By Thembi Mabhula

The National Electricity Regulator Authority of South Africa (NERSA) has finally granted Eskom a 24,8 percent tariff increase for 2010, 25,8 percent for 2011, and 25,9 percent for 2012. Eskom originally applied for 35 percent increases over a three year period to fund a R385 billion power expansion programme. NERSA has at least successfully managed to grant a lower hike in an effort to minimize the overall negative effect on especially the poor.

According to Economist Gerald Wolman, chairman of Business and Economic Affairs at the Cape Chamber of Commerce, the standard price of electricity will rise to 41,57 c/kWh (cents per kilowatt hour) when the first increase is implemented this year. By 2012, electricity will cost 65, 85 c/kWh (Sapa and Staff Reporters, Cape Argus). NERSA has recommended that municipalities charge an extra 15 percent for 2010/11, then 16 percent for each of the next two years.

Despite the reductions to 24.8 percent, the increase is still high and will have adverse effects and far reaching implications to all South Africans. When the increase is implemented businesses will have to push their prices up. This applies to prices of commodities in general, since electricity is a prerequisite in the manufacturing of goods. The effect of the price increment will impact severely on the poor.

Impact on Employment

The 24.8 percent electricity hike will have a negative impact on employment opportunities, affecting both employers and employees. Businesses have already been hit by the world recession and fuel hikes, the increase of electricity will merely push up inflation. SACCI (South Africa Chamber of Commerce and Industry) estimates that approximately 250 000 jobs will be lost as a consequence, and it will be a factor in CPI [consumer price index] remaining outside the target range (Sapa; Polity.org.za).

Consumers have already suffered the double blow of the global economic recession and the increase of the fuel levy to 32 percent. According to the Eastern Cape Herald, the fuel levy will see a general increase of 10c a litre as well as an additional 7,5c/l to help finance a new petroleum pipeline between Durban and Gauteng. There will be a further 8c/l increase for the Road Accident Fund on petrol and diesel (Janine Oelosfse, Herald).

Impact on Farmers

Farmers are greatly concerned about the electricity price hikes, because it will hit their profits hard and further push up the prices of their products. The effects are likely to force marginal farmers out of production. Farmers in the Southern and Eastern Cape are already battling with the worst drought in a century, with water supplies critically low. The electricity price hikes will hit small to medium enterprises the hardest. According to a Nedbank economist, these are the enterprises that are responsible for a lot of job creation and they were hit hardest by the recession (Sapa; Polity.org.za). On the other hand, the poor have not yet recovered from the impact of the recession, and now the electricity hike adds to their burden.

Impact on the Poor

The poor, just like every other consumer, will have to dig deeper into their pockets. While the poorest in our communities are marginally subsidized in electricity through the indigent policy, it is pretty clear that everything else will be affected, for example food prices and other goods.

The Politics of Electricity

COSATU views the increment as a “betrayal of the poor”. They complained that the hikes were four times above the current rate of inflation. The ANC, on the other hand, has accepted the decision of NERSA. They feel it is at least acceptable as it is vastly different from the 45 percent now pitched at an average of 25 percent, much lower than the 35 percent originally requested by Eskom. They believe alternative means that will assist the communities to survive need to be pursued.

It must be mentioned, though, that the ANC through its investment arm, Chancellor House Holdings, has gained a multi-billion Rand contract to build boilers for Eskom’s Medupi power station. Hitachi Power Africa is currently executing the local content for two power plant orders from Eskom.  The projects comprise 6 x 800 MW Utility Steam Generators for each of the Medupi and Kusile Power Stations in Lephalale, Limpopo Province and Emalahleni, Mpumalanga Province respectively. Hitachi Power Africa (Pty) Ltd, a subsidiary of the German-based Hitachi Power Europe GmbH, was established in late 2005 and is owned by Hitachi Power Europe GmbH (70 percent), Chancellor House Holdings Pty Ltd (25 percent), Makotulo Investments and Services (Pty) Ltd (five percent), (Hitachi Power Africa).

The mere fact that ANC has vested interests obviously puts it in a weaker position to fight for the poor, as it plays referee and player at the same time. What is so ironical is that the ANC claims that its investment in this business venture will help the poor. How are the poor going to benefit from the ANC’s 25%? Looking beyond our borders, South Africa sells electricity to other countries, including Botswana, Mozambique, Namibia, Zimbabwe, Lesotho, Swaziland and Zambia, which amounts to 13 589 GWh. This means that around six percent of Eskom’s total electricity sales go to other countries in Southern Africa. Before implementing the increment, why did our government not consider first of all reviewing these outside deals to sort out domestic pressure?

Exploring Alternative Energy Sources

It is apparent that South Africa is struggling to match its electricity supply to meet the demands of its citizens. The cost of electricity will persistently rise as Eskom is determined to increase the supply of electricity.

