South Africa’s electricity tariffs are among the lowest in the world. But, says TREVOR DE VRIES of AEG Power Solutions, should Eskom be granted the 16% increase over the next five years, many businesses will battle to make ends meet, and should therefore look at alternative power sources like solar power.
South Africa’s electricity tariffs used to be among the lowest in the world, but if the national power utility Eskom is granted approval for its request to implement a 16% electricity price hike, the country’s power would soon be among the most expensive in the world.
In October, the parastatal applied for permission to increase the electricity tariff by 16% annually over five years, which will amount to R1 trillion. If the National Energy Regulator of South Africa (Nersa) agrees to it, increases would kick in for Eskom customers from April 2013, and from July 2013 for customers who have their electricity supplied via municipalities.
South Africans have already been subject to tariff hikes from Eskom, and are reportedly paying 142% more than they were in June 2006. Should Nersa accept Eskom’s new request, economists have calculated that the cumulative effect of the tariff increases between 2002 and June 2017 would amount to a 580% increase.
These additional increases would be the tipping point that will cause many local businesses to go under. Such sky-high prices will most certainly also be a deterring factor that will prevent international companies from investing in South Africa. To add even further insult to injury, Eskom is proposing these hikes to cover its operational costs at its rapidly ageing power plants, and to fund the construction and completion of new coal-fired power stations which are notoriously noxious polluters and a leading cause of smog, soot, acid rain, and other toxins that are harmful to health and the environment.
The time is therefore ripe for South Africans especially business owners to seriously consider switching to alternative sources of power, such as solar, advises de Vries. A few years ago, renewable power was prohibitively expensive, but advances in technology have reduced the production costs of solar power in particular. Now, with these increases on the horizon, solar is even more cost-efficient comparative to coal-powered energy.
The question is at which point we reach parity in the cost of solar power versus the cost of traditional power. At that point, it makes infinitely more sense to invest in solar. We’re almost there, as the continuing rate hikes by Eskom push the price of coal-powered electricity close to the price of solar-powered electricity. And with the Demand Management programme, where Eskom provides rebates for companies that save energy, there’s no other way to look at it but that the way of the future is renewable energy and solar in particular.
It is cost-effective, not just in terms of savings in the long term, but because consumers can actually generate income from it too. Not only do consumers of solar power take some of the load off Eskom’s national grid which is already under strain to keep up with demand but the excess solar power they do not use can be sold back to the utility. Being able to access power at its source and provide the energy required to power industry is a no-brainer. With the abundance of sunshine in South Africa, it provides a very good business proposition.
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