slEconomics has undertaken this review with the purpose of highlighting what we see as some of the more significant issues associated with electricity pricing in South Africa and its impact on the economy.
“Impacts of Electricity Access to Rural SMEs”ijmvsc
This study was intended towards evaluating the impact of electricity availability on the operation and
performance of SMEs in the rural areas of Bangladesh. The results are based on a study from a survey
carried out in two electrified villages in Paikgacha, Khulna. The study detected favorable changes on the
production costs, profit margin, development and modernization of business, women empowerment,
quality of life, and human development due to the electrification. The findings of the paper will help the
stakeholders in number of areas including developing grid electricity services, supporting rural
electrification programs, developing the updated framework for micro enterprise development and also
overall reduction of poverty in the rural and disadvantaged areas of Bangladesh
slEconomics., Electricity sector tariff reforms in Thailand. Stephen Labson 2014Stephen Labson
Under AEC liberalization, Thailand's energy sector is expected to undergo reforms including third party access to transmission and distribution networks and competition in retail segments. This will require unbundling of tariffs within the electricity supply chain.
The document analyzes tariff setting mechanisms for key parts of Thailand's electricity supply industry under AEC, including EGAT generation, EGAT transmission, MEA/PEA distribution, MEA/PEA retail supply, and EGAT single buyer. It recommends a cost of service approach for each, with a hybrid incentive-based regulation/return on assets model for generation, transmission and distribution, and a cost pass-through model for the single buyer and retail supply. The proposals aim
The document discusses opportunities for SK Energy to enter the wind power market in China. It analyzes the market size and growth potential of China's wind industry. Government policies strongly support the development of renewable energy like wind power. The wind power market in China is large but development has been uneven across regions. There is potential for SK Energy to partner with players in the industry to take advantage of opportunities in both developed and developing wind power markets in China.
Eastern Winds examines the frontier of wind power development in Europe. The report deals with the prospects for wind power in central and eastern Europe, tackles financing and provides an in-depth analysis of 12 emerging wind power markets. Eastern Winds is also a tool for decision-makers highlighting bottlenecks, regulatory challenges and providing policy recommendations. The report features: 1- In depth analysis of central and eastern European markets: first wave (Bulgaria, Romania, Turkey, Hungary, Poland) second wave and future markets covering - Power market overview, wind energy sector, supply chain, legal framework, opportunities and challenges. 2- Analysis of the wind power sector’s growth in the region - high growth in the more mature markets but boom and bust effect - and projections up to 2020. 3- Wind energy financing - Requirements of private banks when financing projects in emerging markets, profiles of International Financial Institutions active in the region and EU funding. 4- Policy recommendations
This document provides an ex-post critical evaluation of energy policies in Malaysia from 1970 to 2010. It analyzes key policies through the lens of historical institutionalism, tracing their origins and impacts. The analysis reveals three notable successes: 1) establishing PETRONAS as the national oil company, 2) reducing reliance on oil by growing natural gas production, and 3) creating an oil and gas industry ecosystem. However, dependence on non-renewable resources remains high despite renewable potential. The policies have had mixed results in shaping Malaysia's energy mix.
Assessing the Impact of Tamil Nadu’s Electricity Tariff Policy on TANGEDCO’S ...AurovilleConsulting
This document analyzes the impact of electricity tariff policies in Tamil Nadu on the financial performance of TANGEDCO, the state-owned electricity utility. It finds that TANGEDCO has accumulated significant losses and debt due to several factors, including a tariff structure with cross-subsidies that results in revenue being lower than costs. Energy charges for many consumer categories, especially those designated as "low tension", are below the cost of supply, contributing to TANGEDCO's losses. The existing policies have also led to higher-paying industrial and commercial customers migrating to other states or procuring power from other sources, further reducing revenues and undermining the cross-subsidy system.
Before we kick-off a new line-up of insightful studies and conversations on energy this 2021, we take a snapshot of the previous working papers which were featured last year.
These studies were produced under the Access to Sustainable Energy Programme-Clean Energy Living Laboratories (ASEP-CELLs) project implemented by the Ateneo School of Government (ASOG), and funded by the European Union.
