One notices that aspirant independent and alternative power generators are not only willing to add generating capacity to the SA grid, but are willing to do so at prices per kilowatt hour (KWH) that are little above the regulated prices offered to Eskom. As encouraging, is that there would appear to be no lack of foreign and domestic capital to fund these projects designed to add to capacity or to replace Eskom as the economic supplier.
This makes an important point. It is not a lack of capital that constrains SA economic growth. Global capital has never been more abundant or indeed cheaper. The constraint is the lack of growth itself that reduces the expected return on capital and so the incentive to invest more capital in SA projects. Clearly the energy sector at current wholesale prices for electricity is an attractive investment destination.
Hence the energy regulator Nersa must have set prices high enough, despite all of Eskom’s protestations to the contrary. Clearly also, at current prices, there is no reason to have to depend on Eskom to add further generating capacity and for the government to have to borrow on its behalf or what comes to the same thing – to guarantee more of Eskom debt at the cost of its credit rating. The private sector has demonstrated it is willing to build and fund all the electricity South Africans would be willing to buy at current prices, adjusted for inflation. Eskom is to receive an extra 8% a year per KWH for the next four years.
The latest entry to the ranks of alternative suppliers of electricity is ArcelorMittal, which sees an opportunity to reduce its considerable energy costs at its Saldanha Steel Plant by generating its own, using imported gas as its feedstock. Its economics depends on selling 600 of the 800 planned Megawatt capacity to the grid – ie to Eskom, which may not be enthusiastic about the idea.
A more obvious customer would be the City of Cape Town which might well be able to negotiate a below Eskom price for a guaranteed takeoff. The City officials tell me (with perhaps a typical lack of enthusiasm for innovation) that the law makes such a deal impossible or that somehow Nersa would not allow it. This would mean perhaps that the law is an ass that needs to be turned in a different direction. Nersa surely would have no objection to wholesale electricity prices below regulated levels?
Or, perhaps, such reactions reveal that the electricity sector has yet to come to terms with the reality that Eskom’s regulated prices are not too low to discourage additional capacity building, but are in fact more than high enough to encourage expensive alternatives to coal or gas fired alternatives. And perhaps even so high as to discourage demands for electricity upon which a competitive economy depends. Surely the lower the price of electricity, the better for the SA economy? Or am I missing something?
Good question. But, to start with, rgzoenice that twhatever we do,it will be agradual transition. Electric cars will be on the market before the end of the decade but only a few thousand a year at first and then build up volume over time. So there’s time to build new power generating plants.But there are other options than just large (traditional technology) power plants. To take one example, solar power (I’ll use this because its the one I know best but here are others: wind, tidal, geothermal,etc).In California, more power is already needed and soon. But solar power can supply (estimates) up to 30% of the demand and even more of the peakdemand (that occurs when its hot and sunny when solar is at its most efficient). That’s a BIG chunk of the power requirements. And it has the advantage that it can be buildt quickly installing solar panels takes days, not years and as market demand builds (its already rising rapidly) the scale of new power generation rises with it. Point is, we get the power starting more or less immediately.The real key is going to be developing an infrastructure that “caters” to electric cars the way our oil/gas/service station industry caters to gasoline powered cars now. And that will take time but again, it will be years before we have enough electric cars to matter, so in a sense its a “self-correcting” problem. Someof this infrastructure is already under development. Here’s one model of how some of that infrastructure might work in practice (and, for the sake of arguement, assume its all solar power, weather permitting):You’ve left your car plugged in to recharge sunday afternoon after the family got pack from church. So, Monday morning, its at full charge. But bad news the traffic is a mess, so by the time you get to work, you’re down to half charge. No problem. The owner of the parking deck (enterprising soul) has installed sollar arrays on the roof and plug-ins (with meters to tote up the fees) for customers. You park plug in your car and its recharged long before you get off work. And the rest of the week works pretty much the same. It’s not a 100% solar system but 80% of your power at home and from your car comes from solar panels and while paying for those home solar panels was a push a few years before, they’ve long since returned the investment in lower energy costs. Between that ant the savings on transportation (even the electricity you buy from the parking concession is cheaper than gas used to be) you pay half for energy you did in 2007.Granted, this may take 20 years but that or something similar is the way things are headed. Almost makes you feel sorry for the oil companies. Almost!