SA’s Energy 2010 – 2012

Last month Eskom announced it would be increasing electricity prices by 45% a year starting in 2010 for the next 3 years. Compounded that increase translates to a 304% hike on top of current prices.

If we take 2008 as a base year that saw an increase of 27%, then 2009 with a 31.3% increase, and then the 45% increase for three years, we will have seen a  staggering 508% increase in total by 2012. This increase is depicted in the graph below with 100 as the original base cost (2008).

The injustice for many is that Eskom can’t implement this increase onto very large industry, like the aluminum smelters, due to contracts put in place that span numerous decades which have fixed very low prices,. This is despite the fact that heavy industry is where the bulk of SA’s energy is consumed. Low income households will also be protected from the increases for obvious reasons so it is the commercial sector, light industry and the high income residential sector that will carry the burden, and tariff hikes will most likely be even larger than expected.

South Africa’s renewable resources rank in the best on the planet because of the intensity of our sunlight, the length of our coastline and the open space we have but currently Eskom has only one plan for power stations and that is our cheap and highly polluting coal..

Eskom’s finances also pose a difficult problem for renewable energy generation as Eskom is the sole buyer of electricity, so instead of investing in a plan that grows the renewable energy sector and feeds clean energy into the grid, they have opted for coal, partly due to it’s cheap expenditure, even though coal power stations will be dinosaurs in the next 20 years. This is unfortunately backed by the Department of Energy. R385 billion is going towards new coal stations and distribution lines in the next five years funded mostly by the state (tax payers) when their expansion and supply plans, like any other business should be funded from the profit of their business.

Renewable energy targets of 10000GWh by 2013 (from the white paper on renewable energy) are unclear as it is hard to establish whether this is per year, or electricity supplied in total. Either way, they are extremely short of the target with approximately 10% currently reached, and they are relying on Independent Power Producers to make up this number. But no Power Purchase Agreements have been signed yet by Eskom and so that hopeless cycle continues.

GCX Energy Engineer, Ken Ross’ take is that Eskom should own and manage the distribution grid and all the stations they have, and that it becomes an open market for Independent Power Producers to supply electricity, either through distributed generation or large scale renewable energy projects. The Independent Power Producers would then pay Eskom a distribution fee and sell direct to customers. This would encourage small scale renewable energy generation and help solve the emissions crisis that Eskom is currently causing.

With everything said and done however, the hikes we face will bring our electricity prices inline with international prices and the only benefit of this is that it will encourage South Africans to operate more efficiently and conserve energy like the rest of the world.