An open letter to South Africa's Political Leaders, by David Lipschitz. 2012-04-23

An open letter to our leadership

Dear Helen Zille, Patricia De Lille and Belinda Walker

cc'ed: Trevor Manuel, Dipuo Peters, Jacob Zuma

The South African economy should be growing as fast as the other BRICS countries, ie Brazil, Russia, India and China. Besides BRICS, Mexico South Korea and Angola are also growing rapidly at up to 15% real growth per annum for over 10 years!

So what are the main problems that prevent South African growth?

There are three central problems:

1) Lack of Electricity Supply and inability to effectively deliver electricity;

2) A worsening communications infrastructure;

3) No way to Communicate with Government.

In more detail:

1) According to David Murrin in his book "Breaking the Code of History", in order for strong GDP growth a country needs three things: Population Growth, Resources and Electricity Supply. South Africa has 500,000 new people every year and South Africa and the SADC have huge resources.

This leaves Electricity Supply, or lack of electricity supply. The government thinks they will lose R24 billion profit they get from Eskom. The Cities think they will lose the 60% to 90% of revenue they get from electricity sales.

But government (ANC and DA) is constraining electricity supply. If the electricity industry was deregulated today, then the economy could grow at 10% in real terms which is 15% with inflation. 15% growth is R450 billion per annum. Government is 1/3rd of the economy and therefore government's additional income would be R150 billion.

This number FAR exceeds the R24 billion plus the e-Tolls plus the Carbon Taxes, plus the Electricity Levy, plus all the other charges, water increases, electricity increase, rates and taxes increases, and administration overhead that government places on South African citizens and small business.

And this assumes that Eskom profit declines. This is highly unlikely as Jevon's Paradox shows that the faster Energy Efficiency and Renewable Energy grows in a country, the faster electricity demand grows and therefore the faster the up-take of base load (utility / Eskom) power grows! Therefore it is likely that Eskom's profit would grow by deregulating!

Note that building power stations assumes that the electricity can be delivered. But the South African transmission system is aging, and lack of maintenance and poor choice of equipment (saving money at tender stage rather than looking at long term costs) means that transformers which should last 35 years are now lasting 12.5 years on average. So even if we build 40 GW of centralised power stations, be they coal, nuclear or renewable energy, it is unlikely that that energy will be delivered effectively.

The answer is decentralisation of the grid and removing or decreasing electricity from a transformer. This will lengthen the transformer's life without it needing replacement by removing the burden on the transformer.

2) Over the past 6 months, many of my friends, colleagues, and I, have found that phone calls, cell phone calls, sms'es and emails get dropped, not delivered, or incorrectly delivered. Quality of calls is diminishing. And just at the time that Cell Phone companies profits have reached record levels. Cell Phone companies and Telkom obviously aren't reinvesting in infrastructure.

In order to have effective growth in the 21st Century, one needs a high quality and effective communications system. This would allow much more home working and people in rural areas, if given locally generated electricity and satellite and other communications system, could communicate and compete with people in the cities, thus alleviating one of the biggest challengers facing us in the 21st Century. For example it is expected that the population of the City of Cape Town will double from 4 million to 8 million by 2030! And if you've gotten in your car recenly, you will have noticed the increasing traffic jams and worsening roads. e-Tolls will not solve this problem.

Many overseas countries changed to ADSL2 and ADSL2+ 4 years ago! This allows increases in speed from 4 MBPS (mega bits per second) to 24 MBPS. And this is entirely possible over South Africa's infrastructure as I have been reliably informed that Telkom only use 4% of their Fibre Optic Communications Backbone.

So not only Eskom and the municipalities and cities, but also Telkom and the Cell Phone companies are constraining South African growth. I wonder if these people work for South Africa or the other BRICS countries?

3) The National Planning Commission (NPC) http://www.npconline.co.za/ have released a 444 page document for comment. I have spent 20 hours so far reading and commenting on the document and I have 30 pages of notes based on reading the first 120 pages. I have emailed NPC and phoned them to ask some questions, for example, by when do they expect the comments? The emails aren't answered and the phone rings and rings. Yet the NPC document calls for Active Citizenry, Strong Leadership and Effective Government. Is this just Greenwashing so that government can look good, or does Trevor Manuel mean what he says?

In summary, the problems in South Africa can be quickly resolved, but government must listen to its Active Citizens and it must reduce our burden, both taxation and administration, and at the same time deregulate electricity supply and remove communications constraints. Trying to get to speak to someone in government (ANC and DA) is an absolute nightmare. Things that should take minutes take months, for example, my wife applied for a birth certificate for her mother and the process took 9 months. My wife was born in Montenegro. Whilst we were there in January, she went into a police station and got a birth certificate in 15 minutes! In South Africa, my wife had to go to the municipal offices about 3 times, send faxes, speak to Pretoria monthly and eventually she got a document in 9 months!

