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Sep 07, 2012

Greater collaboration urged as SA moves towards multiparticipant power market

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SECURITY|Africa|Energy|Security|Werksmans Attorneys|Africa|South Africa|Security|Electricity Sector|Energy|Internet Solutions Internetix Conference|Multiplayer Electricity Industry|Power Producers|Security|Greg Nott|Happy Masondo|James Surowiecki|Power|Security|Reinforcing|South East Asia
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Effective collaboration in the energy and electricity sector, between independent power producers and government, is necessary to overcome hurdles in the sector, says law firm Werksmans Attorneys director Greg Nott.

The current transition to a multiplayer electricity industry, which can cause frustrations, also means that the South African industry can avoid the problems faced by independent power producers in South-East Asia during the 1990s, where a financial crisis and, in some instances, a lack of prudent technical assessments led to serious problems.

The risk of instability and market collapse can be tempered by careful development of an independent power production industry, which does take time, he says.

However, effective collaboration is an arduous task because it entails detailed debate and compromise, but leads to superior decisions, said newspaper New Yorker journalist and author James Surowiecki, who spoke at the Internet Solutions Internetix conference in August.

Using Bayesian probability mathematics, which gives the probability of an effective solution to a problem, given limited and unverified information, such as those encountered daily in business meetings where effective decisions must be taken using limited information, Surowiecki noted that diversity in groups and teams effectively countered the effects of incomplete information on decisions.

Diversity in teams means that a broader problem space is explored, compared with mutual reinforcing that occurs between like-minded people that can amplify incorrect assumptions and, hence, decisions, he explained.

“Working in diverse teams is not easy. We like to work with people whom we agree with and we must work hard as part of a diverse team. Working in diverse teams can also be uncomfortable and frustrating; the best decisions, however, do not arise from easy consensus, but rather from conflict, disagreement and compromise. An effective decision must balance the diverging views of a diverse team and effectively integrate different viewpoints in order to determine the best course of action.”

It falls to the industry to form a more coherent view with which to approach government and to support government in growing an independent power industry rather than advocating competing market views, which can make government policymaking uncertain, says Nott.

“If we analyse the prospects of an independent power producer in South Africa based on the existing legislation and policy environment, then the prospects are good. However, in light of the recent delay of financial closure for initial independent power production bidders and with no date given for financial closure of these bids, the implementation of policy by government remains in question, increasing risks and financial costs,” says Werksmans Attorneys director Happy Masondo.

“To ensure security of supply, South Africa needs independent power producers and alternative sources of energy,” she concludes.

Edited by: Martin Zhuwakinyu
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