April 2012

Compound complexity and the need for power deregulation

Doug Kuni, in his presentation at the Free Market Foundation this month, gave a practical demonstration of the difference between a simple and a compound pendulum. The simple pendulum, he points out, was at the heart of the development of the clock, the instrument that made accurate navigation possible. Kuni suggests that the clock tower that began appearing in villages all over Europe, and in particular, its pendulum-driven inner workings, gave rise to the paradigm of the industrial age. Not only did society move towards time-driven routines and rates of pay, but perceptions of organisational control were based on the notion that every pendulum-like action taken by any manager or official would result in an exact and predictable gear-like consequence on every connected wheel in that community.

Eskom too, from its roots back in 1923, has successfully (until recently) operated the South African electricity supply according to the simple pendulum principle. A single operator generates enough energy to meet demand at its power stations; transmits it across a common grid and distributes it to to the local point of need - and because of this centrally-managed process, reliable, inexpensive and abundant energy can be made available.
But things have now changed. Kuni delinks his single pendulum to reveal a three-armed compound pendulum, which he sets in fascinating motion. Added complexity, while much more interesting to watch, results in unpredictability. "The most powerful computers available today can only predict a few seconds worth of a compound pendulum's motion," Kuni points out.

Society has now entered a networking paradigm, he suggests, where a single twitter entry can have widespread and completely unpredictable consequences. Inter-connectivity makes it very difficult to isolate a problem and limit the damage it causes. He cites a cross-grid power outage in the Eastern United States that took two weeks to resolve. In South Africa, with reserve margins low, a major catastrophe at any of the large power stations could cause demand to exceed supply, which would drag the frequency down. While automatic load shedding should kick in to protect the system, it is not inconceivable that this one major event could trip every power station in the county.

The three interacting arms of Eskom's compound pendulum: generation, transmission and distribution, are all currently in unpredictable motion. Any problem in any one area of the network will result in far-reaching knock on effects. "Our system is in very complex territory," Kuni warns. "We neither know nor can we predict when the next failure will happen and, as is the nature of complex systems, when they fail, they fail catastrophically."

The Free Market Foundation (FMF), in response, suggests that free-market economic models are suited to overcoming complexity. Because markets respond organically based on opportunities, complex problems will quickly be overcome as the market adopts substitute technologies or takes over and restructures individual facilities to make them profitable. So, it believes the power crisis can quickly be overcome if market forces are given free rein.

The complexity of our power grid is caused by the combination of interconnectedness and scale, yet the conversations relating to additional generation capacity all assume that the ‘interconnected-grid' is paramount. Baseload capacity is seen as the fundamental problem, which inevitably steers spending decisions towards coal or nuclear power plants and away from any dependence on baseload-unfriendly renewables, ie, towards increased complexity. But there was a simpler time, before Eskom, when mines, municipalities, farms and households used to have to take care of all of their own electricity needs and this is still not uncommon in communities across Africa.

It is difficult to imagine a long-term solution to our power woes emerging from a super-SOE. Instead of attempting to solve all of the problems on the current grid, wouldn't it be better to allow private participation at all levels, to effectively meet as much local demand as possible using off-grid options? Is it not now time for South Africa as a country to reduce its dependence on Eskom and the state? Every new off-grid installation, big, small, renewable or fossil-fired, will reduce complexity, help to increase security of supply, and improve the reliability of the connected grid.

It is government, however, that holds the key to allowing this to happen. As is evident from the excitement generated by the DoE's Renewable Energy Procurement programme, indications are that a lot of private developers would invest in power should legal mechanisms be put in place to properly accommodate ‘willing buyer, willing seller' principles.

We don't need to privatise Eskom, but to avoid compounding our power crisis we do need to break its monopoly. We need deregulation and we need it now.

Peter Middleton