Last week, there was a newspaper article quoting Deputy Finance Minister Nhlanhla Nene as saying that electricity “rationing” was inevitable. The statement has serious implications for this country, its citizens and the economy and deserves to be unpacked.
As things stand, the social partners at the National Economic Development and Labour Council (Nedlac) are deliberating on something called the energy conservation scheme (ECS).
The scheme, which the Department of Energy and Eskom want made mandatory, seeks 10% savings (against a 2006 baseline) form South Africa’s top 500 electricity consumer, which together account for about half of South Africa’s current demand.
It has been described as a “last resort” remedy, or “safety net” in the event of a supply crunch, which some see as increasingly inevitable.
Although Eskom and government have repeatedly stressed that there is no intention of reverting to the damaging policy of rotational load shedding, last use between February and April 2008, they have also warned that the system is out of balance.
In the absence of significant savings and/or the introduction of near-term private power generation, Eskom warns that the supply shortfall could be 6 TWh this year and 9 TWh in 2012/13, with 9 TWh representing the equivalent of Cape Town's yearly consumption, or the capacity of a 1 000-MW-plus power plant.
Therefore, government and Eskom argue that the ECS should be immediately implemented, even if it is not immediately activated.
In other words, they are calling for the framework to be put in place so that it can be deployed rapidly in the case of an emergency. Doing so, they say, would create new disciplines at a company level, whereby firm baselines would be established, and systems would be installed to for monitoring and verification.
Naturally, there is resistance to the move, which has even been dubbed “load shedding by another name”.
But business has also acknowledged that, for such a scheme to be avoided, extraordinary efforts will be required to close the gap.
To my mind, there is little question that the ECS, which incorporates punitive disincentives for those consuming above their baselines, could have negative consequences for investment, growth and employment creation. However, there is also little evidence of an alternative proposal.
Hopefully a rational debate is now under way at Nedlac from which realistic replacements will emerge. I am not overly optimistic, however, and I think that large consumers should probably begin preparing for the worst.