Webinar: Electricity Sector Reform in South Africa
On June 10, 2020, the International Institute For Sustainable Development (IISD) hosted a webinar titled “South Africa’s Electricity Sector Reform: Lessons from Emerging Economies.”
The webinar brought together an international panel of speakers who discussed electricity sector reform from their country and/or industry experience.
The speakers included: Richard Bridle (IISD), Jongikhaya Witi (South African Department of Environment, Forestry and Fisheries), Lwandle Mqadi (Eskom), Chido Muzondo (IISD), Shruti Sharma (IISD), Alejandro Robles (Instituto Tecnológico Autónomo de México), Anton Eberhard (University of Cape Town), Lauren Hermanus (Adapt), Matthew Parks (Congress of South African Trade Unions [COSATU]) and Saliem Fakir (The African Climate Foundation).
- Reliable and affordable energy is essential for South Africa’s economy.
- Unbundling alone will not solve all the issues, and the standard model of reform is not contextually applicable to South Africa.
- Mexico and India provided cautionary details regarding the continued need for bailouts, cost-recovery options, and targeted subsidies for the poor and vulnerable.
Speakers noted that the South African Department of Mineral Resources and Energy (DMRE) and Eskom have both broadly adopted the idea of a “just transition” when speaking about electricity sector reform in South Africa. However, despite the term’s pervasiveness throughout policy and planning documents in South Africa, there doesn’t seem to be a widely accepted definition of the term. Speakers highlighted the need to establish a working understanding of “just transition” in the South African context, so the definition moves beyond rhetoric to become a meaningful inclusion in the planning and implementation of electricity sector reform in South Africa. Additionally, speakers agreed that the focus of a “just transition” should be as much on a just process as a just outcome. Eskom needs to ensure that the transition is transparent and features high levels of participation from all relevant parts of society.
A few speakers, most notably from COSATU, noted that further engagement around job losses beyond coal-powered stations and Eskom itself is needed to facilitate a just transition. Additionally, it was argued that further investigation is needed to assess the impact of reform on the mining sector and the coal belt of South Africa.
Speakers further remarked that the current model of electricity sector reform as proposed by Eskom does not address the entity’s debt burden or its continuous need for bailouts. Moreover, as was echoed by presenters of the Mexican and Indian case studies, the need for bailouts from the government is likely to continue even after reform. Presenters and speakers alike stressed the need for further practical details regarding how the debt issue will be addressed, how the transition will be financed (the reform itself but also new investment into a more diversified energy mix and new generation capacity), and finally, how cost recovery will feature in South Africa’s reform.
The Mexican case study underscored the risk of renewables becoming associated with private sector energy and coal being largely regarded as a public energy source. As South Africa is already facing resistance toward privatization (as echoed by a few speakers), the Mexican case study emphasized the need for South Africa’s reform to proactively investigate ways to mitigate this risk in order to ensure that decarbonization of the energy sector is still a priority during reform.
Much of the discussion around electricity sector reform in South Africa is focused on Eskom and unbundling; however, more emphasis should be placed on shifting ownership models to encompass a more diverse array of actors and extending the energy discussion beyond Eskom. This includes: reinvigorating the Renewable Energy Independent Power Producer Procurement (REIPPP) (tackling roadblocks for independent power producers [IPPs], streamlining bidding windows etc.) and providing appropriate mechanisms for municipalities, private sector actors, communities, and households to engage in self-generation.
Looking forward, electricity sector reform was widely seen as a way to facilitate intensive private sector investment in renewable energy—which in turn provides economic stimulation post-COVID-19—while simultaneously moving the energy sector reform beyond Eskom.