The only way to ensure frugal energy consumption is to hit consumers where it hurts — in the pocket. Here’s what the experts had to say
Moderator: Dr Rob Crompton, regulator primarily responsible for petroleum pipelines at the National Energy Regulator of South Africa (Nersa)
We have a country with a very high unemployment percentage and with lots of poor people and we’ve just spent billions electrifying many of their homes. We have an economy that has a ‘minerals-energy complex”.
If you take [the] statement that ‘prices need to rise dramatically”, yes, it will send signals.
My questions are: will those be shock signals and won’t the prices that we really need cause massive economic restructuring? We know that restructuring is always accompanied by a dip in the economy before it picks up again. Can we accommodate that and won’t there be popular resistance to these market signals and pricing? Won’t the masses oppose the kind of prices that we really need to get that kind of power? In that case, is there not a cheaper, least-cost option?
LJ Grobler, professor in mechanical engineering at the School for Mechanical Engineering, North West University
We definitely need more regulations. People hate regulations, but sometimes you need regulations to protect people from themselves.
I once listened to a guy who worked for the California Energy Commission for many years. He gave very interesting figures on the energy consumption of [refrigerators].
From the 1940s the power of the refrigerator just went up, then around the 1960s it started to level out. After the power crisis in the 1970s the energy use of refrigerators halved, thanks to labelling — new regulations had come in on what refrigerators should use. That’s why we also need regulation.
Is it only regulation or only market forces? We need both and we should all become part of the solution. There are [energy-efficiency] projects out there with returns of 30%, 40% or 50%.
Where on earth can you get that return investing in your core business? Companies are looking at 8% or 10%. We’ve already been doing it — all that we need to do is, as our tariffs increase, accelerate the process of implementation.
Andrew Etzinger, general manager responsible for business strategy and integration for Eskom’s networks and customer services business
We’ve all become complacent about the fact that there’s been no load-shedding. But it’s completely the opposite.
The demand for electricity has steadily increased now from about March. We are now back to where we were a year ago. The 10% reduction [experienced after load-shedding] has been largely eliminated.
We’ve seen most of our large customers coming back to almost full production, which means that we’ll be in much the same situation that we were, capacity and reserve margin-wise, as January 2008. So it’s vital that we really pursue energy efficiency earnestly.
Last January the idea of a power conservation programme (PCP) was put into action between government and the regulator, which would see a form of rationing of power and would attempt to provide a more economically sensible solution to make the best of available power, rather than load-shedding.
Sectoral targets would be developed and we would all be, as with water restrictions, asked to make do with less power to keep businesses going rather than to have the devastating impacts of random load-shedding at times.
Although work was done on the PCP, a decision was taken not to go forward with aggressive implementation because there was no need. Load-shedding was off the table temporarily.
But I think we really need to consider putting the PCP into operation because we can’t take the risk of load-shedding on a daily basis. It’s a controversial view but I really think that, as unpalatable as it seems, there is a risk that we could be in serious trouble if we don’t find a way of making better use of energy.
What we desperately need is future certainty and we’re talking now about a price path. The round of preparation for the multi-year price determination from the regulator calls for a price path, which will give predictability.
Everybody understands that electricity prices will go up, but to what extent? If an industrialist needs to make a decision on whether to make an investment, electricity is a big element.
By giving that price path, even if it’s just for five years, we’ll really be doing the economy a great service.
Ompi Aphane, policy developer, department of energy
We cannot find ourselves out of this mess without dealing with the issue of tariffs and, in particular, the way that tariffs need to rise drastically.
We talk about energy efficiency in the context of shortages of electricity, but irrespective of whether we have enough electricity or not, we should hardwire energy efficiency into our behaviour and the only way we can do that is, yes, regulation.
Ultimately, if we do not hit people’s pockets we will not be able to change people’s behaviour in the immediate term.
We do not have any other option. We’re doing energy efficiency not only because we cannot build more power stations cheaply, so energy efficiency represents a least-cost option for us in the context that we face, but it also is a time issue.
Even with the best of possibilities we would not be able to build more in the time frames available for us compared with what we could do to be able to use energy efficiently. And those are the issues that are in our control.
About two months ago Eskom got a 31% increase and municipalities promptly passed the 31% [to consumers] across the board. What you would have wanted is a situation where you have differentiation in the way you apply the tariff increase.
Keep the poor cushioned from the increase but drastically increase the level to which we recover the cost of providing the service to the industrial customers.
If we don’t do that, we’re not going to protect the poor and we’re not going to be energy efficient. We’re not talking about retaillevel kind of tariffs, we’re talking about wholesale. That’s where we need to send the price signal, then we’ll get the right kind of behaviour.
Terry Markman, council member, the Free Market Foundation
The only way you ever get efficiency in anything is if you allow market forces to apply. If you want markets to operate you definitely must not have political interference — and, I’m afraid to say, we have political interference.
The most important thing you need to have is competition. You need to have freedom into a market. You need to have no barriers. That means deregulation. You need to have a choice of supplier. You need lots of producers.
We have one supplier, we have no competition — users cannot choose. Market forces are not driving South Africa’s energy efficiency, but to solve the problem you’ve got to get them to operate.
We haven’t spoken about the market in terms of how you’re ever going to get it in. I would like Nersa to publish a statement, if this is true, that anybody can sell to anybody else under certain conditions, because we don’t know that.
The moment you can break the Gordian knot of letting people sell electricity without having to go to the regulator, you’re going to start solving the problem.
Your only efficiency is going to come from getting market forces to operate in the long term. I don’t believe the poor should be subsidised by those electricity users who can afford it.
If you’re going to subsidise anything it should be out of general taxation. You should not be misallocating prices.
Just as pensions for the elderly come out of general taxation, any subsidies you want to do should be through a general taxation level.
Crompton
Can energy efficiency save us?
Markman
Energy efficiency will go some way to keeping the prices down but, from what I understand, the prices are much too low and will have to go up.
As they go up people will become more efficient — that’s human behaviour.
Aphane
Energy efficiency is about opportunity cost. It’s cheaper to make an intervention to save the energy than to build the next supply option. It’s the logical thing to do. It’s a no-brainer. We have to be energy efficient, because, if we are not, we’re going to build more expensive options.
Etzinger
The individual who implements energy efficiency benefits from a low electricity bill. By being more efficient you are protecting yourself against more price increases.
But then, obviously, because we’re not paying the full cost of electricity, we’re also assisting our compatriots and other people in business by keeping the overall price low. Simply, we have no choice — it has to work.
Grobler
The question is: how much can we improve energy efficiency and what should we do to improve our efficiency? People talk about 25% efficiency. Is that really realistically possible? How do you do it, physically?
No matter how we look at it, if we don’t change the bulb, nothing happens. That is the issue on which we’re missing the point — we don’t really know how to improve energy efficiency. I can even go further and say we don’t really know what we mean by energy efficiency.