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Eskom’s price increases not enough to power SA – 40000MW will be needed by 2030

The devil is in the detail of Eskom’s bid to increase electricity tariffs by 16% every year for the five years between April 2013 and March 2018. The proposal to the National Energy Regulator (Nersa) is to structure the tariffs in a way that makes business and industrial users pay 21%, which then cross-subsidises the poorest consumers.

But the danger is that Eskom’s pricing structure is starting to dictate industrial policy. For example, government’s industrial policy action plan hinges on job creation through a revival of manufacturing. But Eskom’s electricity price trajectory, which has risen from 17c/kWh in 2006 to 60c/kWh in 2012 and is projected to be R1,28/kWh by 2017/2018, is pricing SA out of the market. By 2017/2018, the annual increase Eskom is seeking will mean that 30% of the industrial tariff could be subsidy contributions.

SA will probably require about 29000MW of new power between now and 2030. But about 10900MW of old power capacity will be retired over this time, which means that in fact more than 40000MW of new power capacity needs to be built by 2030. Eskom’s current committed capacity expansion programme, which includes the two new coal-fired power stations Medupi and Kusile, will add 10000MW of new generating capacity to the existing system. This means that, even with contributions from independent power producers (IPP), there is still a clear gap between future needs and committed infrastructure investments.

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