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Morris Mthombeni and Albert Wocke

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Read the professors’ business school-style case study before considering the issues raised in the box at the end.

At the end of last year, Dan Marokane became the 12th chief executive of Eskom in the past decade alone. He returned to the embattled South African state-owned utility monopoly, which he had left in 2015, to tackle the tensions between fixing the company to ensure energy security in South Africa and meeting its “just energy transition” commitments to lower emissions.

At COP26, the UN Climate Change Conference in Glasgow, in December 2021, the US, EU, UK, France and Germany pledged $8.5bn to help South Africa shut its coal-fired powered stations. Eskom generates more than 90 per cent of electricity used in South Africa and the Southern African Development Community region, of which 85 per cent is produced from fossil fuels.

Overall, the energy sector contributes 41 per cent of South Africa’s CO₂ emissions, according to the World Bank , earning Eskom the dubious honour of being called “the world’s worst polluting power company” by some environmental groups. Eskom also finds itself at odds with climate activists and academics such as those from University College London and the International Institute for Sustainable Development, who argue that “no more fossil fuel projects are needed as renewable energy sources take up the demand”.

In addition, since 2008, Eskom has struggled with debilitating national blackouts euphemistically known as “load shedding”. These were caused by insufficient generation to meet demand for power as a result of poor management, corruption and bad political decisions. Electricity prices spiked and the lack of power further weakened the South African economy, costing as much as £40mn per day.

The authors

Morris Mthombeni and Albert Wocke are professors at the Gordon Institute of Business Science at the University of Pretoria in South Africa; Professor Mthombeni is also dean at Gibs

During the first half of 2024, the situation appeared finally to be stabilising, following the appointment of Mteto Nyati as Eskom chairman. Nyati had a successful track record in the technology and telecommunication sectors. Marokane, as a new chief executive with a supportive board chair, is also able to draw on his prior experience at Eskom, when he was in charge of generation.

Marokane has cautioned that, while there has been no load shedding for several months, “South Africa is not out of the woods yet”. His strategy includes carrying out extensive maintenance at underperforming coal-fired power stations that had been poorly maintained, and dismissing corrupt or incompetent managers. The turnaround is complicated by a new business model and the need for Eskom to move to cleaner energy production as part of the just transition programme.

Eskom was a vertically integrated business since its inception in 1923 but, in 2019, the South African government began a process of unbundling the company into separate subsidiaries for generation, transmission and distribution. The objective was to tackle the problems that led to load shedding and improve efficiency and transparency, reduce rent seeking, and protect capital providers interests.

The first division to be spun off in July this year was transmission, now an Eskom subsidiary known as the National Transmission Company South Africa, which operates with a separate board and management team. This has the potential to be the most profitable of the subsidiaries and will run the transmission system and buy electricity from multiple generators, not only Eskom. It will eventually provide a platform for generators, consumers, retailers and traders to trade with each other, as happens in a number of other countries. But Marokane might want to push back the timing of the spin-off for two related reasons.

First, Eskom ought to protect its less profitable generation division, currently dominated by fossil-fuel energy sources. In July, Eskom spoke out against government plans to issue licences allowing private generators to sell directly to customers, and to permit the import of energy into South Africa. The company was concerned that applicants would be able to cherry-pick customers, leaving existing small users without the present cross-subsidy from larger consumers.

Second, to meet its carbon emission reduction targets, Eskom must find a way to address a continuing reliance on fossil fuels as the main source of energy in its generation division. The company had pledged at COP26 to reduce emissions from 442mn tons a year to between 350mn and 420mn tons by 2030. Retaining transmission capability within Eskom could help support a sustainable restructure, leading to a better funded just transition plan.

Marokane was confident Eskom would reduce about 71mn tons of CO₂ from generation by 2030, as it aggressively built a renewable energy portfolio. Yet it has failed to repurpose its 63-year-old 1,000MW Komati power station, east of Pretoria — it was finally decommissioned in October 2022.

Owing to the social consequences of the loss of hundreds of jobs at the fossil-fuelled Komati, which were replaced by many fewer focusing on social entrepreneurship initiatives, Marokane described it as an “ atomic bomb scenario in terms of social discord”.

Despite partnering with the South African Renewable Energy Technology Centre and the Global Energy Alliance for People and Planet to redeploy the hundreds of people who lost jobs after the closure of Komati, Eskom has found that the path to a just energy transition is not a smooth one.

Discussion points

See the FT video above, and:

ft.com/eskom-case1

ft.com/eskon-case2

Considering the current strategy to unbundle Eskom into generation, distribution and transmission subsidiaries, how can the company make its generation business comfortably profitable?

Is the organisational restructure a crucial part of Eskom’s plan to achieve its emission reduction targets? If Eskom believed the restructure was unnecessary for it achieve its 2030 emissions reduction targets, could Marokane and his team consider retaining the current structure for the foreseeable future?

