Thursday, July 28, 2016

Looking a gift horse in the mouth?

I see it is Eskom-bashing time again.  Awful Eskom! How could they turn down the gift of free energy?

Well, they could and they should. Try to put yourself in their shoes.  You are battling to keep the lights on and the wheels of industry turning. Then someone tells you there is a gift waiting for you in the Northern Cape. They say “Take it and pay!”

What do you say? “Thank you so much”? or “Could you come back later, please?”  or “But I didn’t order it.”  No matter.  “The Department has decided.” So you run to your Minister and she says ”Not me! Try the Minister of Energy.”

Slowly you discover this really is a mugs’ game. You thought you knew your job, and suddenly you have a second boss, who tells you to buy stuff you don’t want, at a price you had nothing to do with, while your new boss’ sidekick, the Regulator, tells you to keep your costs under control. No, I wouldn’t want to try to run Eskom.

And Eskom has reason to complain. The Department of Energy’s renewable programme is a great success, and it will in due course provide us with about 10% of our power. But from the Eskom viewpoint, that is a 10% drop in production, and they have assets that were supposed to be financed by producing power. To make things worse, they have to pick up the gift on the donor’s doorstep, not their own, and pay for its transport to Eskom’s own customers.

Worse still, the donor cannot tell you when his gift will be available, nor how big it will be when it arrives.  So you have to run your generators up and down to make sure there is enough power to keep your customers happy. But your generators are unhappy not being run at the nice even pace they were used to, and they wear out sooner than they should. More costs.

Anton Eberhard has recently suggested breaking up Eskom into a privatised generating company and a public transmission company, Gridco, which will buy power from all the private power producers, transmit it through the grid and sell it to distributors at a markup to cover costs.  Great idea.  It works well in Europe, where there are interconnections so that if your windpower dies on you, you can beg from your neighbour.

We don’t have that luxury. Neither does Australia, which is battling with an Eberhard-type model right now*. During one recent cloudy, still day, their Gridco had to pay $Aus14 000/MWh for enough power to stabilize the grid, when their average cost was $Aus100/MWh.

Be careful, very careful, what you wish for.


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