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Steep price hikes key to power plan

Energy services company MaNoa is warning business to prepare for a series of steep electricity tariff increases that is expected to continue until at least 2015.

"According to the Department of Energy’s latest integrated resource plan (IRP), which details the country’s long-term energy generation and usage prospects, the price increases will be used to help fund urgently needed electricity generation projects worth many billions of rand," said MaNoa.

The plan, driven by the National Energy Regulator of SA and Eskom, was the result of a consultative process involving various stakeholders, including business, which started earlier this year.

According to MaNoa’s Esme Bluff, the plan assumes that business and South Africans in general will quickly become vastly more energy efficient.

"However, if this is not the case, the power cuts we’re expecting to begin from next year (and run up until 2016) will be far worse than even the medium-term risk mitigation plan suggests," she added.

"Companies need to be aware of the risk this presents and start doing something about it."

Although Bluff lauded the IRP for its bold move in consulting with a broad range of stakeholders, she expressed concern that the plan, which was thorough in many ways, might be underestimating the extent of the energy crisis.

"The IRP has used historical electricity usage figures to arrive at predicted future electricity demand, which would be okay if it weren’t that South Africa had experienced rolling blackouts in 2008-2009.

"However, the reality is the demand at that time was far higher than Eskom’s ability to supply. That means the real figures — had there been no power cuts — would have been far higher."

Bluff said this may mean that South Africa has a larger energy crisis on its hands than the IRP was basing its planning on.

"The wisest course of action would be for business to immediately start planning for its own power supply in the face of serious power shortages and determining the best possible course of action for continuing to operate at minimum risk over the next few years."

The plan for ensuring adequate energy supply over the next few decades included a mix of nuclear (25% — five potential nuclear power station sites have already been approved), renewable energy sources such as wind and solar (33%) and conventional energy sources (two coal-fired power stations are already in the works, with a possible third to be approved soon).

"With such a great emphasis on wind and solar power, consumers can expect to pay more for electricity as these are not cheap technologies," Bluff noted.

According to the IRP, electricity prices would more than double over the next 20 years.