The recent request by Eskom to the National Energy Regulator of SA to increase tariffs by 45% every year for the next three years has been met with outrage, shock and a flurry of impotent online petitions in a bid to stop it.
But the price hike is actually good news.
The recent request by Eskom to the National Energy Regulator of SA to increase tariffs by 45% every year for the next three years has been met with outrage, shock and a flurry of impotent online petitions in a bid to stop it.
But the price hike is actually good news.
For too long, we’ve been spoilt with cheap energy, believ it or not- some of the cheapest in the world. We are used to paying very little for our power, and if the price increases as much as expected, we are in for a shock when we get our electricity bills at the end of each month.
Of course this isn’t great, but we are already paying a much higher price for energy than we think, and we’ll be paying even more in the future. Essentially, Eskom sell their power for about half of what it costs to produce, due to a long-standing government policy of under-pricing power to attract industry into the country. We are not even close to paying the direct cost of our coal-based energy.
But it is the indirect costs, the immense social and environmental costs of this power that are missing from Eskom’s tariffs.
The price that Eskom charges does not factor in the cost to our health and the cost to our environment.
Fossil fuels are dirty fuels. Burning coal and oil pollutes the air, pollutes water and creates health problems.
Burning fossil fuels emits carbon and other greenhouse gases and changes the climate of the earth.
Healthcare costs as a result of the burning of fossil fuels are immense and will continue to grow exponentially, but it is nothing compared to the costs associated with climate change. None of these costs are included in the market price of energy.
By selling electricity at rock bottom prices, Eskom was actually doing us a disservice. They created an immense barrier to entry for independent power producers and suppliers of renewable, clean energy. No independent producer could compete with Eskom selling their government-subsidised power at 33c per kilowatt hour (kWh), half of what it costs to produce. With the tariff increases, the price would triple to 99c/kWh. And that’s still not including the immense social costs of generating this dirty power. Eskom chairperson Bobby Godsell said independent power producer applications that had been submitted to the energy regulator place generation costs between 75c/kWh and 120c/kWh. This indicates that finally they would be able to compete and provide South Africans with alternative sources of power.
This low-cost power has also meant that we waste this precious commodity, we use it incredibly inefficiently and we take it for granted. South Africa is one of the biggest per capita emitters of carbon in the world. Of course the price increase is going to hit us hard, particularly the poor, and it is going to negatively affect our inflation rate. Eskom have asked for the free basic electricity grant to increase from 50kWh a month to 70kWh (apparently the average low-income user uses 80kWh per month) and Finance Minister Pravin Gordhan factored electricity tariff increases (of 35% per year) into his mid-term budget on Tuesday, saying that he expected inflation to be 6.3% next year and dropping to 5.7% in 2012.
We need to take a longer term view than just ‘we shouldn’t have to pay for Eskom’s inefficiencies’ and see that we are actually still paying much less than the real cost of power. We need to realise that this short-term pain has long-term gain.
The tariff hikes pave the way for a real opportunity for change. With more expensive energy, individuals and businesses are incentivised to reduce consumption, to use energy more efficiently, to invest in their own renewable supplies of power and even to move off Eskom’s national grid. Independent power producers can now generate power at a competitive cost, especially with renewable energy sources such as solar and wind (which have negligible hidden or social costs). According to a new analysis from the World Wildlife Fund, the world has just five years to initiate a low carbon industrial revolution before runaway climate change becomes almost inevitable. But the good news is that it can be done and that the long term benefits will be immense.
Billionaire business maverick and founder of CNN, Ted Turner called clean-energy technology "the greatest business opportunity that the world has ever seen". It is the new gold rush. The price increase will hurt us in the short-term, but in the long term it allows us to move away from Eskom and their inefficient (and unreliable) production of dirty power.
A move to a low-carbon economy has significant benefits, including lower healthcare costs, lower air and water pollution, energy security, job creation and a more stable economy. It could also save humankind from extinction. Instead of shaking our fists at Eskom, we should be thanking them for getting us closer to that highly desirable goal!
This column was orgininally published on the South Africa The Good News website which can be found at www.sagoodnews.co.za
