Thursday, 24 January 2008

Power crisis in South Africa – Electricity supplier cannot meet demand

South Africa is in the midst of its worst ever power crisis. Eskom, the country’s electricity supplier – Eskom - has failed to make provision for economic growth and the need for additional power generation capacity.

The government is equally at fault. Warned ten years ago that additional investment would be required, the government decided to do nothing. In the meantime, the government’s silence has been deafening.

While South Africa struggles to live with daily power cuts and grid-locked traffic, Eskom has warned that it will take between five and seven years of infrastructure development to provide the required capacity. It has asked that no major industrial investment take place in South Africa for the next five years. A recipe for economic disaster.

Apart from the inconvenience factor (which is significant) businesses are being crippled by frequent power outages or ‘load shedding’. The situation is tantamount to a national emergency and warrants urgent interventions. Solutions must be found.

Eskom is looking at alternative energy sources. In a country where sunshine is available in abundance, solar power is the first and obvious choice. Eskom has initiated a program to encourage the use of solar heating panels to largely replace the use of electricity for hot water. Eskom will offer a subsidy on the purchase and installation of equipment as well as other incentives to consumers.

The basic idea is sound. Solar powered water heating has the potential to reduce our electricity demand substantially. But there is a major drawback.

Even with the subsidy, the purchase and installation of these units will involve major expenditure by consumers. Take-up of the offer is likely to be much slower than Eskom anticipates.

The root of the problem is therefore in the funding and the rate of take-up of the offer.

If we are serious about finding at least a partial solution to the crisis, then more drastic action is needed.

What if the government were to fund the purchase and installation of solar panels? The options are thereafter to treat the cost as a loan from Eskom to the consumer. The loan can be charged against the electricity bill. A second option is for Eskom to retain ownership of the units and charge a monthly rental to recover some of the cost. While this will represent a major capital outlay by the government which could negatively impact on the budget deficit, the cost of not doing this is horrendous.

A major investment in solar power would be the first step towards finding a short term solution to the crisis. The cost of taking no action is yet to be calculated, but expected outcomes are:
 Reduced economic growth. Maybe economic decline?
 Putting a strain on the tourist industry
 Jeopardising the 2010 World Cup
 Higher unemployment
 Severe social impact of a declining economy

Sometimes a situation warrants drastic action. This is exactly what is called for here.


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