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Category: Energy supply

2024 update: Municipal water & electricity tariff increases vs inflation since 1996

10Aug
by Sean Moolman  
0

In 2021, we published an analysis of municipal water & electricity tariff increases compared to inflation since 1996. 

That analysis revealed a shocking reality: the average price of both water & electricity across the four largest South African municipalities increased about four times faster than inflation.

This was a sad state of affairs in a country where a large part of the population lives in poverty.

The question is: have things improved or deteriorated further since 2021?

To answer this question, we have updated the analysis with data up to 2024. The result is shown in the graph below.

Note: The graph depicts overall average increases for residential consumers – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • Both water and electricity tariffs have increased dramatically faster than inflation over the period 1996 to 2024.
  • In fact, water tariffs have increased even faster than electricity tariffs, despite the electricity tariff increases receiving a lot more negative attention from the press and consumers.
  • Over the period 1996 to 2024, electricity tariffs increased almost 5 times faster than inflation and water tariffs increased almost 6 times faster than inflation.

The unfortunate conclusion is that the unsustainable trend of much higher than inflation increases in the price of water & electricity by municipalities has continued over the past three years.

This is despite continued deterioration in municipal water & electricity infrastructure, leading to an increase in local power failures and water supply disruptions. 

Sources:

  1. See our previous article for methods, assumptions and references: The Price of Water and Electricity in South Africa: A Tale of Two Tragedies.

2024 update: Eskom tariff increases vs inflation since 1988 (with projections to 2026)

10Aug
by Sean Moolman  
0

In 2015, 2017, 2019 and 2022 we published infographics showing Eskom annual tariff increases since 1988 compared to inflation.

Eskom tariffs increased by an eye-watering 18.7% in 2023 and again by a painful 12.7% in 2024. This compares to CPI (Consumer Price Index) increases of 5.9% and 4.9% over the same two-year period.

The graph below shows the Eskom tariffs from 1988 to 2024, plotted against CPI (Consumer Price Index) or inflation over the same period. It also shows projections up to 2026, based on inflation projections and Eskom’s planned applications to NERSA (and assuming NERSA only grants half their requested increase of 36.15% for 2025).

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • In the period from 1988 up to the 2008 electricity crisis, electricity tariff increases did not keep tread with inflation. This was partly due to government policy to keep electricity tariffs as low as possible for poor communities, but also due to Eskom having an oversupply of electricity (in the 1990’s) and not investing in new capacity (in the 2000’s).
  • Between 1988 and 2007, electricity tariffs increased by 223%, whilst inflation over this period was 335%.
  • From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2024, electricity tariffs increased by 937%, whilst inflation over this period was 155%. Thus, electricity tariffs increased six-fold (or SIX times faster than inflation) in real money terms in 16 years.

Eskom plans to apply for another 36.15% increase in 2025, so unfortunately it seems the dramatic increases in electricity prices are likely to continue.

Sources:

  1. Eskom tariffs and charges. Website: https://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_And_Charges.aspx. Last accessed: 2024/08/10.
  2. Stats SA. CPI History. Website: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?.  Last accessed: 2019/10/01.
  3. Bureau for Economic Research. Inflation Expectations – History (2021). Website: https://www.ber.ac.za/BER%20Documents/Inflation-Expectations/?doctypeid=1065. Last accessed: 2021/07/30.
  4. South Africa Inflation Expectations. Website: https://www.resbank.co.za/content/dam/sarb/publications/statements/monetary-policy-statements/2024/january/Statement%20of%20the%20Monetary%20Policy%20Committee%20January%202024.pdf. Last accessed: 2024/08/10.

Image of power lines by Martin Vorel on Libreshot.

2022 update: Eskom tariff increases vs inflation since 1988 (with projections to 2024)

01Aug
by Sean Moolman  
2

In 2015, 2017 and 2019 we published infographics showing Eskom annual tariff increases since 1988 compared to inflation.

Following Eskom’s court order success against NERSA in early 2021, it increased electricity prices by an average of 15.63% in April 2021. In April 2022, a further increase of 9.61% was approved. So what do the numbers look like today?

The graph below shows the Eskom tariffs from 1988 to 2022, plotted against CPI (Consumer Price Index) or inflation over the same period. It also shows projections up to 2024, based on expert forecasts and inflation projections.

