Energy at the World Summit

12 August 2002
AS MUCH as he is wary of the throngs expected at the World Summit on Sustainable Development (WSSD) late in August, Associate Professor Anton Eberhard will be making his way to the Johannesburg event to attend the launch of a new book, Energy for Sustainable Development: A Policy Action Agenda, to which he has contributed a chapter on electricity policy.

Eberhard, who holds a joint post between UCT's Faculty and Engineering and the Built Environment (EBE) and the Graduate School of Business (GSB), co-authored the piece, Towards Sustainable Electricity Policy, with Walt Patterson of the Royal Institute of International Affairs (RIIA) in London and the late Professor Carlos E. Suárez of the Instituto de Economía Energética in Argentina.

In their section, the three discuss the impact that liberalised electricity markets – a global trend – has had on "public benefits" (such as access to electricity and impacts on the environment) over recent years. For much of the past century, the electricity sector has been organised as a vertically-integrated public monopoly, explains Eberhard.

This is still largely the case in South Africa. Eskom is responsible for all three components for the industry, ie electricity generation, transmission, and much of its distribution. "The industry always used to be thought of as a natural monopoly – the economies of scale were such that it paid to have a huge national company running it."

But, in a move started in England and Latin America in the 1980s, and emulated now in most Organisation for Economic Co-operation and Development (OECD) countries, there have been some important changes in the industry in terms of competition, privatisation and the introduction of new regulatory regimes, notes Eberhard. This turnabout has been spurred on by, among other things, the rapid change in technology, which in turn has made it possible for a multitude of players to participate in the industry.

"The traditional centralised structure is changing to one that is much more decentralised, both technically and institutionally," he says. "Smaller-scale and flexible generation options will be introduced (such as fuel cells and micro-turbines) and networks and information and communication technologies will have to be more responsive and versatile."

In some developed countries, electricity is being traded like a commodity – companies bidding for the right to generate electricity, while others bid to buy it, Eberhard points out in example.

"The interesting question about this is what happens to public interest issues – in social and environmental terms – if the industry is taken out of government hands and competition is introduced? Eskom, for example, has done very well around electrification, electrifying two million homes since 1994. Would a private company do this?"

More than likely not, posits Eberhard.

"The problem we have is that there's this massive change happening in the industry – with many more players coming in and huge innovations – but how do we promote sustainable development at the same time?" he asks. In their chapter of the new book, Eberhard and his fellow authors have tried to come up with some answers to this dilemma, pointing to practical – "smart" – policy and regulatory instruments that can be put in place to advance the public benefit.

"What's fresh about this book is that we are not arguing against market liberalisation," he says of the tome. "Each chapter, I think, pushes the boundary and is innovative in a way that writing around this sector has not always been.

"We feel that the changes that have been happening through the introduction of competition are very positive. There are major economic gains and technical innovation needs to be given space. But we are saying, how do we have these changes and also achieve our social and environmental objectives?"

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