Let’s not be mistaken, climate change will be decided by governments. I don’t want to discount the miracles individual masses can achieve but it is the operations and investments of governments that will decide our fate. Their role in climate change is just too large for climate change to be solved without them. One area of prominence for governments in this regard is energy production and consumption. In South Africa, as we all know, this has been a particularly frustrating area. The mismanagement of Eskom has led to raised prices and regular load shedding. In response, people have increasingly been calling and hoping for electricity to be supplied to households and businesses independently of Eskom. This sentiment also applies to renewable energy. For many South Africans, the thought of a government State-owned Enterprise (SOE) controlling the future of renewable energy in our country is frankly frightening. However, what is unfortunate is that renewable energy should be supplied by the government, and probably needs to be.
Firstly, it is clear that the future of energy is the phasing out of fossil fuels and the full use of renewable energy or nuclear energy. This is because, in order to stop climate change, we will need to emit zero pollutants. Therefore, all use of government fossil fuels will eventually need to stop. Then, all needed capacity must be replaced by renewable or nuclear energy. This amounts to roughly 80 000 megawatts In South Africa by 2030. At the moment, independent energy production is restricted to only the Eastern Cape and Western Cape by the Renewable Independent Power Producer Programme (REIPP) and produces about 5000 megawatts to add to the grid through solar and wind facilities, so about 1/16th of what will be needed. So why is it that most renewable energy should be provided by the government?
Firstly, it has to do with timing and price. We don’t have much time. South Africa’s and the world’s energy production needs to be almost fully renewable by 2030 if we are to keep the effects of climate change from becoming too severe. That is less than a decade for a private market in South Africa to increase its capacity by 1600%. It also took about R200bil of investment for independent power producers to get to their current capacity, which was an impressive achievement for those involved, but would then equate to over R3 trillion of investment to meet all of South Africa’s future needs. Although renewable energy will get cheaper as the decade goes on, that is an extraordinary amount of money to raise when other governments around the world are doing that job. Government, on the other hand, can raise capital and borrow more easily to meet this financial need. Furthermore, governments can purchase more expensive technologies that are more efficient, but not yet price-competitive enough for private markets. Renewable energy generation is a large enough financial problem on its own, but the fact that it is so closely time-constrained means that only the financing of a nation can (maybe) pull it off.
Furthermore, there are clear, established economic arguments for production to be done by governments. Electricity production and dissemination are what is termed natural monopolies, meaning it is an industry characterised by high barriers costs and economies of scale. Economies of scale mean that governments are able to integrate the whole grid at a much cheaper cost compared to multiple firms, since this project will have substantial fixed costs that decrease on average as production increases. It is also not just the price for them that matters, but the price for us too. An efficiently run state enterprise with subsidies can give a market competitive price lower than a private monopoly due to only needing to produce normal profit. Also, as I have established, at this point scale is more important than efficiency. Private markets tend to work slowly, and consumers adjust choices gradually, however governments can force positive change without any effect on the consumer’s welfare and no need to rely on consumer choice. Lastly, governments can better oversee job transitions from those working in fossil fuels into the renewable energy sector, which should result in less unemployment, which is an expected by-product of this transition. Renewable energy around the developed world will be handled and performed by governments who know these lessons well, and our government should too.
However, many argue that the government cannot run energy efficiently. There are of course also economic arguments to discourage government monopolies, mostly to do with efficiency, but I think we’ve all seen those arguments play out well enough in South Africa to not need further explanation. Unfortunately, that is no longer the domain of this argument. We have reached a point beyond efficiency. The heart of this argument is that we need to reach zero as quickly as possible and scale is the supreme goal. The rest of the world is relying on its governments to phase out fossil fuels from the economy and South Africans should expect no less from theirs. However, with the past performance of Eskom, it would take a political miracle to make this time around a different story. Therefore, it seems that renewable energy is doomed. We do not have the time or resources to leave government out of this equation, nor does government likely have the capacity to achieve this lofty goal. One can only hope that both the private and public sectors can work together to save our future. Seems like wishful thinking nowadays.
References
https://www.renewableenergyworld.com/wind-power/renewables-in-coal-out-south-africas-energy-forecast/
https://www.sciencedirect.com/science/article/pii/S1110016821002295#b0075
https://theconversation.com/how-the-rollout-of-south-africas-renewable-energy-plan-is-failing-communities-164798
https://www.iea.org/countries/south-africa