To receive updates on our latest events and publications, please subscribe to our mailing list through this link: http://bit.ly/ASEPCELLsMailingList
Recovery of cost of electricity supply in the nigerian power sectorAlexander Decker
This document summarizes a research study analyzing cost recovery in Nigeria's power sector. The study examined how increases in electricity tariffs through the Multi-Year Tariff Order (MYTO) in 2008 and 2012 affected operational cost recovery, revenue generation, and power generation. The researchers found that while full cost recovery was not achieved in some years, the level of recovery was significant. Revenue increased significantly after MYTO was implemented in 2008. However, increased tariffs did not have a significant impact on power generation. The study recommends setting tariffs to allow private operators to recover costs and make profits when they take over the sector. Efforts should also be made to reduce transmission and distribution losses and ensure regular supply to increase demand.
“Impacts of Electricity Access to Rural SMEs”ijmvsc
This study was intended towards evaluating the impact of electricity availability on the operation and
performance of SMEs in the rural areas of Bangladesh. The results are based on a study from a survey
carried out in two electrified villages in Paikgacha, Khulna. The study detected favorable changes on the
production costs, profit margin, development and modernization of business, women empowerment,
quality of life, and human development due to the electrification. The findings of the paper will help the
stakeholders in number of areas including developing grid electricity services, supporting rural
electrification programs, developing the updated framework for micro enterprise development and also
overall reduction of poverty in the rural and disadvantaged areas of Bangladesh
slEconomics., Electricity sector tariff reforms in Thailand. Stephen Labson 2014Stephen Labson
Under AEC liberalization, Thailand's energy sector is expected to undergo reforms including third party access to transmission and distribution networks and competition in retail segments. This will require unbundling of tariffs within the electricity supply chain.
The document analyzes tariff setting mechanisms for key parts of Thailand's electricity supply industry under AEC, including EGAT generation, EGAT transmission, MEA/PEA distribution, MEA/PEA retail supply, and EGAT single buyer. It recommends a cost of service approach for each, with a hybrid incentive-based regulation/return on assets model for generation, transmission and distribution, and a cost pass-through model for the single buyer and retail supply. The proposals aim
The document discusses opportunities for SK Energy to enter the wind power market in China. It analyzes the market size and growth potential of China's wind industry. Government policies strongly support the development of renewable energy like wind power. The wind power market in China is large but development has been uneven across regions. There is potential for SK Energy to partner with players in the industry to take advantage of opportunities in both developed and developing wind power markets in China.
Eastern Winds examines the frontier of wind power development in Europe. The report deals with the prospects for wind power in central and eastern Europe, tackles financing and provides an in-depth analysis of 12 emerging wind power markets. Eastern Winds is also a tool for decision-makers highlighting bottlenecks, regulatory challenges and providing policy recommendations. The report features: 1- In depth analysis of central and eastern European markets: first wave (Bulgaria, Romania, Turkey, Hungary, Poland) second wave and future markets covering - Power market overview, wind energy sector, supply chain, legal framework, opportunities and challenges. 2- Analysis of the wind power sector’s growth in the region - high growth in the more mature markets but boom and bust effect - and projections up to 2020. 3- Wind energy financing - Requirements of private banks when financing projects in emerging markets, profiles of International Financial Institutions active in the region and EU funding. 4- Policy recommendations
This document provides an ex-post critical evaluation of energy policies in Malaysia from 1970 to 2010. It analyzes key policies through the lens of historical institutionalism, tracing their origins and impacts. The analysis reveals three notable successes: 1) establishing PETRONAS as the national oil company, 2) reducing reliance on oil by growing natural gas production, and 3) creating an oil and gas industry ecosystem. However, dependence on non-renewable resources remains high despite renewable potential. The policies have had mixed results in shaping Malaysia's energy mix.
Assessing the Impact of Tamil Nadu’s Electricity Tariff Policy on TANGEDCO’S ...AurovilleConsulting
This document analyzes the impact of electricity tariff policies in Tamil Nadu on the financial performance of TANGEDCO, the state-owned electricity utility. It finds that TANGEDCO has accumulated significant losses and debt due to several factors, including a tariff structure with cross-subsidies that results in revenue being lower than costs. Energy charges for many consumer categories, especially those designated as "low tension", are below the cost of supply, contributing to TANGEDCO's losses. The existing policies have also led to higher-paying industrial and commercial customers migrating to other states or procuring power from other sources, further reducing revenues and undermining the cross-subsidy system.
