The Seamy Side of Coal-Fired Power

South Africa has one of the heaviest carbon footprints in the world...and the World Bank is offering a US $5 billion loan - the biggest ever to any African entity - that ensures its footprint becomes even heavier. The World Bank, however, says the loan assists South Africa's electricity parastatal Eskom to "achieve financial stability, increase generation capacity and efficiency, and adopt a low carbon trajectory."

While the exact loan amount remains unclear what is clear is that ordinary South Africans are on the hook to repay it with Eskom's proposed 35 percent rate hike for each of the next three years. This affects all South Africans but those already financially stressed are hit hardest: the under- or unemployed, those living on fixed incomes and pensions, and our youth, approximately 40 percent of the population. A low income household that today pays R360 per month will pay R1000 by 2012 while a suburban household paying R750 will fork out R2400. [US $1 = approx R7.50] The free basic electricity supply of 50Kw/hour will rise to 70Kw/hour but a quick glance at your own power bill shows this quantity is meager...and virtually ensures users will resort to fossil fuels when the meter runs out.

National Energy Regulator of South Africa - Nersa, - held hearings in communities around the country to allow South Africans to air their views on the rate hikes. I attended the Durban, KwaZulu Natal event on January 18 along with business owners, workers, community members, and some 600 protesters from South Durban whose T-shirts declared "No more lies, service delivery now" and "They tell me to go to hell but they are the corrupt ones."

Considering that Eskom's largest service beneficiaries are multinational corporations and smelters that pay about 11 cents per kilowatt hour while household customers pay 44 cents /kilowatt hour the peoples' outrage is understandable - and palpable.

From South Durban, Wentworth Development Forum's Patrick Mkhize explained for a radio interview that the rich can cope with the hikes "but for the poor it will be back to candles and paraffin stoves notorious for accidents and injuries and even burn down homes. We are heading for disaster." He said that energy "like water and other resources important to human survival is a right, not a privilege. If we had a true democracy this country, hailed by many other countries for having the best constitution, would give energy for free considering where many of us come from in terms of race and segregation."

Meanwhile, a spokesperson for pharmaceutical multinational Glaxo Smith Kline stated that the facility would pull out of South Africa if its energy rates increase. He said that the company does business in South Africa because of very favorable business conditions and profits and if these diminish the company will seek them elsewhere. Indeed, Eskom was established in 1923 to deliver cheap and abundant electricity to big business, primarily the mining, industry, and energy complex. The World Bank made loans to Eskom in the 1950s to build coal-based power plants. Eskom built more coal powered electricity generators in the 1980s, produced more cheap electricity than required, and consequently mothballed some of these generators.

While the historical complexities that allow a parastatal like Eskom to levy utility hikes of this magnitude on the backs of ordinary people have deep origins and are not covered in this short article, the reality of day-to-day life in South Durban communities is antithetical to the World Bank's stated goal of "a low carbon trajectory." (See groundWork's "The World Bank and Eskom: Banking on Climate Destruction" and other free publications for detailed information.) Eskom accounts for 40 percent of South Africa's CO2 emissions, estimated at 440-million tonnes in 2004 which makes it one of the most carbon intensive economies in the world.

South Durban is one of the most industrially polluted regions in southern Africa and the protesters at Nersa's Durban hearings expressed concern about the adverse social and health effects of two oil refineries and their associated chemical works, a pulp and paper plant, and the many other industries surrounding their communities. Until recently South Africa had few environmental protections laws at all. Today it has some of the best ever on the books. Alas, these laws are paper tigers that are under-utilized, seldom implemented, enforcement is almost non-existent, and Records of Decision are easily overturned or ignored.

Eskom is regularly referred to as a "rudderless" public enterprise based upon its past and what it proposes for the future. It began by delivering bulk supplies of cheap electricity on the backs of commodity booms and prices from energy intensive industry such as aluminum, chrome, and ferro-manganese smelters for the export market. About 80 percent of its energy capacity is contracted to its bulk customers while the rest supplies small business, mom and pop shops, and residential customers. Since Eskom's contracts are favorable to business and ensure that Eskom is penalized for reneging on these sweet bulk energy deals it passes any penalties on to ordinary people. Generally, a parastatal refers to any over-production as "surplus" yet at Nersa's Durban hearing Eskom presenter Mr. Makwana, referred to Eskom's "profits". The audience picked up on this and Makwana immediately corrected himself. Such slips reinforced ordinary peoples' impression that they are the fall guys when things get tough for big business yet are forgotten when things go well. This was apparent in 2008 when Eskom did not have the capacity to fulfill its contracts and the subsequent load-shedding put out lights all across the country. With ordinary people already paying up to seven times more than big business for energy the proposed 35 percent increase means that the people will subsidize a 'new build' program that is wholly dependent on mining and burning more coal...and that ties South Africans into coal and further pollution for at least the next three to five decades.

None of the South African government's or Eskom's promises to include renewable sources of energy - solar, wind, or wave - are under serious discussion. Indeed, Eskom's plan - further extensive mining and burning of coal with a slight increase in nuclear power - sounds like business as usual to the many community groups around the country who attended Nersa's hearings. At the Cape Town event, Deputy chair of the SA Wind Energy Association, Mark Tanton suggested Eskom's tail is wagging the energy regulator's dog. Tanton stated the Department of Energy's integrated plan was published after Eskom's submitted its own three year energy plan with tariff hikes to Nersa. Tanton said the Department of Energy's plan should guide Eskom's energy plan, not the other way around. "The government said 30 percent of electricity must come from independent power producers. We don't see this in Eskom's multi-year price determination."

The government's White Paper of 2003 states that 4 percent of electricity produced by 2013 must come from renewable energy. Based on Eskom's projected electricity consumption this would be 4700 MW but Eskom's three year plan states that only 400 MW would come from renewable energy sources, a huge departure from the White Paper.

According to Tanton few renewable energy technologies installations could be completed in just three years to generate 4700 MW although wind energy could come close with 3000 MW. "Eskom does not take wind energy into account when it comes to base-load generation, which is the same thing as believing that the world is flat. We read into this that the future Eskom sees is very dark: coal! This is business as usual and it's wrong." He said Eskom wants to maintain its control and that means keeping to business as usual "since it has spent 50 years planning one way it's difficult for it to change."

Moreover, a relationship exists between the majority political party, the African National Congress (ANC) and Eskom that many South Africans view with alarm. The ANC's investment arm, Chancellor House, holds shares in firms that benefit from public contracts. This means the ANC is positioned to easily meets all the criteria for social and economic redress and that it also has a vested interest in preferential treatment when applying for government tenders and contracts. The ANC holds shares in Eskom and according to Bantu Holomisa, leader of the United Democratic Movement, this "creates a conflict of interests that leads to bad governance and corruption. We now have a situation where Eskoms plans are not possible unless they fleece the public." The UDM he said, "calls to Parliament to intervene and appoint an independent judge to assist Nersa and strengthen their hand to consider the entire Eskom situation and all the implications for the economy and the public."

So why should citizens of the north's developed countries worry about what is going on in a faraway developing country at the tip of southern Africa? Well, it is about interdependence. For the foreseeable future, South Africa's rich coal seams will continue to produce electricity for export markets... and increase CO2 emissions that know no borders. Every human being is implicated in how we generate and use our energy resources; we cannot depend upon the poor and seemingly powerless ad infinitum to bail out the rich and powerful. If Nersa's hearings are anything to go by, a deep resentment smolders across this land. If it ignites it engulfs beneficiaries in the developed north too.