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • In the period from 1988 up to the 2008 electricity crisis, electricity tariff increases did not keep tread with inflation. This was partly due to government policy to keep electricity tariffs as low as possible for poor communities, but also due to Eskom having an oversupply of electricity (in the 1990’s) and not investing in new capacity (in the 2000’s).
  • Between 1988 and 2007, electricity tariffs increased by 223%, whilst inflation over this period was 335%.
  • From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2022, electricity tariffs increased by 653%, whilst inflation over this period was 129%. Thus, electricity tariffs increased four-fold (or quadrupled) in real money terms in 14 years.

Considering the current serious state of Eskom’s debt and the fact that the country probably cannot afford for Eskom to fail, consumers can likely expect a continuance of much higher than inflation electricity price increases over the next several years.

In fact, Eskom has already applied to NERSA for a 32% tariff increase in April 2023. It has also applied to NERSA to restructure residential tariffs to ‘reflect cost drivers more accurately’. The restructured tariffs will see two main options for direct Eskom customers – Homepower and Homeflex. 

For the Homepower tariff, the grid connection fee would increase from R218/month to R938/month – this is the charge before you have used a single kWh of electricity!

The Homeflex tariff will introduce time-of-use charges – in other words, the price of electricity will change depending on the time of day. (Time-of-use charges is widespread internationally, and helps to balance grid load by incentivising electricity use outside of peak hours.)

Eskom is in serious need of restructuring – which the government at last acknowledged and announced in 2019. As of October 2022 this restructuring has not yet been completed, but is in progress.

Sources:

  1. Eskom warned its pricing itself out of the market. Website: https://techcentral.co.za/eskom-warned-its-pricing-itself-out-of-the-market/105167/. Last accessed: 2021/07/30.
  2. Eskom tariffs and charges. Website: https://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_And_Charges.aspx. Last accessed: 2022/10/20.
  3. Stats SA. CPI History. Website: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?.  Last accessed: 2019/10/01.
  4. Bureau for Economic Research. Inflation Expectations – History (2021). Website: https://www.ber.ac.za/BER%20Documents/Inflation-Expectations/?doctypeid=1065. Last accessed: 2021/07/30.
  5. South Africa Inflation Expectations. Website: https://tradingeconomics.com/south-africa/inflation-expectations. Last accessed: 2022/10/20.

Image of Lethabo power station by Simisa on Wikimedia Commons [CC BY-SA 3.0]

2019 update: Eskom tariff increases vs inflation since 1988 (with projections to 2022)

25Oct
by Sean Moolman  
1

(Click here for a 2022 update to this article)

In 2015 and 2017 we published infographics showing Eskom annual tariff increases since 1988 compared to inflation.

Following NERSA’s approval of a 13.87% average tariff increase in April 2019, what do the numbers look like today?

The graph below shows the Eskom tariffs from 1988 to 2019, plotted against CPI (Consumer Price Index) or inflation over the same period. It also shows projections up to 2022, based on currently projected increases as approved by NERSA (8.1% in 2020 and 5.2% in 2021), as well as Stats SA and the Bureau for Economic Research’s inflation projections.

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • In the period from 1988 up to the 2008 electricity crisis, electricity tariff increases did not keep tread with inflation. This was partly due to government policy to keep electricity tariffs as low as possible for poor communities, but also due to Eskom having an oversupply of electricity (in the 1990’s) and not investing in new capacity (in the 2000’s).
  • Between 1988 and 2007, electricity tariffs increased by 223%, whilst inflation over this period was 335%.
  • From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2019, electricity tariffs increased by 446%, whilst inflation over this period was 98%. Thus electricity tariffs increased more than four-fold in 12 years.
  • Based on the currently approved increases for 2020 and 2021, the total increase in electricity tariffs from 2007 to 2021 will be 520%. By then, electricity tariffs would have increased more than 5-fold in 14 years.

Considering the current serious state of Eskom’s debt and the fact that the country probably cannot afford for Eskom to fail, consumers can likely expect a continuance of much higher than inflation electricity price increases over the next several years. Eskom is in serious need of restructuring, but this is likely to face strong resistance from the trade unions.

