Opinion: Could Eskom be repurposed to become training ground for the energy transition?

31st July 2020 By: Tobias Bischof-Niemz

Opinion: Could Eskom be repurposed to become training ground for the energy transition?

One of the most common remedies proposed for addressing Eskom’s financial and operational problems is that of reducing jobs at the State-owned utility. The argument is premised on the view that Eskom is massively overstaffed and that its headcount should, thus, be reduced to help lower costs and boost efficiencies.

Eskom is indeed a large employer, with about 39 000 people staffing its generation, transmission and distribution units (a total of 47 000 employees at group level), and its payroll made up about 15% of total revenues of R180-billion in financial year 2018/19. Even if the utility were to pursue aggressive downsizing, it is unlikely that it would be able to realistically reduce its headcount by more than 10% over the coming five years. Reducing its total payroll by 10% would, in turn, reduce its cost base by less than 1.5%.

Given the confluence of South Africa’s unemployment crisis and an energy transition that will require people with technical skills, more creative solutions than simply slashing jobs should surely be considered.

One proposal would be to abandon the idea of retrenchments entirely, and repurpose Eskom’s well-structured and effective technical training system to help build the pipeline of technical skills required for the energy transition.

To achieve such a realignment, Eskom could receive an official mandate, funded through the tariff, to retrain both its own generation staff and any affected coal miners for redeployment in the renewables sector. Under such a mandate, Eskom should be allocated jobs retraining numbers that at least equal the number of jobs set to be lost in coal mining and coal power generation at any point in time.

In parallel, renewables infrastructure, including wind farms, solar photovoltaic (PV) farms and upstream component manufacturing plants, should be deployed in the coal region of Mpumalanga at a pace and at a magnitude that absorb those retrained workers.

This would require adding a spatial dimension to South Africa’s renewables procurement programme. The easiest implementation would be through allocating a certain percentage of the national renewables programme to the coal region, and to conduct a regional auction for new wind and solar assets. Mpumalanga would require a renewables allocation of about one-third of the total in order to sustain the same job numbers as there are today in the coal power stations and the associated coal mines. The other two-thirds would be deployed across the country, as is the case currently.

Based on the least-cost build-out scenarios up to 2050 provided in the Integrated Resource Plan (IRP), it can be assumed that South Africa will require between 60 and 70 Gigawatt (GW) of wind and 60 to 70 GW of solar PV capacity by 2050, generating a combined 300 Terawatt-hours (TWh) of electricity yearly. At a 20-year lifetime of the assets, to maintain this fleet would require a continuous yearly build-out rate of 3 GW apiece, in perpetuity.

It has been established from projects built to date under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) that roughly 10 000 direct and supplier jobs are created for every 1 GW of new capacity built each year. These jobs are related to development and construction alone, as there has not yet been much local manufacture of components. Analysis arising from the REIPPPP also shows that, for every 1 TWh of electricity produced yearly, roughly 200 direct jobs are required to operate the wind and solar PV assets.

Therefore, the continuous roll-out of wind and solar PV at a combined 6 GW per year, leading to 300 TWh per year of electricity generation eventually, would mean 60 000 construction jobs and another 60 000 jobs in operations – 120 000 permanent jobs in total.

These are significant numbers, given that Eskom’s generation division currently employs roughly 10 000 people at its coal-fired power stations. South African coal mines employ roughly 90 000 people to produce coal for both Eskom and export. Just above 40% of South African coal goes to Eskom, so it can be assumed that 40 000 coal miners are attributable to Eskom’s demand. Hence, Eskom converting coal into electricity employs roughly 50 000 people directly at the power stations and indirectly at the coal mines.

With one-third of the total renewables capacity deployed in Mpumalanga, 1 GW of new wind and another 1 GW of new solar PV – 2 GW combined – would have to be built in that province every year in perpetuity. From an energy perspective, Mpumalanga would be delivering 100 TWh a year by 2050 from solar and wind. In that end state, Mpumalanga would host 40 000 permanent jobs in construction and operations of wind and solar assets alone, without factoring in any manufacturing jobs.

Those 40 000 permanent jobs in construction and operations only of Mpumalanga-based renewables are already 80% of the total Eskom-coal-related jobs in Mpumalanga today. Yet more jobs will be added when the batteries, gas and hydrogen power stations that will be needed to balance variable wind and solar supply are included. In addition, Eskom’s coal stations are also not entirely removed in this scenario, not even in 2050. In addition, the opportunity to attract renewables manufacturing will be significant, once South Africa has a consistent and large build-out programme in place. As with the generators, that manufacturing could be incentivised to establish shop in Mpumalanga.

The transition from coal to renewables can more than absorb the jobs currently needed in coal, and a pipeline of technically skilled workers will be required. A modest spatial adjustment to the renewables roll-out plans towards the coal region of Mpumalanga would retain the province as an energy province in the long run.

Eskom is one of the few organisations in South Africa with a proven record of developing the technical skills required to operate a large and complex electricity supply industry. Much as the coal-fired power stations themselves can be repurposed to support South Africa’s transition to a low-carbon economy, so should Eskom’s vast training machinery. By doing so, the country will not only have a ready supply of appropriate skills, but the personal risk to coal miners and power-station workers of the transition will be materially reduced, if not eliminated.