All Active Citizens want is for government to do their job. If we can get to this today, in 2012, then by 2040, South Africa will be the top country in which to live.

Yours truly,

An active, committed, patriotic, South African citizen,

David Lipschitz

The real reason for sluggish growth in South Africa. 2012-04-18

See http://www.engineeringnews.co.za/article/african-growth-robust-as-south-africa-sputters-imf-2012-04-17

The real reason for South Africa's sluggish performance is because of lack of electricity supply. Eskom holds onto its monopoly to the detriment of South Africa as a whole. The ANC owns Eskom, so they are to blame! Come on ANC: Think forward; release your stranglehold on electricity supply and allow South Africa to grow at 10% like the other BRICS countries. Speak to people like me and we'll help you to grow South Africa, make lots of money and make the South African environment a safe and healthy one.

David Lipschitz comments on City of Cape Town Draft Budget 2012 - 13 Net Metering Tariff Proposals. Added 2012-04-11

Here is my comment on the Draft City of Cape Town Net Metering Tariffs for July 2012. Feel free to copy and send to idp@capetown.gov.za

To see the Tariffs, visit: http://www.capetown.gov.za/en/Budget/Pages/DraftBudget2012-2013.aspx and click on "Utility_Services_Electricity_Consumptive"

Dear IDP process:

Introduction:

The DA run City of Cape Town are doing what their cousins, the ANC government did in 2009. In 2009, the Government introduced a Feed In Tariff, but made it impossible to get. There was no Power Purchase Agreement (PPA); systems had to be bigger than 1 MW; and initially PV was not included!

In 2012, the City will follow in the Government's footsteps and introduce an impossible to implement Net Metering Tariff. A real pity as the only and major constraint to GDP growth is lack of electricity supply and I believe it is illegal for the government to have a stranglehold on this, via their monopolies Eskom and their Municipal Agents.

The SABS and NERSA have published the Embedded Energy policy documents which make Net Metering including Time of Use Tariffs a reality with only an endorsement from the Cities and Eskom.

Furthermore the only people who will benefit from "Net Metering" are homeowners using more than R4500 per month of electricity. So the government again introduces a law which benefits the rich at the expense of the poor and at the expense of the Renewable Energy industry and the thousands of jobs it will create and the millions of jobs that will be created by having a reliable, cheap and sustainable electricity supply.

Here are my detailed comments:

The proposed Tariff has a kWh portion and a Service Fee. The City of Cape Town say the Service Fee is to pay for the distribution lines to my house, maintenance etc. But the City will pay Eskom 63 cents on average for electricity and charge an average middle class homeowner R1.46. Prices include VAT. One would imagine that the reason for the increase in fee is for Value Added Services as is the case with most service providers, eg a retailer buys goods from a supplier and marks up the goods. The mark up is the value added.

A homeowner using Net Metering exports surplus electricity to the grid during the day and then imports the electricity needed at night. Over the course of a year, the total electricity price should be zero. But with the service fee the price over the year will be the service fee, ie R8,000.

Homeowners using 3,000 kWh per month or more can benefit from Net Metering! These homeowners should install a 20 KW renewable energy system, but if they install a 1 KW system, they will break even. The reason is that they will be paying R200 per month for the system, R664 per month Service Fee and a lower per kWh rate for their electricity of R1.16 instead of up to R1.57.

With Net Metering, the Grid becomes the "battery." If people using Net Metering knew that when there was load shedding they would still have electricity it would be worth it to pay the R664 service fee. Otherwise it isn't. And therefore the only people who will benefit from Net Metering, as usual, will be the rich.

Conclusion

For a country to be sustainable it must not only incentivise people to save energy but it must also allow these people to make their own electricity. Government is constraining the economy in the most dramatic fashion and exporting thousands of jobs to the Asian Tigers. Jobs that could be done in South Africa if only we had some visionary thinkers who realised that the only remaining constraint in a country with a rapidly growing workforce and a huge resource base, is lack of electricity supply.

Government will take a minimum of 10 years to supply the quantities of electricity needed, and in fact when one looks at the numbers, Kusile and Medupi only replace electricity that will be lost in the 2020's due to existing plants reaching end of life!

Only private capital can make electricity cheaper and faster than government can. Deregulate the electricity market today and see how fast the economy grows. Allow Net Metering with existing tariff structures, at the new July 2012 rate, and no Service Fee. Implement a locally produced electricity meter which has been designed locally at about a 1/5 of the cost of imported meters. Do it now and win the next election!!

Yours faithfully,
David Lipschitz

City of Cape Town Draft Electricity Tariffs relating to Net Metering - 2012-04-06

The City are doing what the government did in 2009. In 2009, the Government introduced Feed In Tariffs, but made them impossible to get. Now the City will following in the Government's footsteps and introduce Net Metering, but make it impossible to get!

