Chairperson and hon Minister, we are currently in the midst of an energy crisis in South Africa. It might not seem like it, because we have so far managed to keep the lights on, but this fact does not tell the true story of what is going on behind the scenes.
Eskom is currently having to pay energy-intensive companies to cut back on their production so as to ensure that we have enough energy to keep the country ticking over. Essentially then, we are in the absurd scenario where taxpayers are paying companies to keep people out of work.
I have also been informed just this week that a company that wishes to put up a business that will employ 1 000 people has been told that the municipal grid infrastructure will not be able to supply them with the requisite amount of energy.
Minister, I am sure you will agree that this is making a mockery of our job creation targets. It is clear that if we don't sort out our energy crisis, we will never be able to sort out our unemployment crisis.
The responsibility for this crisis rests solely with the ANC government, but if we are now going to solve it, we will require everyone to be part of the solution.
Unfortunately, Eskom has continuously demonstrated that it can no longer be entrusted with keeping the lights on. In the midst of our energy crisis, what should have been a routine test at Duvha Power Station last year resulted in a turbine smashing through the roof and more than 600 MW being removed from the grid! This will cost in excess of R2 billion to repair and will cost our economy even more in terms of companies having to cut back on production as a result of there being no energy available.
The Medupi Power Station that Eskom is building is now projected to run over schedule by at least a year, and its costs are escalating out of control. It will probably turn out to be one of the most expensive coal- fired power stations per megawatt ever built in the world and threatens to push our electricity pricing path to unaffordable levels.
These are issues that the Minister of Public Enterprises will have to account for though, but the lesson for this department is that our energy solutions can no longer just lie with Eskom. This department has to create the right policy and institutional framework for the creative energy of our people and businesses to address this crisis. In order to do that, we need the complete paradigm shift that you were talking about.
In the hearings on the Independent System and Market Operator Establishment Bill, ISMO, many submissions argued for a comprehensive vision of what the final institutional framework governing the electricity sector would be. Piecemeal legislation without this ultimate vision in mind will not deliver optimal outcomes. This can be seen in the independent power producers sector where, despite a commitment over a decade ago to derive over 30% of energy from independent power producers, we currently derive only a paltry 2%.
The situation with regard to municipal electricity distribution is also in a complete mess. It is clear that the current situation of major underinvestment in our distribution grids, to the tune of R40 billion, along with the fact that many municipalities rely on electricity sales for the majority of their revenue, is completely untenable. This is a huge disincentive for energy efficiency initiatives and also prevents households from being part of the solution by not allowing for two-way metering. There is a massive leadership vacuum on the issue, Minister, and this department has to address it.
The Independent System and Market Operator Establishment Bill is, however, a welcome step, albeit, in fact, two years after the President announced it, but in order for it to be successful, it has to allow for wheeling through the grid.
Large energy-intensive companies must be able to enter into contracts with independent power producers so that the burden of these investments is removed from the state. The problem with our current 20-year energy plan is that it requires all South Africans to shoulder the risk of massive investments like that of our proposed nuclear build programme, whereas the majority of this energy will be used to power the expansion plans of a few large energy-intensive companies. If, however, that energy comes on stream at a price that is not globally competitive, these companies could decide to expand their operations elsewhere, leaving us with the problem of extremely expensive stranded assets.
Energy is a rapidly evolving sector globally, and South Africa needs an energy policy that can respond to these changes effectively. Ever since the Integrated Resource Plan, IRP, was promulgated two years ago, there have been massive shifts in the global energy space, with the price of some technologies, like solar photovoltaic energy, plummeting and massive gas finds in our region making this a possible future energy source. As promised by this department, we therefore need a revision of the IRP so as to see whether we need a major adjustment to our policy.
I agree wholeheartedly with the National Development Plan when it states that South Africa will face major challenges in financing the capital costs of a nuclear fleet. Nuclear plants involve massive, lumpy investment, and it will be extremely challenging to build the institutional and skills base for running new generation nuclear plants. This is what the National Development Plan says. Most importantly, it states that all possible alternatives need to be explored. Yet, unfortunately, this government seems determined to stifle any debate over our nuclear programme.
No information has been put into the public domain about the economic feasibility of new nuclear power, nor the different financial models that are being considered. Instead, what we are seeing is nuclear energy being included in the energy plan despite the department's own modelling that shows that it is not the most cost-effective energy source.
The public has a right to be concerned, as an investment of this magnitude - whatever the final figure might be, and we can debate that - has the potential to bankrupt our economy. Instead of these lumpy investments, what we should be seeing is a far greater emphasis and budget being put on energy efficiency, and smaller but more rapidly deployed energy generation plants.