In the wake of my previous article extolling solar with battery backup as a quick and relatively corruption-proof way of adding power to the grid, I welcome President Cyril Ramaphosa’s 25 July announcement that home-scale solar — including a feed-in tariff — will be in the mix.
A feed-in tariff is important for making solar not only viable for the less wealthy but for enhancing its contribution to the overall grid. A feed-in tariff allows households and businesses to make money off any excess solar power they generate. Where this has been adopted, the result is a very rapid increase in home-scale solar particularly as the price of photovoltaics has dropped.
Making it easier for smaller-scale private generation is also welcome.
Where I differ with the Ramaphosa announcement is in sticking with the plan of splitting Eskom into three companies — generation, transmission and distribution. This is not a novel idea; it has been tried in Australia and failed there for the same reason that splitting the British rail network into trains and infrastructure failed.
The Eskom split proposal is a failed 1990s idea: why are we even considering it?
If your primary goal is to supply a service to end-users, you need the underlying infrastructure to be in good shape otherwise your service falls apart. Once you split these off, you divide responsibility and it becomes possible for the other components to fail without destroying their entire cash flow. In Australia, the result of this mistake was long-term degradation of transmission and distribution. In the United Kingdom, the rail system fell into such disrepair that the Tories brought it back under state control in 2021.
Transmission means long-range very high voltage movement of electricity; distribution is closer to the consumer and voltages are lower, including the final step-down to 240V.
Eskom has five fundamental problems:
Too big to fail — because South Africa is so dependent on Eskom, it has to be kept going no matter how catastrophically bad it is;Failure to diversify away from coal — a sunset technology not only because of climate change but the pollution it causes in the vicinity of mines and the other toxic pollutants it emits like heavy metals;Crisis in municipal debt — many are so far behind in paying Eskom that they have no way of recovering;Internal sabotage — there are frequent complaints of deliberate damage to equipment and theft of resources; andInability to manage large generator projects — not only is Eskom investing in coal plants when this is the worst possible time to do so, but they have had cost overruns and are not operating reliably many years after they should have been commissioned
Which of these does splitting the company solve? None. All it will do is triple the number of incompetent boards and managers unless the culture of cronyism, impunity and cadre deployment is ended. If those problems are corrected, Eskom in its existing form will become more viable. If they are not, splitting the company three ways triples the scale of the problem. And, as we have seen from the Australian example, it is not a solution anyway.
The proposed split does not undo the “too big to fail” effect — if any one component fails, the whole system collapses, because they are interdependent.
The Australia Institute in a 2021 study estimates that there was underspending in real terms in that county of $1-billion a year (about R11.5-billion) on electricity infrastructure with a drop of 28% in distribution investment since 2006; the drop in transmission is 33%.
If that happened in Australia, why would copying the same idea here work better? We have seen the catastrophic effect of failure to maintain big power plants. Why would we want this for the entire system?
To make it worse, the crunch in Australia came when small-scale renewable generation was taking off in a big way, exactly the plan the Ramaphosa government plans to put in place here. Transmission at least is in good shape but much of our distribution network is at municipal scale, where maintenance has been neglected. Adding a lot of home-scale solar to a dilapidated grid is not a great plan.
What would be a better idea?
Eskom should split as follows:
Bulk generation, transmission and distribution — what Eskom does now; under the assumption that its existing problems can and should be fixed;RDP solar — installation of a solar panel on every RDP house, with an initial target of one million homes, to be funded by a combination of government subsidy and cost recovery of a share of the electricity generated for the first five years;Public institution solar — schools and tertiary institutions should be encourage to go solar, with a mix of subsidies for the less wealthy and private funding for the well-funded institutions; andHome solar — no subsidy; those who can afford to buy solar should be permitted to feed into the grid with a feed-in tariff competitive with their municipal electricity tariff (ideally with smart metering, to encourage efficient usage relative to peak demand).
Eskom divisions split off to handle the solar options would be in competition with small operators who would have to perform to stay in business. This would compel these new Eskom siblings to be competitive. Doing it this way would allow Eskom to save on the wage bill for its core operations without divisive downsizing. Each of these new Eskom divisions could be further split into smaller regional or local companies, reducing the scale of each operation — and hence reducing the “too big to fail” effect.
The main Eskom operation would still need to address its underlying problems but in the meantime the combination of Eskom’s own solar divisions and a large number of smaller players in this space will reduce the “too big to fail” effect on generation. That would allow more effort to be put into fixing the municipal side of distribution, while ensuring that transmission stays in good shape.
Philip Machanick is an associate professor of computer science at Rhodes University.
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