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ESKOM and Government Policy : Ignoring South African entrepreneurial spirit and history! July 26, 2013

Posted by warwicksworld in Uncategorized.
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Eskom and a host of related energy issues supported by daily TV energy reduction pleas, the 49M campaign and a host of official and unofficial websites, offering practical energy ideas, continue to dominate South African media. It’s time to look beyond the media noise and assess just how Government’s Eskom policy is negatively affecting South Africa’s long-term growth rate.

South Africa has a proud history of creativity, ideas, inventions and entrepreneurship. There was a time that we could have led the world in renewable energy. Solar panel development, lithium ion batteries and the ‘Joule’ our very own battery-powered car, are all South African pioneered. Include in the list, Elon Musk the South African born and raised founder of Tesla the 2012 USA car of the year, (a battery powered world-beater). Today, all these inventions and inventors count for nothing as they have subsequently closed down or left our shores.

Fossil-based energy will come to an end at some time. It could be due to environmental issues, carbon output, water shortages or renewable energy replacement. As a country, we need new ideas and Eskom is just not well-suited to the task. It’s old news that the R115Bn Medupi is late, over- priced, over engineered and over budget. Eskom, like 99% of all electricity utilities, is stuck in the past. If Mr Westinghouse (power transmission pioneer) and Mr Edison (light bulb and power grid inventor) – were to walk into Eskom’s head office, it is probably a fair bet that they could join a board meeting without too many adjustments to their inventions and insights. In fact if they were to ask: “What happened whilst we were away for the past 100 years?” The board members would struggle to announce anything more interesting than the CFL (compact florescent light) bulb. That’s how little power generation has changed over time! Put another way, electricity utility companies don’t have the ideas or answers and lack the motivation to find them.

It is inconceivable to expect a monopoly to change its modus operandi. Why should they? Salaries, bonuses, status, return on Investment – are all guaranteed. After all it’s their job to make sure that if any consumer ‘switches on’…power is available. And for that, they are guaranteed a financial return. But that doesn’t make it right for us for the future. And leaving aside issues such as Eskom’s value for money, cost and remuneration structures, project management competencies etc, there are actually far bigger issues at stake.

The industrial age, as we know it, was built on cheap energy. Free market thinkers (and I am one of them) have always believed that the market sets the price and in the process balances supply and demand. Yet in the case of energy it is mostly an illusion. Much like the infamous post 2008 financial crisis, saying ‘ privatising profits and socialising losses’ – the same applies to the existing energy utilities. The price of energy does not factor in the long-term social costs at all. Balancing prices in energy supply-and-demand relates to today, the present, and certainly not the cost to society in 10 or 20 years time.

Eskom now represents the very worst of old ideas and industrial strategy. A top down -‘one too many ‘ monopoly – a sort of ‘one size fits all’! It’s just not the way to engage, implement and manage in a connected society. Furthermore, the more we attack Eskom about annual price increases (the nuclear vs coal debate etc), it just serves it perfectly and our attention is deflected from asking the really tough questions that should be asked of them. The Business Report’s 18 July 2013 article about Eskom seeking exemption from pollution targets just reinforces the argument relating to incorrect pricing, long term social cost and distraction from the real issues. The simple fact is that Eskom has no compelling reason to change the way it has worked. And it has no idea how to reinvent itself – as it has never had to! It cannot be the champion of new ways and ideas and be the enforcer of its own monopoly. That’s like running with the hares and hunting with the hounds, which is bad news for all South Africans and particularly entrepreneurs.

Somebody should tell the government that we are well into the collaborative, connected age. There is a new energy revolution on the way. Every electricity and energy consuming device will eventually be connected to the internet or a smart-phone and it will dwarf the size of the internet as we know it now. Consumption patterns, costs, possible savings and carbon footprint measurements will be available in real time. Low consuming households will even be able to sell carbon credits to higher consuming users. Companies and countries who embrace this vision will enjoy a comparative trade advantage over those who don’t. Hundreds of thousands of skilled jobs will be created in this new revolution. ESKOM’s top down (take it or leave it style) is simply just not the way to get the solution you want or that which we as a country need. And the idea of saving electricity as a national strategy is neither satisfactory or nation building. Nor does it encourage economic growth, increase employment or stimulate entrepreneurship. No wonder we can’t get beyond 2% annual growth rates.

