Despite tariffs rising by 60% in the past year — and despite load-shedding and the imminent threat of a shutdown on the power grid — South Africa has achieved relatively little in the way of energy savings since our electricity crisis became apparent.
It is thanks mostly to the global recession and its impact on the local economy that the country has made any significant reductions in its electricity demands.
Higher tariffs — prices have been raised twice since South Africa was brought to its knees in January 2008 — have done little to get the country saving electricity, said Andrew Etzinger, general manager for business strategy and integration at Eskom.
Instead, thanks to the economic crisis and its impact on industrial output, the country was able to survive the worst of its energy shortage.
Steel, ferrochrome and aluminium smelters have shut down or reduced their output as commodity prices plummeted — as have mines and manufacturing lines across the country. ‘The crisis had a huge impact on demand, reducing it by 10% between 2008 and 2009,†said Etzinger. ‘But demand is back and trending upwards and these savings are being eroded.â€
Tariffs were raised in December 2007 and again in July 2008 by a total of 27.5% and then again in July 2009 by 31.3%.
According to Etzinger, it is relatively difficult to measure the impact of price on demand, but he said there has been little ‘sign of a reduction in demand†outside the effects of the crisis.
South Africa’s reserve margin, the difference between peak demand and supply, is targeted at 15%, to ensure system integrity. That reserve margin is back at levels of between 5% and 10%.
Large industrial users, which consume about 40% of the available power, saw demand drop by 20% in January, creating an overall 8% drop in demand, according to Etzinger. ‘But now the likes of mines are coming back on line — we cautiously expect them to be back at full production in the first quarter of 2010 — and that will put us under some pressure,†he said.
There are some significant differences between Eskom’s circumstances and what they were in January last year. Coal reserves, for one, are well over 30 days, the technical performance of plants is better and certain units of mothballed power stations have been returned to service.
But Eskom dropped deep into the red to achieve these outcomes, raising serious concerns about the utilities’ financial health. It also faces a funding gap on its R385-billion capital expansion project and is so cash-strapped it has ceased projects to the value of a reported R7-billion, including major renewable projects such as the concentrated solar power project in the Northern Cape.
Following the January 2008 energy crunch large industrial users cut their consumption by 10%. As systems integrity returned, however, the 10% was steadily eroded into April of 2008.
The rationale to conserve power eventually fell away with the emergence of the economic crisis and the crash in commodities, said Etzinger. But with the threat of a shrinking reserve margin, now would be the time to reinstitute the power conservation programme (PCP).
The National Energy Regulator sought public comment on the PCP in February this year, but it has been questioned by large business, not least because entities that exceed their sector specific conservation targets could be hurt by punitive tariffs.
Critics have said that such a programme would only hinder growth and real recovery when it arrives, as power conservation is tantamount to power restriction.
Instead, measures such as co-generation need to be supported, they said, as do independent power producers (IPPs). IPPs have long been champing at the bit to supply the grid with additional electricity.
Government and Eskom, however, are still ‘ironing out†the question of who will pay for the cost recovery of the additional power. The question really is who will meet the cost of the difference between what Eskom sells power at and the rate at which that power is purchased from an IPP.
Government has published regulations on new generation capacity. Etzinger said, however, that a decision on the cost recovery mechanism is ‘imminentâ€, as is a decision on the criteria for the selection of IPPs.
These have to be decided by government to ensure that Eskom is not both player and referee when it comes to selecting its IPPs. In some cases, large users have attempted to become more energy efficient ahead of changes in demand.
Xstrata, which operates large ferrochrome smelters, has introduced technology developed in-house at two of its five smelters that is 25% to 30% more energy efficient than conventional smelting, said spokesperson Songezo Zibi.
Nevertheless, industry remains the largest user of the country’s electricity supplies with about 40% of demand coming from big industry. This figure rises to between 50% and 60% when light industry is included.
Domestic users account for about 20% of demand and this usually rises to between 30% and 35% during peak hours. Domestic users have not, however, saved a great deal despite rising tariffs that are set to continue to rise.
But with the largest consumption coming from industry, can changes in behaviour from domestic consumers really achieve the kind of energy savings needed to keep South Africa’s grid healthy?
During peak demand times in particular, Etzinger said that residential customers can certainly make a difference. ‘The 1% or 2% that it adds to the reserve margin is a huge help.â€
Ultimately, before new capacity is installed — project completion is due only in 2016 — South Africa has to become more energy efficient. As it stands the power grid cannot support a growing economy.
