More Power to Business

AN old Eskom engineer with extensive experience in building power stations once told me that electricity was cheap to make but expensive to distribute. That is just as true today as it was in his time.

Getting precise information is difficult but it seems that the actual generating cost of electricity at the power station is about 35 cents per kilowatt hour or unit. Eskom’s average selling or wholesale price is 61 cents a unit and a small business buying electricity from a municipality can pay up to R2 a unit.

This is how grocers, with pencils behind their ears, used to work out their prices in the days before supermarkets.

From Eskom’s point of view, renewable sources of electricity make no sense at all. If it can generate electricity for 35 cents a unit why on earth should it buy power from independent producers at a cost of 90 cents a unit for wind and between R1.42 and R2.45 for different versions of solar power?

A businessman, on the other hand, would look at the figures and say the 35 cent generating cost is not the problem. It is the R1.65 that it costs to get the electrity from the power station to his business.

The second thought is that if he can cut out the whole distribution system (in exactly the same way as the supermarkets cut out the wholesalers) and organise his own electricity supply he will have better control of costs and he will have energy security. If he can put solar panels on his roof and produce electricity for R2 a unit this year he will know that his power will still cost R2 a unit next year and the year after. And in 10 years time when municipal electricity is, say, R3 or R4 a unit he will be sitting pretty.

Vodacom has done this exercise and concluded that solar panels are the best option. Their system is up and running in Cape Town and they are delighted with its performance.

The Department of Energy and NERSA have also looked at the situation and decided that it is in the long-term interest of the country to promote renewable energy. What they don’t seem to grasp is that feeding expensive solar or wind energy into the national grid will simply make electricity more expensive because the distribution costs have to be added to the already high generation costs.

What they should do is promote renewable energy for off-grid use or to supplement supplies from the grid. Every business which decides to generate its own electricity is doing the country a favour for its means that there is more Eskom power available for the mines and the manufacturing industries where it is most needed.

Promoting electrical independence and encouraging the independents to feed their surplus power back into the grid would be a constructive move for it would increase the national generating capacity at no cost to the State or the hard-pressed Eskom. It would also be a great experiment for not all independent ventures will be successful but some will get it right and show the way for others.

The municipalities won’t like this one bit. Every new self-provider means a customer lost and less income from electricity sales. Cape Town’s electricity department is acutely aware of the problem. Over many decades it has been one of the best-run departments in the municipality and its earnings have subsidised less-efficient sections of the municipality. As technical men, they know that electrity must be used more efficiently if we are to avoid black-outs, but they are under pressure from the political bosses to protect the revenue stream.

Any business man or woman can see the problem with this approach. It’s like asking your sales team to sell less product when they are on commission.

Yet this is what we have – an order from the Government to save electricity. And they have put the sellers of electricity in charge of the savings plan at a time when both Eskom and the municipalities desperately need every sale they can make because the revenue is essential for their survival. It’s like asking a supermarket to persuade its customers to buy less food and groceries.

If we are to solve the electrity crisis we have to see it from the consumer’s point of view. As Raymond Ackerman said – “the customer is King.” Or was it Queen?

In this case the customer is the economy of South Africa. All the mines, factories, shops, offices and domestic consumers. Ask them what they want and they will tell you in a loud chorus – “We urgently need a cheaper more reliable supply of electricity”.

There are just two ways to reduce the electricity bill: use less electricity and bring down the cost per unit.

Instead of fleecing the public with green taxes or paying subsidies on solar water heaters (the scheme has not worked anyway) incentivise business to produce better and cheaper heat pumps, more efficient solar geysers and appliances which use less power.

Encourage people to generate their own electricity and allow them to feed surplus current back into the grid.

The problem of the high initial cost is easily overcome for one just has to look at what three South Africans have done in California. Two brothers from Pretoria, Lyndon and Peter Rive, financed and guided by the redoubtable Elon Musk (also from Pretoria), have built the biggest solar business in the United States. They install solar panels on roofs but they don’t sell them, they lease them and provide the necessary maintenance as part of the deal. Their company, Solar City, went public this year and is now worth billions of dollars.

This kind of thinking is not going to come from Eskom or the municipalities, but it can come from business.

All this leads to the radical question – is the national grid obsolete? Is it not better to make the electricity where we use it and cut out the power line costs, transmission losses and some of the distribution expenses? Would gas power stations at the coast not be more efficient than the monsters Eskom is building in the far north of the country? It would certainly balance the grid and decentralising power generation will surely improve energy security.

As it stands the national grid is north-heavy and it is beginning to look decidedly old fashioned. Technology is advancing so rapidly that we need to be a great deal more flexible in our planning. Future solar panels will be cheaper and more efficient, new types of batteries are being developed to store power, fuel cells will soon be available and new materials like graphene make even copper wire look obsolete and expensive.

In this changing world the old answers are failing us and we need new and fresh thinking and we need it urgently. That is why the Cape Chamber has organised the first of what we hope will be a series of energy symposiums to bring the best and most creative minds together to shape a better response to the electricity crises. The first symposium takes place in the City Hall on August 21. For more detail e-mail Denise – denise@capechamber.co.za.

By Peter Haylett
Chairman of the Cape Chamber of Commerce and Industry’s Industrial Focus Portfolio Committee

 

 

 

 

 

 

 

 

 

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