Free markets are sometimes thought to be better at the “how” of solving problems, rather than “what” the actual problem is to be solved.
Mechanically, free markets are innovative and efficient and offer the consumer choice; in the latter lies the rub. This can lead to market failures due to short-sightedness in decisions regarding externalities that require central distribution networks, big-picture thinking and national interest.
The arrival of rooftop solar in South Africa straddles the government-market axis in a stunning display, showing how markets, consumers and government converge when dealing with problems. It also shows us how bad choices can be good decisions and that the distinction between being a consumer and a voter disappears when an issue has crucial survival value.
The concept of load-shedding feels as if it belongs to a different generation, but it was less than a year ago; this demonstrates the consumer’s ephemeral memory, which can be good or bad, or both at the same time.
Eskom has done a great job of selling a narrative to investors and the public in which they are the heroic saviours. Certainly, the managerial will Eskom displayed when fixing maintenance issues and making difficult hiring and firing decisions is to be applauded. The government can also be credited with bailing Eskom out to the tune of R254 billion, with the effects kicking in just before the elections. Not as much backslapping and congratulations are given to the consumers themselves, who solved a significant part of the problem by consuming less or paying for private solutions.
Household energy mix
The rollout of solar in South Africa’s household energy mix altered the energy landscape. Our national power generation needs have dropped by 5,440MW as of April this year because of this. It was achieved without government instruction, guidance, or tax incentives. The market simply got on with it by shifting supply and demand goalposts as needed.
Consumers like me, fed up with the imminent threat of load-shedding, have adjusted our expectations downwards and are now switching the geyser on for only a few hours at a time. I don’t bathe every day anymore.
In my previous home, I installed rooftop solar. Where I lived, electricity interruptions played havoc with our lives. People switched to gas and petrol generators and started pooling resources in the form of enterprise. Pavement barbecue systems with gas stoves or wood sprang up every night at 18h00 to supplement dinner requirements in the street. In a real way, citizens started to understand that energy from Eskom is not the only way into the future.
More importantly, we grasped that government is not necessarily the best or only route out of a sticky situation. This is both an unsettling and liberating realisation.
Energy experts point out that good household solutions don’t automatically scale up to the national grid level. Furthermore, energy forms that rely on natural mechanisms like the sun or the weather have a disadvantage when compared to more consistent sources of fuel like coal or gas. Renewable energy is expensive to set up as a new infrastructure and has not developed the industrial efficiency of the more established coal-based systems.
Nuanced and complex
Environmental or “green” arguments are also nuanced and complex when renewable energy is discussed. Experts caution that we are headed to a future where the world is littered with “green” solar panels and other waste materials that won’t biodegrade, and that our expectation of solar and wind as more “environmentally friendly” might be romanticised. Solar panels and batteries have a relatively short shelf life still; manufacturers are working hard to solve the issue, but at present we are adding to industrial waste piles as we try to maintain a decent modern lifestyle.
There are no two ways about it, despite the clever marketing, green energy is dirty. To solve one problem, we create two others. That is the price tag of industrialisation. That is the cost of progress and upliftment. It was the same when coal replaced the horse.
Most South African households can’t afford solar, so it remains a first-world answer to a third-world problem. Therein lies its salvation also. The market innovates and explores. When the middle and upper financial classes benefit from technology, the effect can trickle downwards. People who thwarted load-shedding and sustained their business enterprises because of private energy options could afford to keep their staff employed, for instance.
Manufacturers are producing more efficient and affordable products to increase market share. The industry as a whole puts pressure on governments to invest in national solutions. These are the most efficient way to service the lower income groups. This is how markets and governments share opportunities and costs.
Opens the floor
Does it matter that wind and solar aren’t all that we expected? Not really. It opens the floor for competition. That is where the nuclear guys get their opportunity: by offering an alternative that they claim is cleaner, less wasteful, quicker to build and easier to integrate into the grid.
I expect a mix of energy solutions for us in the future, comprising coal-based, nuclear, gas and renewable energy. That is enough choice for consumers and governments to feel hopeful and productive. People often asked me how I justified spending the money on a solar system. It is a calculation that goes beyond the maths of the cost of hot water. The equation is weighted towards the freedom of choosing to stick the kettle on or take a bath when it suits you. You are paying for the opportunity cost of stability.
Load-shedding affected far more than electricity continuity. It threatened the sustainability of the nation. Without power, people feel powerless. A stable energy supply is one of the biggest indicators of the economic growth of a country. We need all hands on deck.
If you have to get a bit dirty on the way to a 5% growth in GDP, then it might be a reasonable price to pay.
[Image: Biel Morro on Unsplash]
The views of the writer are not necessarily the views of the Daily Friend or the IRR. This article was commissioned by the Free Market Foundation
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