Johannesburg - South Africa would need to double electricity production at an estimated cost of about $44 billion (R282 billion) to support average economic growth of 6 percent a year over a 20-year period, Thulani Gcabashe, the chief executive of Eskom, said yesterday.
The government has appointed a task team headed by deputy president Phumzile Mlambo-Ngcuka to come up with proposals on how to speed up economic growth from 3.7 percent to 6 percent a year.
The government has said it needed to accelerate growth to reduce poverty and unemployment.
Gcabashe said the country would need to build an additional capacity of 40 000 megawatts (MW) - almost equal to Eskom's current installed capacity of 42 000MW - to meet the demand for power that would accompany such growth.
It would cost $44 billion to build 40 000MW of capacity. This was based on the current cost of $1.1 million a megawatt to build a new power station, Gcabashe said.
The new capacity that will be needed to sustain growth of 6 percent a year is in addition to the current expansion programme, which will cost R93 billion.
Eskom estimated that growth of 6 percent a year would result in demand for electricity rising at 4.2 percent a year over 20 years.
If the economy continued to grow at current levels over a 20-year period, electricity demand would on average increase by between 2.2 percent and 2.8 percent a year, Gcabashe said.
Speaking to the media at a presentation on the new multiyear pricing plan, Gcabashe said customers should expect electricity prices to be above he inflation rate to help the company pay for its R84 billion investment programme.
Electricity prices would have to be in line with costs because Eskom was faced with the task of meeting the increasing electricity demand and did not have many options.
If the National Electricity Regulator refused to grant Eskom above-inflation price increases, the power utility would appeal the regulator's decisions and would drop or delay some of its planned projects, Gcabashe said.
Bongani Nqwababa, Eskom's financial director, said the government had agreed that the pricing of electricity should support the planned investment programme, which had also been endorsed by the government.
"Including appropriate price of capital in the price of electricity is essential because it allows regulated entities to remain financially viable, able to borrow at competitive rates," Nqwababa said.
The new system, which would be introduced in April next year, would predetermine prices for three years and would be reviewed only "if reality turns out significantly different from original assumptions".
Gcabashe said Eskom planned to finance about half of the investment from internally generated resources. The utility generates between R12 billion and R14 billion in cash a year.
About 60 percent of the expenditure would go towards generation capacity, and the rest would be spent on upgrading the transmission and distribution networks.
Independent power producers, which are expected to start operating in 2008, will produce 30 percent of the country's new electricity generation capacity at a cost of R9 billion.