Monday, January 28, 2008

South Africa's Electricity Shortages Causes National Emergency, Says Government

CAPE TOWN 25 January 2008 Sapa


The electricity shortage that has caused repeated rolling power cuts across South Africa over the past fortnight is a national emergency, Public Enterprises Minister Alec Erwin declared on Friday.

"It is the view of Cabinet that the unprecedented, unplanned power outages must now be treated as a national electricity emergency that has to be addressed with the urgent, vigorous and co-ordinated actions commensurate with such an emergency situation," he said.

Briefing the media in Pretoria on what steps government planned to take to address the situation, Erwin called on all South Africans to conserve electricity.

His Cabinet colleague, Minerals and Energy Minister Buyelwa Sonjica, announced details of a power conservation programme for the country, which, she said, would provide an immediate "quick hit" solution to reduce the number of so-called rolling blackouts.

Friday's briefing follows a rising tide of public anger over the power cuts - reported to have cost the economy tens of millions of rands in lost productivity - that have disrupted business around the country over the past two weeks.

Erwin told journalists government had got its timing wrong, and its 2004 decision allowing electricity supplier Eskom to only then start building new power stations "was clearly, in hindsight, too late".

"The underlying problem is a very significant rise in demand [for electricity] particularly over the past few years, resulting from an economy working at full capacity... In a sense, we are the victims of our own success," he said.

Peak demand for electricity in South Africa has reached a level not far below Eskom's maximum output, cutting the utility's reserve capacity to eight percent - almost half of what is considered sufficient to ensure a reliable supply.

Sonjica said government planned to introduce electricity quotas to solve the short-term supply problem.

“We have discussed how quotas will be allocated, who will be exempt from the programme, what incentives and penalties will be in place, when it will start and what legislative enablers we need to have in place for the programme to work,” she said.

The immediate need was to bring the electricity supply system back into balance.

"We need to restore a workable reserve margin in order to alleviate strain on the generation assets and the primary energy supply chain," Sonjica said.

A concept proposal submitted to Cabinet includes quota allocations for various electricity users, penalties and cut-offs, quota trading and flexibility.

The programme is designed to achieve the overall savings target of between ten and 15 percent over time.

To have an immediate saving of eight percent, industrial users would have to use 10 percent less, commercial users 15 percent less, hotels, resorts shopping malls and conference centres 20 percent less, large office buildings, government and municipalities 15 percent less, agriculture five percent less, and residences ten percent less.

Penalties would be given for electricity use above the allocated quota and electricity supply to repeat offenders would be cut off.

An incentive scheme is being established for smaller consumers who exceed the savings targets, while large consumers could trade the unused portion of their quota allocations.

Medium to long-term interventions planned by government include restricting the manufacture of incandescent light bulbs to promote the use of energy-saving compact fluorescent light fittings (CFLs).

"It is projected that 800MW could be saved [nationally] by replacing with CFLs," Sonjica said.

Other plans include the installation of one million domestic solar water heaters over the next three years; fitting so-called "smart metering" systems into homes, which will allow Eskom to remotely manage customer load; and, switching to liquified petroleum gas for cooking.

Sonjica told the briefing that high global demand for coal had caused "some shortage" at Eskom's coal-fired power stations, which produce most of its electricity.

Erwin said the utility was "experiencing serious problems with coal quality and stocks", and warned government would not hesitate to intervene in the market to secure strategic reserves for electricity generation.

It would talk with the mining industry on the matter, but "in the absence of a solution, we will have to invoke the emergency powers that we have", he said.

Responding to questions at the briefing, he said electricity tariffs would increase between 14 and 20 percent next year.

JOHANNESBURG 25 January 2008 Sapa


The power cuts which have almost completely halted nationwide gold and platinum mining will have widespread economic effects, economists said on Friday.

Investment Solutions economist Chris Hart said: "I think there is going to be one irony - that to increase electricity capacity will require the importation of generator machines.

"The gold and platinum industries are going to pay for the
importation of that. The mining industry is a key industry."

"From that point of view the cuts seem... almost a disaster, " he said.

On Friday, there was a nationwide shutdown of most of the country's platinum and gold mines because of power cuts.

AngloGold, Gold Fields and Harmony Gold were some of the major companies only operating emergency facilities, after Eskom told them it could not guarantee a power supply on Friday.

Hart also said the rand was likely to weaken even more than it already had.

He said gold and platinum contributed directly to the trade balance.

"Without the products the deficit will widen significantly."

Hart said he suspected foreign investment already had been and would continue to be affected by the power cuts.

South Africa was seen as a mining country and if it could not supply electricity to the industry it was a "poor reflection".

He said the irony was that the power problem appeared not to be about generating capacity but about maintenance issues.

This made the situation "very difficult", he said.

Eskom needed to adopt a "less haphazard approach to power cuts".

Hart also said the way forward for the industry would be to have a great deal of privatisation, rather than relying on a "monopoly supply".

He said while in some ways, the power crisis was a result of the success of South Africa's previous economic growth; "[Now] we can't progress from what we have achieved".

Chief economist for T-sec Mike Schussler said the situation was a "nightmare".

"Tens of millions of rands a day are being lost," he said,

Mines would not be able to get back up to speed immediately.

The effects of the power cuts were now broadening. Not just the mines but their suppliers and retailers would be affected. Schussler said he had not been approached by so many people for economic advice since September 11.

"My brain is fried. Everyone is up in arms," he said.

"People are very very negative. Negativity in its own right will have an impact on the economy.

"Would you invest in a country whose electricity is not secure? As we lose interest so do foreigners."

Schussler said government needed to spend more time on the power issue that "fighting amongst themselves".

"It's time the blame gets laid on the right people," he said.

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