Whilst the Eskom debate continues to contaminate our economic outlook – all around the world new options and energy solutions are proliferating. It is immaterial where you stand on the issue of renewable energy as the general trends are clear and some facts speak for themselves. For instance On June 16, 2013 Germany achieved a record 60% renewable energy contribution to national electricity demand. Three years back it was forecast that solar panel costs per watt would drop below 5.00 US dollars by 2013. Today it’s around 0.70 US cents per watt. The Tesla battery motor car can out-perform a BMW turbo motor car from 0-100 mph. Earlier this week in the UK the first human pedal-powered helicopter ‘took off ‘ and remained aloft for 60 seconds at a height of 3 meters, and a few months back a solar powered aircraft flew day and night. This week Hyundai released their new fuel cell prototype motor car. In June 2013 Los Angeles also implemented a city-wide feed-in tariff system. Worldwide, progress is being made in every energy discipline from flexible solar panels, wind turbines, fuel cells, micro turbines, flywheels, battery storage systems, etc. – and it is accelerating. So is smart grid and smart meter development! Where once there were a handful of smart phone apps measuring electricity usage there are now dozens – all in a year or two. The best minds in the world, from Bill Gates to Elon Musk, are passionately striving to drive renewable energy technologies. With smart phones proliferating all over Africa, entrepreneurs are setting up charging stations. The truisms are basically this. Fossil-based energy, as we know it, will get more expensive and renewable energy will get cheaper. In a collaborative world consumers want more control, input and to be part of the solution. We want to be ‘prosumers’(proactive consumers). To top it all, Eskom is seen as a bunch of fat cats. But it could have been so different if they could have involved every South-African on a more meaningful and genuine level.

Can you imagine if the following call to action had been adapted by Eskom (to quote from Lord Beaverbrook’s call for aluminium to manufacture fighter aircraft in 1940)? He was quoted as requesting the public to: “Give us your aluminium. We want it all, and we want it now! New and old, of every type and description – and all of it. We will turn your pots and pans into Spitfires and Hurricanes! The need is instant. The call urgent. Our expectations are high.” Maybe ESKOM should have been calling for installation of solar panels on all our rooftops a long time ago. Unlike pots and pans…the availability of sun is not limited!

Perhaps Lord Beaverbrooks’ call to action was one of the first examples of harnessing ‘people power’. More importantly it raised the awareness of the impending Luftwaffe peril facing Britain and united the whole country. Everybody felt involved and part of the struggle. It was an astute decision by Sir Winston Churchill who respected Lord Beaverbrooks abilities but with whom he often disagreed. Fighter aircraft production soared within months of Beaverbrook’s appointment. The mood in South Africa is not united – in fact we feel let down, disconnected and force fed.

Not many South Africans have benefitted from the spending hundreds of billions on Eskom’s top down energy solution. Certainly this is the case when compared to what could have been achieved. Medupi has cost South Africa a new future. Right now a completely new vision is needed. One that embraces the fact that we are in a world where solutions are driven through collaboration and engagement, enhanced by a connected world where information is available 24/7 and where consumers become prosumers. Tough but logical decisions are needed. Here are some ideas.

1) We need a Warren Gatling approach (the Lions 2013 rugby coach who realised that to win the third test and the series in Australia last month, he had to dump his most experienced player and sentimental favourite – Irish centre, O’ Driscol). So, strip Eskom of its renewable energy mandate and put the best people with the best ideas in charge.

2) Give South African entrepreneurs a chance. Winning a ‘prize’ from Eskom for saving electricity may prevent the need for expensive electricity buy backs from the mining industry, but it really does nothing for establishing an economic growth mindset. We need to open up our grid from being top down only, to a smart grid that allows any South Africans to invest even R10,000 in any renewable energy system to save both power and make a return on investment by selling it back to the grid. It’s a government policy decision with few technical barriers but with so many benefits from entrepreneurship and employment and even education. Its’ a no brainer. Devolve power production then watch South African entrepreneurs take up the challenge. Watch then how employment levels will rise. Some of these entrepreneurs will switch to more intensive energy production as their primary business activity. That is just what we need. At the very least, don’t just tell me to switch my geyser off from 5-9pm. Rather tell me that from 12-4 am in the morning electricity is half price! That would get me to change my consumption patterns. With the right financial incentives, businesses and households can easily become active energy producers and managers; rather than remain as passive users. Encourage entrepreneurs to build solar panel and solar heater factories. They are relatively simple labour-intensive operations and perfect for reducing unemployment.

3) Involve all South Africans in a meaningful way. Let every school install, measure and maintain a renewable energy system. It’s not about the size of the system (it can even be a model), but about the process of discovery. It’s a far better way than being taught out of a text book and it will ignite an interest in the sciences like nothing else can. The next batch of engineers and scientists will come from this program in their tens of 1000’s.

We just need to imagine what’s possible and extend that imagination to a belief in the power of all South Africans to contribute to energy production and management. It’s not just about keeping the lights on anymore… but rather being able to be economically competitive as the new energy order slowly unfolds. This should not be left to Eskom – under any circumstances, any longer. See this article in our Renewable Energy Section and on our Editor’s Blog page: https://warwicksworld.wordpress.com/ Warwicksworld Visit: www.bizassist.co.za and see our Renewable Energy section for tips and advice on starting your own energy business.

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