By Saliem Fakir · 17 Mar 2009
There is no better illustration of how muddled the implementation of national energy policy is than the recent gaffe by the Department of Minerals and Energy Affairs (DME) when it put out regulations calling for a tender process to beef-up renewable energy supply.
This was diametrically opposed to the feed-in-tariff (FiT) process set in motion by the National Energy Regulator of South Africa (NERSA), which is going through another round of consultation and finalisation. It seems like the right hand doesn’t speak to the left.
A FiT is an incentive structure to encourage the adoption of renewable energy through government legislation. All international studies and practice show that FiT's are simpler and more effective to implement.
At present, FiT regulations for renewable energy have been successfully adopted in over 40 countries around the world. They have been key to boosting growth in renewable energy generation in countries like Germany and China -- rather than relying on cumbersome DME-style tender processes tied with red tape.
It is not clear why two opposing processes were put in place by the South African government, but it showed-up the glaring contradictions within government agencies around energy policy.
More worryingly it suggests that nobody seems to have a handle on energy policy and strategy in the country. Contradictions like these are not uncommon; they are systemic throughout the various South African energy institutions.
It also suggests that different government agencies, are perhaps, engaged in rivalry over policy and implementation.
Bureaucracies, the world over, if not well managed can descend into independent fiefdoms at great cost to public interest. They, by default, engage in a zero-sum game due to the lack of central leadership.
The consequence is incoherence, the inefficient deployment of state resources and often un-strategic choices in energy investments.
Projects that should never have been considered in the first place are often funded at great expense with little results to show for the investment.
One un-strategic choice can unsettle a host of other strategic and important investments, delaying decision-making because of opportunity cost and as a result imperilling the country’s energy security and national security.
Decisions like these are symbolic of poor oversight.
The lack of central policy control allows various vested interests both within government and outside to manipulate the lack of co-ordination and incoherence in policy to drive specific energy solutions on a partisan and commercial basis rather than taking the nation’s collective interest into account.
It is an open secret that departmental capacity for co-ordination and putting in place a more assertive policy framework to, amongst other things, reign in the renegades, is weak.
There is both a lack of leadership on policy and capacity to plan and implement, as the delay in the release in the National Integrated Resources Plan 3 (NIRP) illustrates – the NIRP 3’s finalisation has been delayed by two years.
People sitting on various government bodies dealing with energy planning have pointed to the fact that three different energy planning processes are on the go – there is the DME and NERSA processes and Eskom’s own planning process, with the Eskom process being far better resourced as they have more up-to-date data.
It is quite obvious that there should only be one planning process but it won’t happen until somebody takes command over energy policy and planning.
This situation has led to quasi private agencies like Eskom, the Central Energy Fund, PetroSA and others to lead on different components of our energy needs and dictating national policy; not always at the best of our national interest.
It would not be far-fetched to suggest that the new matrix of the world order will be shaped around how countries secure and defend their energy security. Energy issues have always weaved their way through political, economic and social life.
Those countries, which have the advantage of being old powers and new emerging powers, are likely to determine the architecture of this world order as their rivalry intensifies.
It won’t simply be on the basis that if you sit with the reserves you will dictate the shots. A lot more will be required. Having a sizeable share of a strategic energy reserve has advantages but being able to play the energy geo-politics well is as crucial as owning key strategic assets.
Many of the old and new powers are net importers of some strategic energy source like oil, coal and gas.
But the weight and alignment of their economic power, investment in science and technology, diplomacy and trade relations with their needs for energy security have been key to how they have shifted the balance of power in their favour.
If anything, energy security has to gain primacy over economic policy. Well, the one doesn’t happen without the other.
The changing face of global geopolitics requires realism as well as assertiveness, being astute and forward thinking. The key to how states play this game will be dependent on their leadership, but leadership without foresight and a clear strategy will result in minimal victories.
Political leadership must be matched with a strong cadre of administrators and technical expertise within government. A fast moving geopolitical landscape requires creative responses and good intelligence.
The long-term threat to South Africa is not war or the lack of defence but our inability to bed-down a clear national strategy and policy on energy security. It has not been elevated to the commanding heights of policy consciousness, as it should be.
Our energy policy still needs to be wrenched out of the minerals-energy complex that has come to dictate, for decades, much of the demand and supply thinking regarding energy.
Energy policy is hamstrung from being more creative precisely because of all the fettered interests that have swirled in the same cesspool, as a result of this complex, and have always prioritised the status quo against change.
Both policies for macroeconomic growth and the energy question should be more firmly aligned.
They in turn should inform our foreign diplomacy, our relations with Africa, the Middle East and elsewhere. Energy security, in any case, in southern Africa, is a regional challenge. South Africa should play a stronger role in shaping this even out of benevolent self-interest.
Given our economic interdependence, a common regional energy security plan is long over-due. Our strategic choices around energy solutions should have a wider view than limiting our thinking to having to be within our national territory only. Outside of our own national boundary may lay more creative solutions to our energy crisis.
There should, for instance, be a revival of the debate about exploiting hydropower in the region. Hydropower may offer far more benefits than our total reliance on coal-fired power stations and it may even be a cheaper option than spending R600 billion on nuclear plants.
But none of this thinking and debate is possible without a government having a much firmer handle on energy security issues. This is a debate that will increasingly also have to take into account our global carbon burden.
The much mooted post-election re-arrangement of the organization of government, including the cabinet and the imposition of a planning commission will most likely see the energy component of the DME split from the mineral division.
The signal being sent is that a new leadership within the ANC will want to embed energy security as being central to economic policy planning. The hope is that we will see a firmer and better national orientation and control over energy policy and investment.
Energy should not only be seen as meeting demand requirements of specific sectors but more widely as a way of stimulating growth in new sectors. Centralizing its planning will ensure that the energy question is at the heart of our political and economic decision making.
At present it is marginal and only reaches critical scrutiny and attention when there is a crisis. This is wholly unsatisfactory and adds to the feeling that we are losing grip of our energy security.
Nice analysis Saliem. Can we hope for any rational decisions with individual self-interest and incompetence rife at all levels of society? As usual the poor have no voice. But some good decisions have been made, even if for the wrong reasons. Bio-fuels, for example, should remain a no-no (or at least no subsidy), with the possible exception of small-scale bio-diesel made by farmers and used to directly substitute for their own diesel requirements. Energy is the basis of all technologies and cannot be left to the profiteering of private enterprise.