The Department of Minerals and Energy in its white paper for 2003, set a target of 10 000GWh of energy to be produced from renewable energy sources (mainly from biomass, wind, solar and small-scale hydro) by 2013 (White Paper on Renewable Energy (2003). This is, arguably, the best way to go. The government needs to invest more into research to find alternative energy sources that are cost efficient and affordable. This route implies that various avenues need to be explored to make use of other energy sources that are non-conventional. Conventional fuels include fossil fuel like petroleum oil, coal, propane, natural gas and nuclear materials such as uranium. Some well -known alternative fuels include biodiesel, bio-alcohol (methanol ethanol, butanol), chemically stored electricity (batteries and fuel cells), hydrogen, non-fossil methane, non-fossil natural gas, vegetable oil and other biomass sources.

Wind Power

Non-governmental organizations such as Afesis-Corplan are already seeking to harness alternative sources of energy as well. The organization is currently awaiting Buffalo City’s go-ahead to put up a wind test mast in the Berlin area as a first step in the implementation of a wind energy project.  The project aims to combine a commitment to generating significant amounts of energy or electricity from a renewable resource (wind), while at the same time contributing towards environmental conservation. Wind energy is one of the most promising new energy sources that can serve as an alternative to fossil fuel-generated electricity. The project aims to demonstrate how a large scale renewable energy project can address the ‘triple bottom line’ of:

1) Environmental sustainability (wind turbines are inherently environmentally sustainable in that they use an abundant resource and do not pollute);
2) Socially sustainable (the project will incorporate a community development component of supporting energy efficiency in low cost housing); and
3) Economically sustainable (The sale of energy will pay for the projects construction costs and on-going management costs and will also assist in financing an introduction of energy efficient technologies to the community.)

Solar Power

Although solar energy is a viable alternative in our country, not much harnessing has been done.  A former Director of Eskom, Johan Smit believes that Solar Roofs are a good alternative worth of consideration. He believes that a 180 m2 of solar roof tiles generates 2160 KWh/month mm or 26 280 KWAh per annum. This would generate cheaper, affordable electricity for all. Solar cell panels (also known as photovoltaic panels) can convert sunlight directly into electrical power.  This can be very handy, because electricity can easily be converted into many forms. 

Electrical power is arguably the most flexible power source since it can operate virtually any type of device, from radio equipment to water pumps, battery chargers to air conditioning. Solar power does of course have its short-comings, the cost and maintenance of the panels could be quite high. Also, at night rechargeable batteries need to provide support. Improvements are being made by scientists and researchers to make solar energy even more cost-efficient.

Biofuels

Biofuel is but one of the alternatives that South Africans have started researching on and have even experimented on. Biofuel is derived from biomass which entails aspects like solid biomass, liquid fuels and biogases. Recent developments with regard to the field of biofuels in South Africa have shown that the Government is very keen to encourage greater activity in this sector.

Biofuel comes from a wide range of sources. DME (Department of Minerals and Energy) expects that biofuels will come from a diverse range of sources. Potential crops include maize and sugarcane to create ethanol, as well as soya beans and sunflower for biodiesel.

As with most Government departments, job creation is a key focus for DME strategy and the Department expects that up to 55,000 jobs, many in the agricultural sector, could be created through the use of biofuels (www.parallaxonline.net/biofuel.html). This will require a significant and comprehensive effort to establish agricultural producers and production plants.

The downside of bio-fuel is that it will tamper with food security and this might seriously affect the supply of food to the poor people. It will create a highly unequal contest between the poor having to compete for the basics on which they live, and the rich who want to burn it to run their cars.

To Conclude

There are still lots of room for South Africa to explore all the avenues at our disposal. For the poor who have to pay significant percentages of their income for household energy costs (for example, heating and cooling), it is important to reduce their energy costs while still enabling them to enjoy decent living conditions.  Energy efficiency measures, like installing solar hot water and insulation, are important in reducing household living costs. Far more attention needs to be given to the renewable energy sector (like wind, solar and biofuel) so as to reduce the costs of these alternatives so and help reduce the current energy generation monopoly of Eskom.  The government also needs to keep its promises and speed up whatever measures are planned along these lines. 

References:
Sapa and Staff Reporters. Cape Argus. 25 February 2010. How Eskom’s hike hits you. Accessed online:Retrieved 16/ 03/2010.
Janine Oelofse. Eastern Cape Herald 10 March 2010. Fuel, power hikes set to hit consumers hard. Accessed online: http://www.theherald.co.za/article.aspx?id=536611. Retrieved 16?03/2010.
About Hitachi Power Africa. http://www.hitachi-power.co.za/en/about-hitachi-power-africa.html: Retrieved 16/03/2010
http://www.dme.gov.za/energy/renewable.stm