In South Africa, building enough electricity generation to power 2 million homes is the sort of thing that can undermine the entire state.
Since work began in 2007, the Medupi and Kusile coal power stations — at 4.8 gigawatts each, some of the largest generators ever conceived— have become emblems for the chronic problems plaguing sub-Saharan Africa’s most developed economy. Nearly a decade late and billions over budget, the 300 billion rand ($15.8 billion) plants are mired in a welter of alleged corruption and mismanagement, will never turn an economic profit, and still haven’t been finished. Their parlous state, and the impact on crumbling state-owned utility Eskom Holdings SOC Ltd, is one of the many reasons why credit ratings companies downgraded the country’s debt to junk status six years ago.
Imagine, then, if you could build the same capacity of new electricity generation without spending a cent of public money in the space of little more than a year. That’s what’s happened since looser regulations and hundreds of days of rolling power cuts driven by Eskom’s collapse opened the floodgates to a new wave of household solar.
Coal has deep political roots, too: President Cyril Ramaphosa began his political career running a union for Black mineworkers in the struggle against apartheid. Mining unions remain central to the ruling African National Congress’s coalition, and about a fifth of pit workers dig for coal.
That makes the revolution of the past two years all the more remarkable. About $2.5 billion of solar equipment has been brought in during the first half of this year, equivalent to the combined total in the previous two years, according to Gaylor Montmasson-Clair, an economist at think tank Trade & Industrial Policy Strategies.
It’s not just individuals getting involved, either. Units of Daimler Truck Holding AG and Toyota Motor Corp this year announced major solar installations to help power their operations. Another started last October at a Heineken NV brewery, while Sibanye Stillwater Ltd and Anglo American Plc are partnering with renewable developers to provide electricity for their mines.
European logistics and engineering companies have lodged bids for a 50 billion rand project to export green hydrogen from the arid northwest, while a unit of Shell Plc and Norwegian renewables developer Scatec ASA are targeting customers seeking to escape the tyranny of Eskom’s rickety grid.
That’s a quixotic and counterproductive ambition. South Africa’s manufacturing activity is still running at pre-pandemic levels — thanks, not least, to those power shortages that make it costly and unpredictable to churn out the simplest products, let alone cutting-edge semiconductors. Meanwhile, the vast supply chain that’s been built in China drove the price of modules to a record low of 17.1 cents per watt in July, according to BloombergNEF’s Jenny Chase. That’s pushed her estimate for worldwide installations in 2023 up by 43 gigawatts in the space of a month, to 389 gigawatts. South Africa would be far better off further reducing impediments to solar imports and installations, instead of embarking on a doomed quest to become a panel manufacturing hub.
Political leaders in rich countries are little better. The US Department of Commerce last week announced that it would impose punitive tariffs on solar panels made by Chinese companies operating in Southeast Asia from 2024, overturning an exemption introduced by President Joe Biden last year.
South Africa’s example shows the potential and the risk of the shift to zero emissions. Where governments and local monopolies get out of the way and let individuals and businesses find the cheapest sources of energy, the world can decarbonise at a dazzling pace. Where they use their influence to coddle incumbents, however, they can still smother the transition in its crib. Those watching the wreck of South Africa’s once-envied power sector shouldn’t look to emulate it.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. Views are personal, and do not represent the stand of this publication.
Credit: Bloomberg
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