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India’s path to net zero 2070 fraught with land access challenges, says ceew study.

Reported By : Srishti Choudhary

Last Updated: September 10, 2024, 18:42 IST

New Delhi, India

The largest RE potential is from solar power and it requires extensive land resources. (Representational image: AFP)

Only 41% of solar potential and 35% of onshore-wind potential are located in areas which have historically not experienced any land conflicts, as per the study

India’s path to the Net Zero goal of 2070 is fraught with challenges in land and water access, a key requirement for scaling up renewable energy across the country, according to a new study led by the New Delhi-based Council on Energy, Environment and Water (CEEW).

As of August 2024, India’s current installed capacity of renewable power has surged to nearly 194 GW – with an additional 5 GW of small hydro. As part of its 2030 Nationally Determined Contributions (NDCs), the country has committed to taking it to 500 GW of installed non-fossil fuel capacity largely driven by solar and wind energy.

But to achieve its long-term goal of Net Zero emissions by 2070, the CEEW estimate reveals that it will need to install over 7,000 GW of RE (5,600 GW solar wind capacity and 1,800 GW wind capacity). While the constraints are relatively manageable up to 1,500 GW, deployment beyond that is fraught with challenges in securing land and water resources and addressing population density.

RE CHALLENGE: IT’S ALL ABOUT THE LAND

The largest RE potential is from solar power and it requires extensive land resources. According to the study, the current distribution of land use will determine whether sufficient land is available for widespread RE deployment. Additionally, the location is crucial, as transmitting power over long distances is not very feasible, as well as the cost of land which will further determine the levelised cost of power.

The study found land conflicts to be a significant impediment. Only about 41 per cent of solar potential and 35 per cent of onshore wind potential are located in areas that have historically not experienced any land conflicts.

In the case of on-shore wind, only 66 per cent of the potential is concentrated in croplands, 27 per cent in rangelands, and only 7 per cent on bare ground – indicating serious challenges in accessing land for large-scale wind generation. Different state-level RE policies are another factor, as there is no standard format for reporting land-related provisions.

“India stands at a pivotal juncture in its energy transition. From land conflicts and population density to the unpredictable but undeniable impact of climate change, every step forward will demand resilience and innovation. The scale of the task ahead is monumental, yet it is precisely this challenge that will define India’s legacy as a country that charts a low-carbon pathway to prosperity against all odds,” said Dr Arunabha Ghosh, CEO of CEEW.

Population density is another factor. Only 29 per cent of onshore wind potential and 27 per cent of solar potential are located in areas with a population density lower than 250 people per square kilometre. However, social conflicts could arise even in areas with low population densities. Other factors like seismic activity and climate risks are less of a concern, as 83 per cent of onshore wind and 77 per cent of solar potential are located in low to moderate-seismic zones.

‘TAP INTO AGRO-VOLTAICS POTENTIAL IN CROPLANDS’

According to the team, one of the solutions lies in exploring the potential of agrivoltaics. Not all of these will be suitable for agrivoltaics. However, even utilising a fraction of the cropland, particularly horticultural areas for generating RE will substantially contribute to national targets and farmer incomes. India had over 28 million hectares of land under horticulture in 2021 with a solar potential of 13,875 GW.

Experts also recommended measures to halt the growth of desertification in states like Rajasthan, which can be detrimental to the development of RE. Over 16,980 square kilometres of land in Rajasthan, with the best RE potential of 832 GW, is desert, the study noted. “Land and water are critical resources for scaling up RE and green hydrogen in India. Prevention of desertification and innovative solutions to address land availability, such as agro-voltaic in horticulture and rooftop solar in dense Indian cities, will be essential. Moreover, as RE projects move into areas with higher climate risks, insurance companies could increasingly hesitate to provide coverage,” said Hemant Mallya, Fellow, CEEW.

ODISHA AND MADHYA PRADESH NEW ‘RE HUBS’?

According to the study, Odisha and Madhya Pradesh can emerge as new states that can bolster India’s RE ambitions with land banks, requisite infrastructure, and seasonality advantage. At present, a large solar potential exists in Rajasthan (6,464 GW), Madhya Pradesh (2,978 GW), and Maharashtra (2,409 GW) at levelised cost of electricity (LCOEs) lower than Rs 2.8 per kWh.

Karnataka (293 GW), Gujarat (212 GW), and Maharashtra (184 GW) have the largest wind potential in India at a levelised cost lower than Rs 3.25 per kWh. Tamil Nadu has a significantly lower cost of generation than other states with a potential of 50 GW at an LCOE lower than Rs 2.65 per kWh, it noted.

The researchers mapped the country’s RE and Green Hydrogen potential by analysing the entire landmass and applying real-world constraints. The study, Unlocking India’s RE and Green Hydrogen Potential, was done by using detailed 5×5 km grid cells to understand what can actually be developed and where.

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