be deemed prudent?
                                   http://meridianeconomics.co.za/wp-content/uploads/2017/11/Eskoms-financial-crisis-and-
                                   the-viability-of-coalfired-power-in-SA_ME_20171115.pdf

Given the climate crisis,
how can ANY investment in
  new coal be prudent?

Just Energy Transition Plan

Coal lobby:

“Coal is necessary for baseload electricity”

Coal lobby:

“Coal is still a good investment ”

Coal lobby:

“Clean coal? ”

1. It would be incredibly expensive (and illogical when
   there are naturally clean options).

2. Eskom is already trying to avoid meeting minimum
   emissions standards.

“What about the workers in the coal sector?”

A way forward:

                 https://90by2030.org.za/wp-content/uploads/2019/09/
                 A-Report-Remaking-our-Energy-Future.pdf

Who should do it?
Consultation, oversight and planning

                    Implementation

How to do it…

What should be in the plan?

Link to electricity tariffs

Together with Eskom reform and JET
planning,

design a new electricity pricing
system that is fair, equitable,
predictable and suits the energy
system of the future

Thank you