Unpacking one of South Africa's largest state tenders in history
The debate around the nuclear deal is ongoing and the trillion-rand question is who stands to benefit should it go ahead. LAUREN HERMANUS, and electrical engineering Masters student at the University of Cape Town BRIAN KAMANZI shed light on one of the biggest deals in our history.
TJ: Is there a real case for South Africa to invest in nuclear?
Brian Kamanzi (BK): I think we must be clear here in a sense about what we mean, a case can really be made for anything, one of the questions really is who are the forces allowed to shape the agenda and what impact will the choices of a few shape the agenda for tomorrow. To speak more specifically in a recent interview with ESKOM Chief Nuclear Officer, David Nicholls, in the Daily Maverick he cited that basic rationale for nuclear rested on the medium to long term need to compensate for our aging coal fire plants that as it stands will not be able to cover the base load power with the expanding demand into the future. I would argue though that due to the advances made in the projected cost of electricity for renewable energy utilisation technologies it is absolutely necessary for us to open up a widespread consultation process to renegotiate the terrain of our state sponsored energy future. So, in summary, that is to say that one can make a case for nuclear to supply our power requirements tomorrow but who benefits from steamrolling any real substantial process that calls into question whether these resources could not be distributed across more environmentally sustainable options. I mean, this would be one of our largest state tenders in history!
Lauren Hermanus (LH): I absolutely agree here. In 2010, South Africa embarked on our first rigorous IRP process, by which we achieved exactly what Brian suggests we need now: a large-scale, data-based, consultative process to set us on a path for energy security and decarbonisation. We must recall that our coal-fired power network is not only ageing, more recent investments in Kusile Power Station, for example, stand in contradiction with our environmental policy. South Africa's electricity system is one of the most carbon-intensive in the world, and we've committed to reducing that significantly. Back in 2010, nuclear was the cheapest and most reliable way of achieving this goal. But not anymore. The IRP is a living plan, it is meant to be updated with new information, such as the technological improvement and cost reductions for renewables. And it was! In 2013, the plan was updated and it was made clear that nuclear investment was needed (if at all) at a much lower scale, and that we needed to delay making a decision on nuclear until we better understood how demand was shifting as people and businesses became more energy efficient (using less energy to do the same things).
TJ: Who stands to benefit is the nuclear deal goes through?
LH: Well this is the trillion-rand question. To be honest, all we can do is speculate. But that is not to say that this speculation is wild and unfounded -- there are certain facts and patterns, networks that are emerging around this massive procurement exercise. In simple terms, the actors who benefit would be local uranium producers, the service providers that secure multi-billion rand contracts, and the providers of credit. The largest uranium deposit in South Africa (Shiva Uranium Mine) is owned by the Gupta-owned Oakbay Resources and Energy.
Although the Ministerial Determination for nuclear points to a fair and competitive process for procuring nuclear, it is now clear that there was only ever one player in the race, the Russian state-owned nuclear consortium, Rosatum. And in terms of finance, it is not yet entirely clear, but whoever provides credit with our new junk status will be able to charge extortive rates. Oh, and taxpayers and energy users will help to service that debt.
TJ: What comes after the deal, if it does not go through? What does our energy future look like?
LH: Well, that is not for me to say alone. The IRP is an ANC-led energy sector reform, to cast light on the secretive workings of the sector and of Eskom under apartheid. This process essentially calls for all relevant stakeholders to engage in a robust and transparent process, led by the department of energy, to determine the course that suits us best. If I were to add my voice to that debate, I would want a sector that was dominated by renewables of different kinds and scales, in which there is some private investment but Eskom still plays a significant role. I'd have Eskom's transmission function -- the one that is keeping REIPPPP projects from connecting at the moment -- under a different state-owned entity. And I'd involve municipalities much more, as small-scale renewables like community microgrids or commercial rooftop solar are really something that needs to be locally managed. Not only this, our municipal revenue system is unduly reliant on energy sales. And most critically, energy sales are one of the few mechanisms that local governments have to get resources from those that have them to those that need them. It is radical economic transformation, but it is a start, and one that is jeopardised by increasing electricity costs and an uncoordinated vision.
BK: In my view, irrespective of whether the deal goes through a national conversation is urgent and must be sustained on our energy future and security as it relates to our most basic requirements to a decent life such as food, health and education. What the conditions around the action against this deal present is an opportunity to energise this debate and pry it out of the hands of the corridors of specialists, academics and industrialists and into the public domain.
TJ: Who benefits from renewable energy in South Africa?
LH: At a high level, we all benefit from decarbonising our energy sector and exploiting cheaper energy sources. Specifically, the companies that have participated in investment through REIPPPP have included local banks and companies, and also Eskom, which has a growing portfolio of renewable energy investments. There have been some concerns about the level of foreign investment and ownership. But this is all for large-scale infrastructure requiring large debt and equity finance. That means that there is a narrow pool of companies that can play in that space. The technology is changing, however, and increasingly, small-scale systems like community solar microgrids or other smaller systems are allowing for a diversity of investors and owners. Internationally, in Germany or the US for example, we see examples of co-ops, small businesses investing to meet their own needs, or to sell into the grid, to get a return on their investment. These small-scale systems have an added benefit of being better suited to extend access in remote rural areas or in dense urban informal settlements. They can also provide cheaper energy, for low-income households. So cities like Washington DC are subsiding solar PV for people in social housing, bringing their electricity bills down and adding to local energy supply at the same time. This is something our municipalities should be investigating, as they are largely responsible for basic electricity access.
BK: When thinking through this question I think we need to balance the present reality of the market with the opportunities technological innovation have opened up. Indeed a large degree of the development and deployment of renewable technologies are presently being driven by private investment. However, the capacity of technologies that utilise sources such as solar, wind and hydro to provide electrification from scales as small as schools to that of communities at large present us with an energy terrain that presents new options for communal ownership. To put it simply I think that if the price continues to drop on tariffs projected for renewables we all stand to benefit. However, no amount of technical innovation itself cannot solve the political problems inherent in our present society that drive gross excess and exploitation. Indeed, renewable energy technologies provide a gap to address some of the climate crisis and that can't be downplayed.
TJ: What needs to happen next, in your opinion?
LH: Tactically, the deal must be halted. It must stop. And we must work through the right democratic processes to do this. They exist. The reason I think that this deal needs to go through and be stopped by the processes, checks and balances provided by law and policy is because there will be other deals. There will always be people that pursue private interests in conflict with public benefit. From a micro level (personal tax evasion or making sure a friend gets a tender that they may not be able to deliver on), to a macro level, like steering an entire sector in a direction that threatens to undermine the economy. And let me add, that this is not a South African or African problem! These are global issues. Our systems, cultures and compacts must be strong enough to resist this. In my view, addressing issues of inequality, and the persistence of racism and serious racial divides must be a priority if we are committed to establishing and consolidating institutions that work.
Lauren is a sustainable development specialist and Strategic Director of the Massive Small Collective, focused on urban resilience, energy innovation and equity. Her experience is in policy, strategy and programme development in both the public and private sectors. She applies Complexity Thinking to development challenges, in her approaches to understanding and addressing societal problems.