Power consumption falls again
|Published
050910 Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. South Africa will need 20 gigawatts (GW) of new power generation capacity by 2020 and would require double that amount a decade later to meet rising demand, the country's power utility said September 7, 2009. Picture taken July 17, 2009. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS) 050910 Electricity pylons carry power from Cape Town's Koeberg nuclear power plant July 17, 2009. South Africa will need 20 gigawatts (GW) of new power generation capacity by 2020 and would require double that amount a decade later to meet rising demand, the country's power utility said September 7, 2009. Picture taken July 17, 2009. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS)
The volume of electricity consumption decreased by 6.9 percent year on year in February, according to figures just released by Statistics SA.
This is the 12th consecutive month that there has been a decline in electricity consumption. The annualised decline is currently running at about 5 percent. In its multi-year price determination application to the National Energy Regulator of SA, Eskom forecast that demand in the 12 months to end-March would decline by 1.4 percent.
It is impossible to determine what, if any, impact the decline has had on employment. As part of its policy of buying back electricity from its major industrial users, Eskom stipulates that there must be no resultant job losses. However, the consumption declines reported by Stats SA are so substantial that they cannot be fully explained by Eskom’s repurchase programme.
Independent analyst Chris Logan, who has done extensive research on Eskom’s cost structure, told Business Report that the ongoing drop in consumption reflected the extent of the adverse impact that Eskom’s cost structure and availability was having on consumers, both commercial and private.
Logan said that if the current consumption trend continued then the country could soon get back to the level it was at during the darkest period of 2008/09.
He said the February drop in consumption emphasised the dramatic decline in Eskom’s position in the economy. “In 2004 Eskom won the ‘Best Brand in SA’ award from the Sunday Times and in 2000 The Financial Times said Eskom was the best utility in the world.”
While analysts are unable to pinpoint the precise timing and nature of Eskom’s decline, Logan noted that in the financial year to March 2009, the parastatal’s coal costs increased 39 percent to R25 billion from R18bn, although electricity output was down that year. That year’s annual report provided no explanation for the sharp increase in coal costs.
Financial 2009 was the first year that Eskom’s controversial supply contract with BHP Billiton generated operating losses for Eskom.
Calculations done by Chris Yelland of EE Publishing show Eskom was getting 26.7c per kilowatt-hour (kWh) from BHP Billiton in 2008. In that year, Eskom’s operating cost was 19c a kWh. This was the last year Eskom made a profit on the BHP Billiton contract.
A combination of a declining aluminium price and increasing operating costs at Eskom have seen Eskom’s losses on the BHP Billiton contract surge to crippling levels since 2008.
The sharp deterioration in Eskom’s situation in 2008/2009 may have been behind the government’s decision finally to abandon attempts to secure Rio Tinto as an anchor tenant at Coega. That proposal would have seen Rio Tinto set up one of the world’s largest aluminium smelters at Coega, employing just 800 people. The government was offering investment allowances of almost R3.3bn and a tax forfeit of R600 million.