Sources:

  1. Noble B. Eskom Annual Price Increase 2019/20. Website: https://powertime.co.za/online/eskom-annual-price-increase-201920/. Last accessed: 2019/10/01.
  2. Eskom tariffs and charges. Website: http://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_And_Charges.aspx. Last accessed: 2019/10/01.
  3. Stats SA. CPI History. Website: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?.  Last accessed: 2019/10/01.
  4. Bureau for Economic Research. Inflation Expectations – History (2019). Website: https://www.ber.ac.za/BER%20Documents/Inflation-Expectations/?doctypeid=1065. Last accessed: 2019/10/01.
  5. Merten M. Electricity price goes up — way beyond inflation — as Ramaphosa answers questions on Eskom in the House. Daily Maverick, 2019/03/08. Website: https://www.dailymaverick.co.za/article/2019-03-08-electricity-price-goes-up-way-beyond-inflation-as-ramaphosa-answers-questions-on-eskom-in-the-house/. Last accessed: 2019/10/01.

Image of Arnot power station by Gerhard Roux on Wikimedia Commons [CC BY-SA 4.0]

Rise of the Electron Economy

12Sep
by Sean Moolman  
2

The “electron economy” refers to a global shift towards using electricity as the main energy carrier. The term was coined in 2006 by Ulf Bossel, a fuel cell engineer and entrepreneur. In 2007, Michael Hoexter neatly summarized the electron economy concept based on Bossel’s ideas in a blog article that is unfortunately no longer accessible on the internet:

  1. “Electricity, it turns out, is a highly efficient and flexible carrier of energy.
  2. Electric motors are highly efficient energy conversion devices (85 to 95% efficiency vs. 15-25% for typical gasoline engines).
  3. Newer (hydrogen) and older competitors (fossil fuels) to electricity are less efficient and/or have environmental drawbacks.
  4. We already have over a century of experience with electricity.
  5. Renewable energy sources (wind, sun, tides, geothermal heat) can usually most efficiently be converted to electricity rather than to other carriers like biofuels (solar cells, though currently expensive, are up to 400 times more efficient in converting sunlight into energy than plants).
  6. We should focus on transitioning to a largely electric energy infrastructure with the probable exception of fuels for aviation and shipping, where biofuels will have advantages.
  7. Increasing the energy-to-weight ratio and usefulness of electricity storage devices (batteries, etc.) is largely a technical and economic issue that will change for the better, as has been already witnessed in the portable electronics industry. Setting today’s battery capacity as an upper-limit to what can be done with batteries and electricity storage is a political move, not based on reasonable expectations for even modest technological improvements.
  8. Even an economy fueled in part by fossil fuels can be made less environmentally damaging by increased use of electricity as an energy carrier and using electric energy conversion devices like electric motors.Using fossil fuels in highly efficient fuel cells and combined-cycle power plants to generate electricity is second-best to electricity generated by renewable sources but may play transitional roles to a carbon-neutral economy.”

The above seems to be quite prescient today (about 10 years later), in light of the rapid growth in recent years in renewable and electricity storage technologies (such as batteries and fuel cells). You can learn more about the electron economy from a slideshow by Prof. Robert Cormia that you can find here.

The International Energy Agency indicated just last month that it has significantly increased its five-year renewable growth forecast, following a record year for renewables in 2015. For the first time, more than half the new power capacity added globally in 2015 was renewable. Some staggering numbers:

  • About half a million solar panels were installed every day in 2015
  • In China, on average two wind turbines were installed every hour in 2015

The spectacular growth in renewables is partly due to regulation and partly due to the rapidly decreasing cost. It is also driven by commitments to move towards deriving 100% of their energy use from renewables by large corporates such as Walmart and Amazon.

On the electric vehicle front, the 2016 Paris Motor Show confirmed a clear shift towards electric vehicles (EVs) by most major car manufacturers. And in a first for Africa, the City of Cape Town will be adding 11 electric buses to its MyCiti Bus Rapid Transit fleet!

South African-born Elon Musk is also pushing ahead with his bold vision of an electric future, with the recent launch of well-designed solar roof tiles and Tesla’s acquisition of SolarCity.

Even the South African government is starting to feel the winds of change blowing: in a very recent presentation on the latest draft of the Department of Energy’s Integrated Resource Plan, nuclear build is now pushed out to come online only in 2037 (vs the previous 2029), and renewables are given a bigger role. The draft will be published for public comment.

