South Africa isn't having an honest debate about proposals to fix its power utility Eskom, and the role that renewables might play.
that South Africa’s power utility Eskom will be receiving R23-billion a year in government support for the foreseeable future are symptomatic of operational and financial crises at the utility.
The second is that restructuring would facilitate a greater role for renewal energy generation driven by privately-funded generation projects. Eskom’s roles as generator, buyer and distributor of electricity would be separated to stop the utility’s generation interests from distorting its purchase and distribution decisions.
The first is a major injection of funds. Mboweni announced that the National Treasury will provide Eskom with R23-billion in cash a year for between three and ten years. This is in addition to financial support in 2015 that exceeded R150-billion in costs to the state. The financial support will largely be funded by reducing other government expenditure as well as an increase in borrowing.
Breaking Eskom up into three parts is touted as a way to improve information about operations and finances, and to reduce inefficiencies. In addition, some argue that it would help attract direct private sector financing. A great deal has been written about the restructuring of state-owned enterprises. There have been both successes and failures. International experience across many industries shows that while separation can have a positive effect, it can also lead to breakdown of communication and information flows, distortion of incentives relative to the public interest, decline in operational indicators and excessive profits for private participants..
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