Solving the Eskom problem and poverty simultaneously

The ‘iShack’ is a low-cost housing structure that aims to incorporate solar power into South Africa’s informal settlements. Image: Triple Pundit

The South African government’s plan to spend almost R1 trillion on nuclear power, and the nuclear agreements between SA and China, Russia, France, Korea have got me thinking.

Imagine this scenario. The Russian state-run bank lends SA R1 trillion. SA pays this 1 trillion straight back to the Russian State-run Nuclear company Rosatom who spends a portion of this on building the facilities here. At this point we’d have paid the money back to the same entity that lent it to us (the Russian state). But then we’d still owe the Russian state-run bank the R1 trillion we borrowed from it. Our future generations lumped with this massive debt would I’m sure wonder how on earth we were suckered into such an obvious scheme.

Now imagine this scenario. Instead of paying that 1 Trillion Rand to foreign companies to build nuclear power stations, we spend it on equipping the very poorest households in SA with locally designed and built rooftop photovoltaic panels (with battery storage), Solar geysers and Wind generators and allowing those households to sell their excess power onto the grid as German households have been doing for years.

In doing so we’d be killing six birds with one stone:

1. Lowering electricity demand (those houses fitted would require much less electricity from the grid).
2. Increasing the amount of total power generated nationally as the households sell their excess power onto the grid.
3. Lowering inequality by giving the poorest households a source of income from selling their excess power.
4. Reducing the need for welfare grants (those households receiving grants could be the first to receive the generators).
5. By spending the trillion Rand here in South Africa on locally built and designed generators, all of the money would be spent here, creating employment on a grand scale, and increasing aggregate demand by spreading wealth into our communities. And because workers households will have no electricity costs, the lower cost of living will in turn bring down the costs labour and that would in turn allow us to be more competitive as a trading nation. Or to put it another way, money saved on electricity costs or made through selling excess power means more money staying in households… essentially a raise in pay at no cost to their employers. Irrelevant maybe when the employers are large highly profitable corporations who could afford to pay their workers more anyway, but much more relevant when the employer is a small, struggling company or startup. (The benefits of Salary-gap moderation as a solution to the low median wage of workers in SA are outlined by the author in another blog on this site called Economic Responsibility in Our Lifetime.)
6. Our current account would be much healthier without the outflow of R1 trillion. An outflow of R1 trillion would severely weaken the rand, and reduce our credit rating, and force SA to borrow more.

An article published on Moneyweb says that it cost Chris Prins around R120 000 to become energy independent using solar cells, batteries and an inverter. (Though the price does not include the gas geysers he installed in bathrooms and kitchen.)

So lets do the maths. R1 trillion is R1 million x 1 million. In other words with R1 trillion we could put R1 million worth of wind or solar generators on each of the poorest million households in SA. Or R500 000 worth on the poorest 2 million households. Or R250 000 worth on the poorest 4 million households. Or R125 000 on the poorest 8 million households.

The economies of scale involved here will surely greatly reduce the cost of producing the panels and wind turbines, so it’s quite possible that R1 trillion would be enough to make every single one of SA’s 9 million households energy independent and net producers of electricity onto the grid. Furthermore, tax incentives for our wealthier citizens could encourage them to do the same with their homes at no upfront cost to the state.

The nuclear power stations (if we decide to take that road) will only be online in 2030 (and most nuclear power stations run way over the estimated build time), whereas the first wind and solar panels (if enough leadership, money and manpower were thrown at their design, manufacture and distribution) would be online far earlier than that. Can we really wait till 2030 for more supply? And how long can our poorest citizens really be expected to live in such dire poverty when there is no logical reason for it.

By Buddy Wells. See more of his blog here.

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