Eskom’s standard electricity tariff increased about 12.7% on Monday. At more than double the rate of headline inflation, this was still about half of what Eskom wanted.
The state-owned power utility applied to the National Energy Regulator of SA (Nersa) for electricity tariff hikes of 32% last year and 22.5% this year to bring, as Eskom argued, SA’s electricity prices closer to “cost-reflective” levels.
Given Eskom’s high expectations, it is likely to continue to seek double-digit tariff increases in the years ahead. Even though huge hikes were not granted, Nersa still approved an 18.65% increase, implemented last year, and this year’s increase.
South Africans thus had to suffer a double blow in these two years by not only having to contend with much higher electricity prices but also having to deal with income losses and higher prices caused by record load-shedding.
Electricity prices for consumers have risen more than 500% over the past 16 years. That amid plummeting reliability of supply. It should provide reason enough for the country to speed up the pace of renewable energy rollout and accelerate the move towards a fully liberalised, competitive electricity trading market.
Australia, which like SA has abundant sunshine and good conditions for wind generation, has experienced rapid expansion of renewable energy generation capacity. About a third of Australia’s electricity generation now comes from renewable energy. The country aims to increase electricity supply from renewables to 82% of national power production by 2030.
Over this period SA is hoping to increase renewable energy in its power generation mix from about 11% to 41%.
At a webinar hosted last week by EE Business Intelligence and UCT’s Power Futures Lab, Bruce Mountain, director of the Victoria Energy Policy Centre, said rooftop solar alone now supplied about 11% of grid-supplied electricity in Australia.
The state of South Australia, which includes Adelaide (Australia’s fifth-largest city), generates about 71% of its electricity from wind and solar.
Rooftop solar, he said, has driven prices down and in some states the typical electricity price is now at zero or close to zero from 10am to 3pm.
The rise of renewable energy has also contributed to the rapid recent fall in wholesale electricity prices in Australia. The Australian Energy Regulator reported earlier this year that the average annual wholesale electricity prices in the National Electricity Market fell 44%-64% in 2023.
These price decreases have, however, not yet resulted in lower electricity bills for consumers. The Australian regulator said the changes in prices will take time to reflect.
It is important to understand why the drop in wholesale prices in Australia is not filtering through, as expected, to consumers, and to take this into account as SA develops its own competitive electricity market.
However, the potential benefit for SA from switching to a renewables-dominated energy mix increases because of the high cost of producing electricity from poorly maintained coal-fired power stations that are inefficient and expensive to run.
Modelling done by researchers at Wits has shown that a renewables-dominated system could result in electricity prices of up to a third less than a coal-fired dominated system.
Unfortunately, SA’s latest round of electricity planning, in the draft Integrated Resources Plan 2023, shows little urgency to pick up the pace of renewable energy procurement and to ensure a least-cost energy mix for the country.
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