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The question was "a friend said you have to buy the system, deliver the energy for free to the city and pay on top more than you would pay without the PV system?!"

David Lipschitz's answer:

The City would pay for the electricity that you sell to it and you would buy it back at the same price.

I'm going to use prices including VAT for this explanation as homeowners typically can't claim VAT, ie R1.034 is R1.18 inc VAT and R19.16 per day is R664 per month inc VAT. I'm also rounding the numbers a bit for the purposes of explanation.

ok so we have R1.18 per kWh as the Net Metering Tariff and R664 per month as the Net Metering Service Fee.

(Note that the normal rate (without using Net Metering, ie using the "Domestic Tariff") for a 1200 kWh house would be R1.46 per kwh.

ie 600 kWh * R1.1808 * 1.14 (14% VAT) + 600 kWh * R1.3798 * 1.14 = R1751.15 per month Divided By 1200 kWh = R1.46 per kwh incl VAT. Note the top rate is R1.57 per kWh including VAT so people using 3000 kwh per month will be paying R1.53 per kWh.

ok, so let's go back to this statement: We have R1.18 per kWh as the Net Metering Tariff and R664 per month as the Net Metering Service Fee.)

So with an 8 KW system, one would produce 40 kWh on an average day in Cape Town. Let's suppose you used 10 kWh during the daylight hours, then at the end of the daylight hours you would have "banked" 30 kWh at R1.18 and the City would owe you R35.40. Then that night you would use the 30 kWh and by the next morning when you start producing electricity again, you would be at "Net Zero."

But you would have an 8 KW system on your roof and that would be costing you about R1750 per month which the same as you would have paid the City for the electricity in the first place.

BUT: In order to use Net Metering you have to pay the R664 per month Service Fee. So you need to add the R664 to the R1750 and you get R2414 so indeed your PV system is costing you more than if you didn't have it!!!

In fact R2.01 per kWh instead of R1.46 per kWh!!

When do we break even? Can we break even?

If we installed 16 KW on our roof instead of 8 KW, we would have a R1434 credit (the credit should be higher, but the Net Metering Tariff is R1.18 per kWh and should be R1.46 per kWh, in fact it should be R1.63 per kWh to get wealthier people involved) with the City each month and subtracting the R664 fee, we would have a R770 credit. But our 16 KW system would have cost us R364,800 (minimum, with contract) and would be costing us R3648 per month. Subtracting the credit and we would be at R2878 which is still more than R1752!!

Note that all this assumes we have a big enough roof. My estimate is that a house with 1200 kWh per month consumption has enough roof space for a 5 KW system, but I need to do more calculations to be sure.

Hence the City are doing what the government did in 2009. In 2009, the Government introduced Feed In Tariffs, but made them impossible to get. Now the City will following in the Government's footsteps and introduce Net Metering, but make it impossible to get!

Net Metering: watch an electricity meter going backwards. 2012-04-03

Watch an electricity meter going backwards.

April Fools Day 2012 - 2012-04-01

The biggest April fools are ourselves. If we work together we can cut our electricity bills by up to 50%. But how to get people to work together?

Renewable Energy Skeptics Beware 2012-03-30

So on Engineering News, Chris Herold, a Renewable Energy skeptic, asked: "Really, you can get electricity out of solar PV from 6 am to 10 pm? You must be living in a parallel universe where the sun shines at different times. And what will you do during peak periods? The biggest evening peak is after sunset. Solar energy is also pretty weak during the morning peak (even worse during winter in Cape Town). All you would achieve is to double the capital cost of overall generating capacity, since we would still need to invest in REAL base load generation. PPP - Peak Power Parasite."

And this is my answer:

Yes really :) An average 3 bedroom 4 person middle class household use 1200 kWh per month. * 12 months / 365 days / 5 average peak sun hours gives an 8 KW grid tie PV system. In July 2012, this family will be paying R1800 per month including VAT for their electricity. R182,400 at 10% per annum over 20 years is R1800 per month!! At R22.80 per watt, 8 KW is R182,400 which is R1800 per month. ie pay the CoCT R1800 per month for electricity or use Net Metering any pay R1800 per month for your PV system.

Then get more clever. Invest R60,000 reducing your electricity requirement by 70%. This means that one needs a 3 KW system. Total price R120,000 or R1200 per month or R1 per kWh instead of R1.50 per kWh.

Then get the Eskom ESCO rebate of 42 cents per kWh at peak time and 10 cents per kWh at off peak time and this equates to R29 per 10% saving in electricity per house per month, ie another R290 off making the per kWh price 82 cents instead of R1.50.

Then use this difference to put in Vanadium Redox battery banks and Ultra-Capacitors and Hydrogen Fuel Cells and load shedding and smart metering systems for households and you have a more localised, reliable system at a cost that Eskom and the Cities can't match. And Eskom pays people who load shed more than 1 MW within 1 second of notification and you have a system which costs less than 82 cents per kWh.