What key factors stop Private Power Generation in South Africa?

(the small print: Quick Summary of this article: The world, Our world, has Changed, For the better, Forever.)

Believe it or not “the key factors” are only the ways we think.

[caveat: I welcome any responses, and critical appraisal. david@mypowerstation.biz]

We have been socialised (brainwashed) into believing that 24x7x365 electricity requires Coal, Nuclear, HydroElectric, Gas. But those run at a 92% capacity factor (per power station) and sometimes that goes down. South Africa is currently at about 60% as we regularly have only 28 GW available on our 46 GW grid. And in a Normal Well Maintained Electricity System there are times that power stations are switched off for maintenance, unexpected shutdowns, lack of coal supplies (for example), wet coal, broken supply chains, and all kinds of other problems.

Add to that that we only get 38% of the coal’s energy out of it, and then we lose up to 20% in transmission, we are at 30% capacity factor, which is the same as a wind farm! Of-course someone might say that we don’t get 100% of the wind’s energy out of the wind, which is true, but I’m just trying to make a point. Nothing runs at 100% efficiency. Solar PV is currently about 20% efficient, i.e. for every 100 Watts that hits the ground at sea level at 25 degrees celsius without wind, we get 20 Watts of electricity.

Then we are told that Solar and Wind and so on are intermittent and that they waste energy. This is true. If the batteries are full and the Pumped Storage is full and there is “spare” wind or sun, then that spare wind or sun is being “wasted.” But it would have been wasted even more if we didn’t take the free energy out of it!

The sun is shining for a few more billion years regardless of whether we use the energy for electricity or not.

And then what about the coal power station? Let’s assume you want to BBQ (braai in South Africa) for your friends at 6pm. When do you start the fire? 5pm? When does your utility start the fire? 5am?
Of-course the utility models how much they expect their customers will use, but when you turn on the light, there is electricity, and if you turn on your kettle, there is electricity, and if you turn on your swimming pool pump, there is electricity. Now try turning one of those things off for five minutes, and then switch it on, there is still electricity! So what happened to that electricity for the five minutes you didn’t use it? It was wasted! And the utility has to factor in this “wastage” in its selling price and you / we have to pay for unused (wasted) electricity.

So we have the technology to do what we need with Renewable Energy. And we have the money. But we don’t have the will, ie we have a thinking problem.

People have temptation, and people have free will. A person's will is their ability to overcome their temptation. For example a runner gets out of bed at 5am to run for an hour before getting ready to go to work. So much more tempting to stay in bed for that hour! The same with anyone who uses their will to overcome their temptation. Normally we only think of sexual temptation, but there is temptation everywhere. One temptation is to use the Coal (because it is readily available, like a prostitute on the corner) and other resources because they are there. But someone famous once said : I hope that we don't have to run out of coal and oil before we start using solar energy. It was Thomas Edison. From a religious point of view, one could say that temptation comes from the d-evil, and free will comes from God. Who will win? Up to you, and me. Evil is live backwards. Evil is the unconscious. We have to be conscious (awake) to use our free will. Apathy is so much easier, and hence why it is so much easier to be a couch potato and watch TV or play computer games, than to spend one's time writing essays about energy.

And one of the reasons we don’t have the will is because of something called “Stranded Assets.”

In my small SME (Small and Medium Sized Business) business, let’s suppose I buy a piece of equipment, and I don’t use it? I’ve still paid for it. And let’s suppose I buy some software for $1,000 and then I only use it for three months before I find something better, I still need to pay the capital cost of the $1,000 equipment. This actually happened to me this year. I paid about $1,600 for some software and a month later I got a contract using some other software that I’m expert at. This $1,600 is “wasted”, as next year when I perhaps go back to this software, I’ll need to pay another $1,600 to upgrade again.

But (coal) power station owners get special treatment. If they can’t sell their electricity, then someone (you and me via our government - we are called the underwriters) pays the power station to be “stranded.” There is almost zero risk of owning a coal or nuclear or gas or hydro-electricity power station, at least from a being paid point of view. You could also have this (see link) problem and then you have other worries!

And if you’ve signed for coal and your power station is five years behind schedule, then every month that you are late, you still have to pay for the coal supply, assuming that the coal mine that was meant to supply your power station is on time with their delivery.

And this “stranded asset” problem allows utilities and their managers to make massive (expensive) mistakes. In South Africa’s case, our government has spent US$28 billion on two coal power stations that were budgeted at $10 billion.

So if we’ve (over) spent $28 billion out of a $10 billion budget AND we are five years behind schedule, what do we do? What would you do? What if you had decided to build something that was going to cost $1000 and now it was $3000, would you stop? When would you stop? At $1200? Or maybe at $200 when you realised that it would cost $3000? And would you decide to build using a new technology for $10 billion or would you do a prototype project for $100 million first to see if it works?

