South Africa warns of electricity tariff hikes until 2015

Energy services company Manoa, Wednesday warned business in South Africa to prepare for a series of steep electricity tariff hikes that is expected to hit the country until 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 billions of Rand.

"The price increase will be quite steep until around 2014/ 2015- - as high as 25 percent -- in order to fund the capital outlay required for increasing South Africa's electricity generation capabilities. After that, the increases are expected to taper somewhat," Manoa director Esmé Bluff said it a statement issued Wednesday.

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

IRP is a long term electricity capacity plan which defines the need for new generation and transmission capacity for the country.

The IRP, driven by the National Energy Regulator of South Africa and Eskom, is the result of a highly consultative process involving various stakeholders, including business, which started earlier this year.

"The IRP has used historical figures regarding electricity usage to arrive at predicted future electricity demand, which would be OK if it weren't that South Africa had experienced rolling black outs in 2008/ 2009," Bluff said.

"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."

According to Manoa, this may mean that South Africa has more of an energy crisis on its hands than the IRP is basing its planning on.

"Whatever the reality is, 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, calling on the services of experienced energy consultants to help determine the best possible course of action for continuing to operate at minimum risk over the next few years," Bluff said.

The IRP's plan for ensuring adequate energy supply over the next few decades includes a mix of nuclear. 25 percent, five potential nuclear power station sites have already been approved; renewable energy sources such as wind and solar 33 percent 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 placed on wind and solar power, consumers can definitely expect to pay more for electricity as these are not exactly cheap technologies," says Bluff. "However, as technology improves, this scenario may change, so it's important that the IRP be flexible enough to change as and when is needed -- not only every two years when it's reviewed," the company statement said.

According to the IRP, electricity prices will more than double over the next 2 years.

All in all, the IRP assumes that businesses are going to become far more energy efficient in the future as it's planning for an overall increase in electricity supply of 15 percent, compared with economic growth that's expected to bump up demand by 30 percent by 2034.

"Companies simply have to wake up to this fact fast or they're going to go out of business - it's that simple," concludes Bluff. "It's also important for smaller businesses to become far more involved in processes such as the IRP as right now as it's only really the interests of large industrial companies that are being properly represented," she added.
(Source:xinhua)