Behind the High Cost of Electricity

By Anna Majavu · 23 Jul 2012

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Picture: Wikimedia Commons
Picture: Wikimedia Commons

The latest electricity price hike of 14.6% will hit the poor hard - as usual - but in fact it is the least of their worries.

Despite South Africa’s sunny and windy climate, and the availability of huge areas of deserted land where wind and solar power farms could be erected, the ruling party is continuing its love affair with the Russian, French and Chinese nuclear corporations currently trying to sell us their nuclear power stations. Once the poor get saddled with the interest and repayment costs for the R1 trillion the ANC will borrow to pay for these power stations, a 14.6% electricity price hike will seem like a walk in the park.

Both the ruling party and the official opposition are using the poor and working class as their punching bag. The DA is, as usual crying crocodile tears over the 14.6% electricity price increase. It is opportune for the DA to loudly lament every year that electricity prices will “hurt the poor” even while remaining blindly fixated on their outdated ideological position that Eskom should be privatised.

DA voter and conservative commentator Rhoda Kadalie recently bemoaned the fact that government was not following Germany's lead in setting up solar power and wind farms. But her view is not shared by the DA, which is still stuck decades behind the times with its penchant for full privatisation of coal-fired power stations.

Because of its ideological adherence to the free market system, the DA has had little use for the concept of clean, renewable energy - beyond supporting the calls of mainly white, individual profit-oriented independent power producers who want to generate energy and sell it back to the national grid.

The only thing the DA has been able to say in response to the ANC’s plans to put up nuclear power plants everywhere, is that Eskom should be privatised so that new private electricity providers can “compete” in the “market”, which they claim would result in lower prices.

Privatised electricity has never been cheaper, anywhere in the world. Researchers at the UK’s Public Services International Research Unit wrote that after the British government decided in 1990 to break their central energy authority into five separate companies, electricity prices increased by between 10% and 20% more than public electricity prices would have.

American private electricity provider Enron showed in California 12 years ago exactly what private electricity companies are capable of. Colluding with politicians and investment bankers, Enron deliberately shut down its power plants in order to create the impression that there was an energy crisis, and then hiked up the price of the “scarce” electricity it was selling. Top executives made off with hundreds of millions of dollars in profits from the manufactured electricity crisis while ordinary Enron workers, who had invested their pension funds in the company, lost everything when Enron eventually declared bankruptcy.

While the DA is using the latest electricity price hike as political capital, the ANC is moving rapidly and dangerously away from setting up the socially owned renewable energy sector that its affiliate, the national union of metalworkers (NUMSA) has called for.

The ANC’s initial propaganda that six new nuclear power stations would create thousands of jobs, boost the local economy and lead to energy for all is already appearing a sham – even before the deal has been signed.
The nuclear plan has been shaky from the start – the ANC first said three new nuclear plants were needed to generate the vast amounts of power it claimed South Africa needed. This number then changed to six at some point, for no apparent reason.

And this week, the vice-president of the Russian state atomic energy company, Ivo Kouklik, bandied about a new figure – eight nuclear power stations.

Writing in the business press, Kouklik shamelessly punted that if the ANC only bought two nuclear power stations from him, he would have to import over 60% of equipment – hardly a boost to local industry. But if the ANC bought eight nuclear power stations, then his company would pay for new South African factories to be set up to build “up to 60%” of the equipment needed.

If six nuclear power stations are needed, then why build eight? It makes no sense.

It is also difficult to tell the difference between this promise and those made by arms dealers in 1999 that they would create jobs and new industries to offset the cost of the arms deal. Most of the promised offsets never materialised.

A nuclear power station costs approximately R200 billion to build. Eight of them would cost R1.6 trillion. Kouklik wrote that only 9000 jobs would be created over the 13 year build with a claimed 15 000 jobs at “the peak of construction”. Some of these jobs will be in “indirect employment - services, schools, hospitals and general production”. It will be impossible to quantify them and they might not even exist. Only R22 billion would flow back to government in income tax. In other words, the maths of the deal is also rotten.

As pointed out earlier in this article, the poor and working class cannot expect help from the DA and the assorted hangers-on that the DA is planning an election alliance with. That group is incapable of thinking of energy as anything but a commodity for sale at the highest price. Neither can the unions be relied on. NUMSA has taken it upon itself to champion the renewable energy cause but with Mangaung looming, NUMSA has yet to make a sensible move such as asking which faction of the ANC is prepared to provide a written contract that if they win power, they will do away with the nuclear plans.

As Peter Becker of the anti-nuclear lobby group, Koeberg Alert Alliance, pointed out in the business press this week, Germany and Switzerland are closing down nuclear reactors after considering the high price of nuclear power and dangers associated with it versus the plummeting costs of providing solar, wind and hydro energy.

There is no silver lining for the poor in South Africa’s energy future. With political parties like the ANC and DA in power, a future of burning paraffin and wood when the electricity money runs out each month is all the poor and working class can look forward to.

Majavu is a writer concentrating on the rights of workers, oppressed people, the environment, anti-militarism and what makes a better world. She is currently studying for a Masters Degree in New Zealand.

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23 Jul

Spot on as Always Anna

Well done. Your writing is always logical, well informed and crystal clear. The reality is that the ANC and the DA represent different factions of two sides of one predatory elite. In South Africa it is, at the moment anyway, simply impossible to vote for a progressive politics. That struggle happens in the movements on the ground. It's such a relief to get (from some writers here) a break from the usual unthinking liberal and nationalist dogma that passes for analysis in SA.

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Anorth Mabunda
24 Jul

Nuclear Nationalisation = Economic Power

You are right Anna, green energy is good but let's not underestimate the importance of nuclear energy and other fossil fuels as building blocks to a successful economy.

All mighty countries in the world (US, China, Japan etc.) have made it through nuclear energy. Without reliable energy we cannot industrialise successfully. SA needs nuclear reactors in order for its planned industrial sectors to thrive. Solar and wind power, yes they are good for the environment; but they are bad for the economy. That's why even after the deadly disaster, Japan still stuck to its Fukushima Daiiachi plant and other reactors, because nuclear energy is the golden ladder by which any country that is successful climbed.

Nationalisation is also key. If the ANC can afford R1.6 trillion for 8 nuclear reactors, this means they can afford to nationalise mines because, apparently, It will cost the state around R970 billion to nationalise only 60% of "our" mining sector.

IT IS THE TIME to do what the West did to get to where they are today and stop listening to what they are telling us to do AYAKATA.

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27 Jul

Nationalisation and Nuclear Down Turn

Nuclear power with all the perceived unlimited energy generation potential doesn't come without its hazards. When the world is moving away from Nuclear power why should S.A move in the opposite direction? What are we to do with the nuclear waste from these stations, adverse effects of radiation on the environment and so on? Short term thinking is not the answer, but we need to consider the bigger picture. There are other energy alternatives like gas fired power stations (with gas recently discovered off the coast of Mozambique and perhaps in the Karoo (not saying fracking should go on). We need to think outside the box according to thinking of the time and not just follow what the West did without considering the implications.

With regards to Nationalisation, my main question is then what afterwards? Taking something is one thing, ensuring that it remains viable is another. This bringing me back to the issue that we need to properly engage in these proposals and weigh out all the pros and cons of any action. Governments are not well known to do particularly well when is comes to managed capital. We first need to learn the basic ideals of good governance otherwise the whole exercise of Nationalisation will be simply transfering ownership from one entity to the next without actual benefits flowing to the people and mining communities.