Flawed assumptions will give SA a 'dinosaur economy' - Publications

Flawed assumptions will give SA a 'dinosaur economy' - Publications

ANALYSIS

Flawed assumptions will give SA a 'dinosaur economy'

SA’s mineral-energy dominated economy might look like a dinosaur in the near future. Photo by Bert K (Creative Commons)
 

July 12, 2010
By Leonie Joubert
Parliament’s portfolio committee on energy has less than a fortnight in which to intervene on the public’s behalf, before SA gets locked into an energy policy that could turn it into an economic dinosaur. The consequences of this could be soaring inflation, burdensome carbon taxes, loss of “green” job creation opportunities, and growth of an energy intensive economy at a time when much of the globe is steering away from this technology.

By the end of this month, the modelling process will be completed on the Department of Energy’s second Integrated Resource Plan (IRP2) - a point of no return for the drafting of the policy since modelling is such a costly exercise, says Gary Pienaar, a senior researcher with democracy watchdog Idasa.

But the energy committee will not be briefed on IRP developments by the department before then, meaning it cannot fulfil its oversight role during this critical phase.

The assumptions upon which the IRP2 is being drawn up are flawed, say critics, and are biased against renewable energy. If this IRP goes ahead on the assumption that SA’s base-load electricity can be supplied only by carbon-intensive coal and nuclear power, and that renewable energy is only good for “top up” power during peak periods, it will lock the country into an energy intensive future with a high carbon footprint.

But the transition away from coal and nuclear is about more than simply avoiding high carbon emissions in coming decades. It is about keeping our economy relevant in a changing world. Prof Mark Swilling, with the Sustainability Institute, says this transition to a low carbon economy is part of a technological transition that is redrawing systems of production and consumption and, as a result, capital and financial flows.

“It’s the equivalent of information technology during the 1970s and 1980s. Saying ‘sorry, we’re not going to join this revolution, we’re going to stick with the old technology’ is the equivalent of saying ‘we’ve decided to delay installing computers in SA by 20 years because we’re perfectly happy with our slide rules and our calculators’.”

Keeping the country outside of the digital revolution would have been disastrous for the economy - and similarly negative consequences will result if SA misses out on this opportunity to “retool, restructure and reconstitute” now, at a time when the country’s global economic competitors are doing just that.

If we don’t keep abreast with this global energy revolution, SA’s mineral-energy dominated economy will look like a dinosaur in the near future.

Even though the parliamentary portfolio committees - in this case, the energy committee - don’t have a direct say in the shaping of policy such as the IRP, they do have an important oversight role. The energy committee should be watching over the IRP process at every stage.

And it’s precisely here that it is in “dereliction of duty”, says Independent Democrats energy spokesman Lance Greyling, who sits on the committee.

Independent analysts, civil society organisations and some MPs have questioned the way the IRP2 is being drawn up - the lack of transparency and public participation, the assumptions that coal and nuclear are the only real options for the next few decades, and the vested interests behind this thinking. They have called for the energy portfolio committee to influence the debate by opening it up for greater public consultation, and by drawing in expertise from beyond the inner circle of Eskom, and mining and other industries with vested interests. They are calling for the department to delay the drafting of the IRP (which will happen once the modelling is completed later this month), until these problems have been ironed out.

But parliamentary oversight of this process has also been disrupted by the Soccer World Cup. The committee ordinarily meets weekly while Parliament is in session, but because of the World Cup, it has taken a six- week recess, rather than the usual three weeks at this time of year.

Elizabeth Thabethe , the African National Congress chairwoman of the committee, confirms that the committee was due to be briefed by the department last month but this was rescheduled to July 27 because of the World Cup. She says the committee can not begin to exercise its oversight role until it has been briefed by the department. She declines to comment on the IRP drafting processes or the committee’s role in this, until the committee has been briefed.

But Idasa has pointed out that this is too late in the drafting process, since the modelling for the IPR2 will be completed by then. “One of the most important policy processes is under way at the moment, for the economy and the energy sector,” says Pienaar. “This is more than a blueprint for the sector for the next 20 years.”

If the IRP2, with its bias against renewable energy, becomes policy, it will have significant consequences for the economy and the general public. The local economy could miss out on a valuable opportunity to move into the global green technology revolution, with large-scale, decentralised renewable energy sources and the associated opportunities for entrepreneurs and green jobs. There is also the matter of carbon taxes and what they mean for inflation.

WWF Living Plant Unit head Saliem Fakir says the effects of carbon tax will ripple through the entire economy - pushing up inflation and making SA’s products less competitive. This could result in reduced exports and job losses. “It looks as though carbon tax might be exercised on the carbon properties of the fuel itself. So coal will be taxed, which will push up the cost.”

The vulnerability this brings to the economy excludes additional stresses, such as the strain on the environment and water resources associated with mining and pollution caused by harvesting and using coal.

While labour is concerned about potential job losses with a shift away from coal-based electricity, it recognises that the IRP addresses only electricity generation, not broader energy issues.

This precludes solar water-heating systems, where the sun’s energy heats water directly, rather than converting it to electricity first.

National Union of Mineworkers treasurer- general David Macatha says the union recognises the job creation potential of the solar hot water industry and will push for it to be included in the draft IRP2.

Macatha says many coal miners are “older” and reskilling them for work in other energy sectors, such as the manufacturing of solar or wind technology, will be difficult. This highlights the need to divert recruits away from mines and into alternative energy sectors - but those industries need to exist before they can absorb labour, and the regulatory framework needs to provide for them before they can flourish.

Until this is addressed, SA will be caught in a Gordian knot as labour resists moves away from coal if there are no alternatives to mining jobs.

Without parliamentary intervention, the IRP may be drafted around problematic assumptions about SA’s energy mix.

Some committee members did urge the chairwoman to call a special meeting to discuss the IRP during the Parliament’s World Cup recess but, by late last week , this had not happened.

This article was originally published by Business Day:
Leonie Joubert, Energy Policy, 12 July 2010

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