Loosening Eskom’s grasp will be a delicate business

The stand-out item in the Western Cape’ government’s budget, apart from its determination not to be caught napping by another wave of Covid -19 infections, was aportioning R70 million to assist six municipalities in generating, buying and selling their own electricity.

The idea is to avoid the tsunami of load-shedding we have been promised for the next five years by the Eskom state monopoly. That is how long it hopes it will take to fix the shambles left of the national power system it inherited from its former managerial kleptocracy.

Unlike other budget promises we have heard from other levels of government this one appears to have determination to make it a reality.

But while hope springs eternal that some part of government can make a discernible positive impact on our lives, and the Western Cape’s government is better by far than most, it is not going to be easy.

In the scheme of things even R70 million of taxpayers’ money is not a lot to equip 12 municipalities with power stations, whether powered by wind or the sun, running costs will be critical for success.

One will be the need for backup systems that can provide power when wind or sun is either too much or not enough to keep the national grid balanced. That they will likely be diesel-powered could be problematic. It is a fuel subject to the rise and fall of the oil price may. It could dramatically affect the price to the customers.

In short, it is not an easy thing to provide the electricity that Eskom does on a good day. There are skills to be learned, not least being managing these new plants. Those with these attributes are scarce. Their price is consequently high. Gone are the days when small towns could flick a switch at 6 pm every evening and the local Briggs and Stratton would begin its regular thumping beat as it drove the municipal generator.

Much will be said about saving the planet and cutting carbon dioxide emissions but the ultimate justification will be the end price of electricity. If there is a sudden jump in the retail price of electricity despite it being free from Eskom; if the municipalities subsidize their salary and wages bill by loading the price, then market forces will react and the richer members of society will take to generating their own and go off-grid completely. The poor will then do what they do all over Africa – buy small petrol-driven generators or install solar-driven LED systems, and continue cooking with gas, coal, and wood.

The private sector can only wish these experiments the best of luck and hope that  Drakenstein, Mossel Bay, Overstrand, Saldanha Bay, Stellenbosch, and Swartland, as recipients of taxpayers’ money, will spend it wisely, hope that the  Municipal Energy Resilience Project will be a success and end load-shedding which is costing the country some R75 million for each stage.

There are three typical ways to pay for such extra costs: raise prices, raise taxes, or inflate the currency and achieve the other two anyway. Those risks are the real flies in the ointment.