The recent request by Eskom to the National Energy Regulator of SA to
increase tariffs by 45% every year for the next three years has been
met with outrage, shock and a flurry of impotent online petitions in a
bid to stop it.
But the price hike is actually good news.
For too long, we've
been spoilt with cheap energy, some of the cheapest in the world. We
are used to paying very little for our power, and if the price
increases as much as expected, we are in for a shock when we get our
electricity bills at the end of each month.
Of course this isn't great, but we are already paying a much higher
price for energy than we think, and we'll be paying even more in the
future.
Essentially, Eskom sell their power for about half of what it costs to
produce, due to a long-standing government policy of under-pricing
power to attract industry into the country.
We are not even close to paying the direct cost of our
coal-based energy. But it is the indirect costs, the immense social and
environmental costs of this power that are missing from Eskom's
tariffs.
The price that Eskom charges does not factor in the cost to our health
and the cost to our environment. Fossil fuels are dirty fuels. Burning
coal and oil pollutes the air, pollutes water and creates health problems. Burning fossil fuels emits carbon and other greenhouse gases and changes the climate of the earth.
Health care costs as a result of the burning of fossil fuels are
immense and will continue to grow exponentially, but it is nothing
compared to the costs associated with climate change. None of these costs are
included in the market price of energy.
By selling electricity at rock-bottom prices, Eskom was actually doing
us a disservice.
They created an immense barrier to entry for
independent power producers and suppliers of renewable, clean energy. No independent producer could compete with Eskom selling their
government-subsidised power at 33c per kilowatt hour (kWh), half of
what it costs to produce. With the tariff increases, the price would
triple to 99c/kWh. And that's still not including the immense social
costs of generating this dirty power.
Eskom chairperson Bobby Godsell said independent power producer
applications, that had been submitted to the energy regulator, place
generation costs between 75c/kWh and 120c/kWh. This indicates that
finally they would be able to compete and provide South Africans with
alternative sources of power.
This low-cost power has also meant that we waste this precious
commodity, we use it incredibly inefficiently and we take it for
granted. South Africa is one of the biggest per capita emitters of
carbon in the world.
Of course the price increase is going to hit us hard, particularly the
poor, and it is going to negatively affect our inflation rate. Eskom
have asked for the free basic electricity grant to increase from 50kWh
a month to 70kWh (apparently the average low-income user uses 80kWh per
month). And Finance Minister Pravin Gordhan factored electricity tariff
increases (of 35% per year) into his mid-term budget on Tuesday, saying that he expected inflation to be 6.3% next year and dropping to
5.7% in 2012.
We need to take a longer term view than just "we shouldn't have to pay
for Eskom's inefficiencies", and see that we are actually still paying
much less than the real cost of power. We need to realise that this
short-term pain has long-term gain.
The tariff hikes pave the way for a real opportunity for change.
With more expensive energy, individuals and businesses are incentivised
to reduce consumption, to use energy more efficiently, to invest in
their own renewable supplies of power and even to move off Eskom's
national grid.
Independent power producers can now generate power at a competitive
cost, especially with renewable energy sources such as solar and wind
(which have negligible hidden or social costs).
According to a new analysis from WWF, the world has just five years to
initiate a low carbon industrial revolution before runaway climate
change becomes almost inevitable. But the good news is that it can be
done and that the long term benefits will be immense.
Billionaire business maverick and founder of CNN, Ted Turner called
clean-energy technology "the greatest business opportunity that the
world has ever seen". It is the new gold rush.
The price increase will hurt us in the short-term, but in the long term
it allows us to move away from Eskom and their inefficient (and
unreliable) production of dirty power.
A move to a low-carbon economy has significant benefits, including
lower healthcare costs, lower air and water pollution, energy security,
job creation and a more stable economy. It could also save humankind
from extinction.
Instead of shaking our fists at Eskom, we should be thanking them for getting us closer to that highly desirable goal!
By Ian Macdonald