I wrote in 2010 that we should scrap this new power station build. Imagine if we had. Maybe we had already spent $1 billion. We would have saved $27 billion, which is a lot of money. It equates to $260 million a month of capital and interest repayments and this at 10% interest over 20 years. But Eskom, South Africa’s utility is at Junk Bond Status (you can see why!), and so its borrowing cost is likely to be closer to 17%. With $530 million a month, you can make a big difference in people's lives, especially in a poor country like South Africa. And at the moment this $530 million a month is going to the financiers regardless of whether people and business actually get electricity or not.

IMHO, this $530 million should be paid per month, and the power station build should be stopped! This is the same advice I gave in 2010 when we had perhaps “only” $18 million a month to pay!

But this requires leadership and we don’t have leaders in South Africa anymore! At least not at the national or provincial level. And if a bank fails or a government fails, then normally we would have a war, but as you’ve seen with “quantitative easing” over the past 20 years, no-one wants war. And in any case, there is a very big alternative now, that we have for the first time in history, and you’ll see what it is - carry on reading.

But hey, if you own or build coal, and if you make a mistake, someone will still pay your salary! Not so for me, an entrepreneur, who has to be mighty careful not to be negligent, especially with my shareholder’s (my wife and family!!) money. An Eskom director has no sureties, no cares, gets paid handsomely for making mighty big mistakes, and really doesn’t care about it, because if his asset is stranded, he still gets paid. But he should sign surety. And then the world will change.

Graph showing when we get to Grid Parity without Batteries in South Africa. With some assumptions, like 100 kW build (12 houses). The green line is reducing cost of Solar Photovoltaic (PV) Electricity. The red line is what homeowners are charged in the City of Cape Town. The purple line is what homeowners should be charged if the City of Cape Town put up their tariff at the same rate that Eskom puts up their tariff to the City, and the Blue line is what the City pays Eskom for electricity. Note how the red line is increasing quite a bit faster than the blue line!

Having said all this, we are finally at Grid Parity including batteries in Cape Town. Grid Parity means we can make our own electricity cheaper than we can buy it, excluding batteries. As can be seen from the graph above, we got to this point in 2012. Grid Parity Including Batteries means that homeowners and SME’s can make our own electricity cheaper than we can buy it, including with batteries and generators!

This means that Eskom and the Municipalities are already irrelevant and redundant, for the rich and for the poor, especially the off-grid poor!

They can threaten us, cut us off, and so what! They can say they’ll cut off our water, but we just had a “drought” and most of the people I know have installed rainwater collection systems and systems to make their well point or borehole water drinkable. Note that before the “drought”, which was actually a water management crisis (Cape Town’s “first” Water Management Crisis was in 1800!), and a drought in thinking, one didn’t need a license to have a wellpoint or borehole. Now the government says people must “Register”. But history has proved that the only reason for registration is for taxation, as one “Re-venues” oneself. No registration. No tax. A recent case in point in South Africa is Road Tolls (eTolls) in Gauteng. Those who registered must pay the eToll. The other people who did not register are liable for zero payments.

On 3rd December 2013, I went to see Alderman Ian Neilson, Executive Deputy Mayor and Head of Finance for the City of Cape Town, who also happens to be a Water Engineer. I explained that by 2020, his (DA) government would be redundant and that he should put measures in place to ensure that people did not “Defect” from the grids, and his government should put incentives in place for people to invest their hard earned money in embedded generation for the City to buy.

I explained that unless he change his thinking (the subject of this essay and answer to the question in the subject), he would be redundant because by 2020 (next year!!), we SSEG people will be able to make our own electricity and water (it is now relatively cheap and painless to even make water from the air) and food and everything, cheaper than we can buy it from the conglomerates, including government, and dare I say it, Amazon and Alibaba.

I presented this case to him and explained about Grid Parity and Stranded Assets. He said, “we’ll change the tariffs”. Fiddling whilst Rome Burns! And he is still changing tariffs, making them worse and worse and chasing more and more people from his electricity grid, and away from his “company.”

And most recently our city has told its few registered SSEG (Small Scale Embedded Generation) electricity suppliers that it will stop special treatment of SSEG’s. At the moment, this “special treatment” involves paying 50 cents per kWh for the electricity an SSEG sells, and charging R1.25 for electricity that the SSEG buys. And there is a Service Fee! But now the municipality is going to charge these SSEG’s the same as they charge everyone, which will be R2.50 a kWh from 1st July 2019. [Please note that these aren’t exact prices, but they are approximations, from my memory and they are here to serve a point.]

