NUMSA commemorates the 100 year anniversary of the Russian Revolution

Motivations For a Socially-Owned Renewable Energy Sector:

15 October 2012, Posted in Campaigns, Speeches

Introduction:

Like everyone else let me start by thanking the organisers of this roundtable for bringing us together to discuss challenges that arise as a result of existing and dominant energy systems.

Let me also say upfront, that as energy prices go through the rooftop, as energy poverty/inequality continue to persist, as communities and a number countries rapidly lose their energy sovereignty and the right to determine their energy choices, as the right to energy remains a dream for millions of the globe’s citizens, as state-owned energy enterprises continue to act like private energy companies; the environmental, political and economic case for genuine public ownership and democratic control of energy is becoming more stronger.

It is NUMSAS’s view that the global union movement must recognise that the tide is turning and that the basis for calls for public ownership and democratic control of energy systems is emerging. As the labour movement, we need to seize the moment with both hands.

But as we seize the moment and put forward a clear and strong case for public ownership and democratic control, we must honestly acknowledge weak points in our perspectives.

For NUMSA, one of these weak points is that in stating our case for public and democratic ownership of energy we have not aggressively extended this case to renewable energy.

It looks as if, because of the ecological damages associated with fossil fuels, as progressives forces (labour and the climate justice movement), we seem to have adopted a default position that says: ANYTHING BUT FOSSIL FUELS.

What this default position has meant is that renewables have been exempted from our calls for public and democratic ownership of energy. We seem to be grateful and comfortable for the steps taken to introduce renewables without analysing the consequences for our members and communities of building a private sector-driven renewable energy sector based on a profit motive.

What I want to do, is to then share with you my union’s position on building a socially-owned renewable energy (RE) sector in South Africa. By doing this, I hope that we can have a discussion on how in going forward as the labour movement, we should not leave renewables when we talk about bringing energy under public and democratic ownership of energy.

South Africa’s Renewable Energy Independent Power Producer Programme (REIPPP):

South Africa is embarking on a multi-million dollar Renewable Energy Independent Power Producer Programme (REIPPP) to introduce renewables onto the country’s energy system.

The allocation of about 17.8GW of renewable energy in the Integrated Resource Plan (IRP) – a 20-year electricity plan from 2010 to 2030 – means that at the end of the 20-year period, 9% of electricity generated will be through renewable energy technologies (photovoltaic, concentrated solar thermal, biomass, biogas, landfill gas, small hydro and wind).

The scale of the programme becomes more evident if one considers non-existence presently of a renewable sector in South Africa and the fact that although renewables will contribute only 9% of electricity generated by 2030, if everything goes according to plan they will constitute 42% of the new build capacity envisaged between now and then.

According to our government, the whole plan will be driven by Independent Power Producers (IPPs).

Organs of the state in the energy sector (municipalities and parastatals) are excluded from the Renewable Energy Independent Power Producer Programme (REIPPP).

After years of consultation that led to the National Energy Regulator of SA (NERSA) announcing draft renewable feed-in tariff (REFIT) guidelines and with consensus emerging on the appropriateness of the REFIT as an instrument to introduce renewables, in 2011 the Department of Energy (DoE) suddenly and without consultation announced a “consultants-designed” instrument called the REBID.

The renewable energy programme will work in the following manner;

1. After government issues calls for tenders from “interested parties with relevant experience to submit proposals for the finance, construction, operation, and maintenance of renewable energy generation facilities”, Independent Power Producers (IPPs) will then bid through a highly confidential process.

2. Winning bidders will then sell what they generate to a “buyer”. In terms of a Ministerial Determination made on the basis of sections 34 (1)(c) and (d) of the Electricity Regulation Act (Act 4 of 2006), the Minister of Energy designated the South African electricity utility Eskom as the “buyer” to which IPPs will sell the electricity that they generate.

3. IPPs will sell the electricity to Eskom through (20-year +) Power Purchase Agreements (PPAs) that they will enter into with the electricity utility.

4. The basis of bidding will be a price that IPPs will sell electricity at and on the basis of identified socio-economic development objectives.

The price at which IPPs will sell the electricity to Eskom makes up 70 points in an evaluation scorecard of 100 points that is used to determine winners. Socio-economic developments objectives such as job creation, local content, black ownership and preferential procurement constitute the remaining 30 points.

5. It is through PPAs that revenue streams are guaranteed to IPPs. For every RE technology there is an applicable tariff or a “cap”. Bidders are required to specify in their bids the price they are requesting or willing to sell electricity to Eskom. The price could be less than the cap; which is where bidding primarily rests.

In our discussions with the Department of Energy (DoE) and in trying to find out what the motivation is behind the IPP-driven model, we have been told that;

1. The model shields the state and taxpayers from all financial risks associated with the programme

2. The model allows the private sector to take the risks and therefore allows government revenue to go to other areas where there are social needs.

As NUMSA, this motivation has not convinced us and we remain opposed to the Renewable Energy Independent Power Producer Programme (REIPPP). In place of the IPP-driven programme, we are calling for the building of a socially-owned RE sector in South Africa.