The Department of Energy’s own Ministerial Advisory Committee on Energy recently released a report that indicated that the least cost scenario for South Africa’s future energy production includes NO new nuclear, and mostly renewables with natural gas as peaking capacity. (You can read more on the analysis here, and find a detailed presentation here.)

Here’s to our electric future!

Infographic: Eskom tariff increases vs inflation since 1988 (with projections to 2017)

25Mar
by Sean Moolman  
0

(Click here for a 2021 update to this article)

Recently we learnt that Eskom has requested another 9.58% tariff increase from NERSA for 2015, on top of the 12.69% already approved for this year. More recently, it has emerged that Eskom is requesting what is called a “selective reopener” for 2016 and 2017 as well. In particular, it seems that Eskom is looking for an additional 9% increase in each of 2016 and 2017 – i.e. 17% increases in tariffs in both these years instead of 8%/year.

 

People know the power of compound interest (exponential growth!), and so it is interesting to have a look at where Eskom’s (effectively South Africa’s) electricity tariffs have come from and where they seem to be going.

The infographic below shows the Eskom tariffs from 1988 to 2015, plotted against CPI (Consumer Price Index) or inflation over the same period. It also shows projections up to 2017, based on the additional increases requested by Eskom, and based on SARB’s inflation projections.

Note: The infographic depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

Looking at the graph, the following can be noted:

  • In the period from 1988 up to the 2008 electricity crisis, electricity tariff increases did not keep tread with inflation. This was partly due to government policy to keep electricity tariffs as low as possible for poor communities, but also due to Eskom having an oversupply of electricity (in the 1990’s) and not investing in new capacity (in the 2000’s).
  • Between 1988 and 2007, electricity tariffs increased by 223%, whilst inflation over this period was 335%.
  • From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2015, electricity tariffs increased by 300%, whilst inflation over this period was 45%. Thus electricity tariffs tripled in 8 years.
  • If the additional increase for 2015 (another 9.58% on top of the 12.69% already approved by NERSA) is approved, this will mean that the total increase in electricity tariffs from 2007 to 2015 would be 335%.
  • If the additional increases for 2016 & 2017 (another 9%/yr on top of the 8%/yr already approved by NERSA) are approved, this will mean that the total increase in electricity tariffs from 2007 to 2017 would be 495%, compared to 74% for inflation over the same period. Thus electricity tariffs would have increased 5-fold in 10 years.

We need to keep in mind that SA’s electricity is still not very expensive when compared to the rest of the world or even Africa. E.g. in 2014, Uganda, Namibia and Ghana had tariffs more than double that of South Africa. However, the problem is that the South African economy has structured itself around cheap electricity, and it will be costly to change the way things are done (behaviour) and change over to more energy-efficient infrastructure.

The SAIRR recently published a report projecting that Eskom will have another 18 000 MW supply shortfall by 2030, if our GDP grows by 3%/yr. This is in addition to Medupi, Kusile and Ingula. (See this Fin24 summary of the report.) To add insult to injury, Standard & Poor’s has just downgraded Eskom to junk status.

Considering the above, it is safe to say that we can expect to see over the next several years: (a) a continuation of the current electricity supply shortages (read: load shedding); and (b) higher-than-inflation electricity price increases.  We will all need to start thinking about how we can contribute to reducing demand and minimising the impact of the supply constraints.

Sources:

  1. Eskom Tariffs and Charges. Website: http://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_And_Charges.aspx. Last accessed: 20/03/2015.
  2. Inflation South Africa 2014. Website: http://www.inflation.eu/inflation-rates/south-africa/historic-inflation/cpi-inflation-south-africa-2014.aspx. Last accessed: 20/03/2015.
  3. Packirisamy S. 2015. SARB lowers inflation and growth outlook. Website: http://www.momentuminv.co.za/AssetManagement_Home/SARBlowersinflationandgrowthoutlook.aspx. Last accessed: 20/03/2015.
  4. Central Bank News. South Africa holds rate, but inflation outlook deteriorates. http://www.centralbanknews.info/2015/03/south-africa-holds-rate-but-inflation.html. Last accessed: 26/03/2015.

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