I know someone who has already defected. And the council met him and said “we’ll disconnect you”, and he said “go right ahead.” The main disadvantage of this “go right ahead” is that he will never be able to sell his house, as current legislation says that a house must be connected to the grid and its electricity payments must be up to date. And this person has stopped paying his service fees. And he has lived in his house for decades, and it is self sufficient in electricity and water, and could even sell electricity and water to its neighbours, so he doesn’t want to sell. And I’ve lived in my house for 23 years, I want to live here forever [and one day when I want to sell, Eskom won't exist in its current form anymore, and the current "law" (as agreed by the citizens) will have changed, and won't matter).

And so eventually there will be millions of people making electricity and water and other “public goods” and the government won’t have any income. 

And guess what. It won’t matter!

Before governments, which arrived in the 19th Century, we had Friendly Societies and Prosecution Associations. South Africa’s biggest and oldest Financial House, Old Mutual, started life as a Friendly “Mutual” Society, in the 19th Century.

Ubuntu

And South Africa has the principle, although latent (unused) of Ubuntu, which means All for One and One for all, or alternatively “I am my brother’s keeper!” or “I am because we are.”

We are together, South Africans, and we are building embedded generation and embedded water and embedded food systems, and other systems, at rapid rates, for everyone. We are rebuilding the Social Fabric of Society with helpful systems like Facebook and Twitter and LinkedIn and free libraries, free Maps, so much free stuff.

Our government says that electricity use is decreasing and therefore we need fewer power stations. But that is because they can’t provide the electricity that people need and therefore people are installing their own power stations or generators. Our government says that they narrowly averted a major existential crisis when they made sure that the Western Cape did not run out of water in 2018. But government spent R12 billion on Water Infrastructure in the past 10 years, and in the two years of the drought, ie 2017 and 2018, private people spent R10 billion on private water infrastructure. [This is my extrapolation based on the number of water containers sold and then looking at the number of people I know who not only collected rain water but also put in potable water systems.]

And if you look at Tanzania (I was there in 1999 when everyone including all hotels and business and government businesses all had water and electricity backup systems), and you look at Ghana and you look at Zimbabwe (which can have 24 hour periods without electricity), you will see that everyone there already has their own backup generators and water systems. And they accept it as fact, and they don’t complain about it. Their investments in being self-sufficient have paved the way for the rest of the world to follow suit, with resources that won’t damage Earth’s fragile climate (I use “climate” in the full sense of the world - our climate (thinking) is changing - and we should welcome it!).

And this is therefore happening in South Africa, because we are African, and it is the African way for people to BE because of YOU.

We are because we are decentralised “tribes.” Just like we’ve been since ancient times.

At some point tribal leaders tried to make countries out of tribes. And that has failed miserably. Including in Europe. The Treaty of Rome is brilliant. Freedom of movement of people. Freedom of movement of capital. Freedom of movement of goods. But the Roman Treaty did not ask for a central authority (“Brussels”) to meddle in local affairs. And hence why Brexit will return the local lands to their local peoples. And then locals will again be able to make their own cheeses, make their own whisky and brandy and “champagne”, and make their own products of all types. And locals will again be allowed to be "poor".

My definition of a poor person is someone who doesn't pay tax. And this is what the centralised power hungry politicians fear the most.

Tribes do not work at a national level. People always vote for the same party in Africa, regardless of their government record, because of tribal allegiance.

But tribes are by nature small, efficient, agile, nimble. And that is where we (finally) are (again) in South Africa and in Africa, in 2019.

Renewable, decentralised, energy is allowing for a return to our ancient ways in Africa. And in the world at large. We are going back to the small self-sufficient-communities of the 15th Century, before “enclosure” turned poor, but self sufficient, peasants into destitute (dependent on the “new” system) slaves. Read The Voluntary City. And even though slavery has been abolished, most of the world are wage slaves, working to pay their bills. Not too many people earn whilst they are sleeping or away from “work.”

The world that I saw / dreamed / visioned in 1999 is becoming a reality. And it is thanks to a process that has changed our thinking for us, without our even knowing it.

This latest essay has crystalized 20 years of thinking and countless thousands of hours of R&D and has allowed me to finally come full circle and I can finally relax just a little bit. I’ll continue to be the starseed that I am, bring seeds for people to plant, and having ideas in my own one person think tank. Actually there are about a dozen people in this think tank, and without you all, I would long ago have “left” and gone back "home" to "the father".

The world has changed. That world actually killed me in 2016, but I lived, and Karma and my colleagues (you know who you are) have allowed me to live. And I am grateful that I will be able to live forever as an African, in my beloved country of my birth, continuing the tradition of countless generations before me.