Why are we opposed to the Renewable Energy Independent Power Producer Programme?

In discussions with government officials and Members of Parliament (MPs), there is an attempt to reduce NUMSA’s opposition to the Renewable Energy Independent Power Producer Programme (REIPPP) to nothing more than an ideological and political stance against the private sector.

While we are not ashamed to declare our anti-capitalist colours, we think that our opposition to the programme cannot be fobbed off as just a mere ideological stance. In fact our ideology and vigilance in relation to the capitalist agenda has alerted us to the following:

Firstly, although the Department of Energy (DoE) always states that it is the IPPs that will take all financial risks associated with the programme, what is never revealed is the fact that National Treasury stands as a guarantor in case that the winning companies do not receive rates stipulated in the Power Purchase Agreements (PPAs).

Secondly, not raised in the argument that the “private sector takes all the risks” is how Eskom as the “buyer” of electricity from IPPs will potential recoup what it pays to independent power producers through electricity tariffs that customers pay.

For us as NUMSA, it is therefore not true that the public is shielded from the risks associated with the programme and private investors are bearing all the risks. Large costs of the programme will feed through to the cost of electricity that users will pay.

The whole bidding approach makes the exercise expensive with costs firstly fed through to project developers and then to project owners; with the main beneficiaries being financial lenders/underwriters and multinational corporations in the renewable energy technology (RET) sector.

Already financial lenders and underwriters are telling developers and owners that local manufacturers do not meet risk-reduction criteria that they as financiers need. What this means is that the bulk of the components in the build programme will not come from South Africa but will be imported.

The effect of these costs will make renewable energy less competitive and hence curtail large scale rollout required to mitigate climate change. We also believe that it will also artificially make coal and other technologies more financially attractive; providing a sophisticated and further subsidy and support for fossil fuels.

In addition to the above, as a union we have other objections to the programme:

1. the focus of the Renewable Energy Independent Power Producer Programme (REIPPP) is to put energy onto the grid and produce “energy security” to big corporations INSTEAD of provision of energy needs to those who remain off-grid

2. the preoccupation to supply renewables onto a centralised grid system fails to appreciate how decentralised energy systems based on renewable energy can be an important lever that women can use in their struggle for equality

3. the focus on grid supply is consistent with a view that sees renewable energy as a commodity for profitable sale in the market INSTEAD of seeing it as a non-commercial means of subsistence

4. the overemphasis on putting renewables onto the grid goes against the approach that sees the introduction of renewable energy as part of larger effort towards energy democratisation, energy equality and a broader attempt to restructure our societies away where production for profit

5. the narrow focus on “security of supply” misses the important contribution that a greatly expanded use of renewable energies can make in constructing new egalitarian relations of production and exchange.

About the bidding model itself, this is what our submission raised;

1. The absence of an economic analysis of the costs and benefits of the REBID model; detailing costs and benefits which will be incurred/enjoyed by project developers; project operators; local suppliers of engineering and design services; manufacturers of equipment to be installed and operated; local workers at all relevant skill levels; financiers and Eskom as a designated buyer.

2. Scanty information on the thinking behind the design of the REBID model, details of how it will work, its soundness, practicality, alignment with national development priorities and especially how it will serve different interests.

3. The lack of explanation why the REBID model was chosen, what other models were considered as alternatives and why these were not chosen.

4. The absence an overall plan to maximise (not project by project) localisation.

5. The lack of a detailed analysis of jobs to be created through the programme; detailing the nature of the jobs, gender profile of such jobs and sectors/regions/towns in which these jobs will be created.

6. The absence of an overarching skills development plan necessary for the programme.

Conclusion:

As NUMSA, we believe that if we are to stop another capitalist grab and block new subsidies to “green capitalists”, the call for public and democratic control of energy must be extended to the renewable energy sector. In our case this concretely means;

1. A campaign by unions to act as catalysts in the establishment renewable energy (RE) cooperatives and other forms of community energy enterprises

2. A struggle to build renewable energy parastatals and municipal-owned renewable energy entities that are under democratic control through constituency-based governing councils and with a strong social mandate to provide energy services, fight energy poverty/inequality and extend the right to energy.

3. Bringing sites with the greatest abundance of useable renewable energy sources such as land under public, community or collective ownership as a way of ensuring the accrual of a large share of economic benefits to producers and owners of the actual means through which renewable energy is generated, transmitted and distributed.

4. The introduction of strategic and targeted a local content requirement regime aimed at building a RE manufacturing sector that guarantees jobs and a sector where full rights for workers (including women workers) are respected and trade union presence is permitted.

5. A search in our region(Southern Africa), the rest of the African continent, the global South and the rest of the world for forms of cooperation and solidarity around energy that will ultimately replace competition and avoid workers of different countries being pitted against each other.

It is only by executing these tasks in the renewable energy sector that we will fulfil our goals and seize the moment to put the entire energy system under public ownership and democratic control.


STOP THE GREEN CAPITALIST GRAB!
Build a socially-owned renewable energy sector as a component a publicly-owned and democratically-controlled energy system!