Electricity costs: South Africa’s double-edged energy sword
South Africans can expect as much as a 15% increase in their electricity costs from mid-2021. This will mark more than a decade of average annual increases of 14% relative to average inflation of just under 6%. It is these increases in energy tariffs that are driving the growth of alternative energy sources, including solar, wind and energy storage, particularly among large commercial and industrial energy users.
But the growth of renewables, if not managed correctly, might chart a risky course for South Africa’s energy sector. Overall electricity costs of the grid-tied power system could increase, while municipalities who rely chiefly on electricity tariff incomes will increasingly struggle to fund their essential service delivery as companies defect from the grid.
This is according to Jonathan Skeen, General Manager at the SOLA group in Johannesburg, who asserts that Eskom’s sharp escalations in electricity costs have fundamentally changed the economy.
Having impacted both the affordability and availability of electricity for poor South Africans and put pressure on struggling manufacturing and mining sectors, the increases have also occurred in parallel to decreasing grid reliability, with 2020 already shaping up to be the worst year on record for loadshedding.
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