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Demand for Electricity Decreases by 7% in South Africa
14 May 08
South Africa is showing that demand-side management may work, as over the past month the country has seen a 7% fall in electricity demand as it waits on the regulator to approve new tariffs.
Global Insight Perspective | | Significance | South Africa has seen demand for electricity decrease by 7%. | Implications | The fall in demand has meant that Eskom has not been forced to impose load-shedding and is a sign that demand-side management is having an effect. | Outlook | Eskom has stated that it may be forced to reintroduce load-shedding if the nation's energy regulator does not back its demand for a vast increase in tariffs prices, which should be announced in June |
Load-Shedding Stopped The load-shedding in South Africa has stopped with demand for electricity in decreasing by 7% last month, according to Eskom's chief executive officer Jacob Maroga. However, it is too early to say whether South Africa's power-sector crisis has become less intense as supply will remain limited and electricity prices are going to increase steadily. South Africa has set a target of 10% savings, which it is not yet achieving and which has significantly affected large industrial users. In February, when Eskom told mining companies that it might not be able to supply more than 90% of the usual electricity supply for up to four years, a number of firms suspended operations. Eskom has a supply capacity of 36,000MW and had a reserve margin of 6% in 2007, less than one-half of the international norm of 15% and compared with a margin of 25% in 2001. However, the company has received a boost as Reuters reports that the African Development Bank has agreed to lend US$500 million to fund the utility's multi-billion-dollar expansion project. Eskom is currently entering a new phase of power station construction, but new major new capacity is not due onstream for another three years. Outlook and Implications On 6 June, Eskom will find out whether its request for a major increase in tariffs has been approved by the National Energy Regulator of South Africa (NERSA). Eskom supplies around 95% of electricity needs in South Africa and originally requested an increase in tariffs to fund a number of new projects that will boost the country's generating capacity. Eskom's finance director Bongani Nqwababa has previously said that load-shedding would be likely to return if the regulator did not hike prices by the requested amount of 53% and the utility has also stated that a number of planned power plants may not go ahead. Eskom’s long-term expansion plans total around 150 billion rand (US$21.4 billion) up until 2012. The company is planning to add 50% more capacity in the next 10 years—all in all, new generating capacity of 40,000MW is to be added by 2025, estimated to cost around 1 trillion rand. This includes building the first new coal-fired power station in the country for more than 20 years, which will be known as Medupi—a 4,500MW six-pack station, with the first 750MW unit likely to come onstream in 2010-11 and with the last unit scheduled to be commissioned by January 2015. The expansion plans also include the construction of a second nuclear power plant, which will have a capacity of at least 1,000MW and will be located in the southern part of the national grid.
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