Before we kick-off a new line-up of insightful studies and conversations on energy this 2021, we take a snapshot of the previous working papers which were featured last year.
These studies were produced under the Access to Sustainable Energy Programme-Clean Energy Living Laboratories (ASEP-CELLs) project implemented by the Ateneo School of Government (ASOG), and funded by the European Union.
To receive updates on our latest events and publications, please subscribe to our mailing list through this link: http://bit.ly/ASEPCELLsMailingList
Recovery of cost of electricity supply in the nigerian power sectorAlexander Decker
This document summarizes a research study analyzing cost recovery in Nigeria's power sector. The study examined how increases in electricity tariffs through the Multi-Year Tariff Order (MYTO) in 2008 and 2012 affected operational cost recovery, revenue generation, and power generation. The researchers found that while full cost recovery was not achieved in some years, the level of recovery was significant. Revenue increased significantly after MYTO was implemented in 2008. However, increased tariffs did not have a significant impact on power generation. The study recommends setting tariffs to allow private operators to recover costs and make profits when they take over the sector. Efforts should also be made to reduce transmission and distribution losses and ensure regular supply to increase demand.
Assessment of Energy Losses and Cost Implications in the Nigerian Distributio...Dr. Hachimenum Amadi
Energy shortages is the major challenge facing the industrial sector in Nigeria. This paper assessed the energy shortages due to technical losses in the Nigerian distribution network and the cost implications. The study was carried out based on network data collected over the period 2011-2015 from three electricity distribution companies (DisCos) drawn from the three major industrial cities of Nigeria. These data were simulated on the Electrical Transient Analysis program (ETAP) Version 12.6. The calculated energy losses for these cities for the said period are 108,959.87 MWH, 149,256 MWH and 72,743.08 MWH respectively. The corresponding revenue losses are N2,434,164,012, N3,538,754,758.8 and N1,699,751,530.1 respectively. The paper suggested remedial measures to reduce energy losses, mitigate losses arising from unannounced electricity cuts as well as achieve a more efficient and reliable electricity distribution network. The outcome of this research provides a data bank for policy makers and future researchers in the areas of electricity generation, transmission and distribution.
Final proof electricity ijbel vol 2-201308819641377
This document discusses a study examining the causal relationship between electricity consumption and economic growth in six economic corridors in Indonesia from 1984-2010. It provides background on electricity infrastructure and policy in Indonesia, reviews previous literature that has found mixed results on the causal relationship between electricity consumption and GDP in Indonesia, and describes the methodology used in this study, which employs Granger causality tests and error correction models on annual time series data from the six corridors. The key findings were uni-directional relationships between electricity consumption and economic growth in some corridors but not others. The study aims to better inform regional electricity and development policies in Indonesia.
The renewable energy target solar administrative reportLuiz Cruz
The document discusses the progress and developments of renewable energy in Australia in 2016. Some key points include:
- Investment in both small and large-scale renewable energy installations continued strongly in 2016, with increased confidence in the large-scale renewable energy target. Over $4 billion in new renewable energy projects were committed.
- The small-scale renewable energy scheme saw a continued rise in average system sizes, driven by strong growth in commercial solar installations. Overall installation rates were high in the fourth quarter of 2016.
- 2016 saw some new challenges in regulating the renewable energy market as technologies advanced and new business models emerged that were not anticipated when legislation was originally drafted.
- With only a few years until the 2020
Barriers, Drivers and Policy Options For Improving Industrial Energy Efficien...CSCJournals
Energy demand in Pakistan is far greater than its indigenous energy supply, leading to prevailing energy crises in the country. The industrial sector, as one of the largest consumers of energy in Pakistan has significant potential for widespread adoption of energy efficiency measures. However, past policies and plans on energy efficiency have not been widely adopted by the industrial sector of Pakistan. This paper identifies and addresses policy-related implementation and institutional gaps. A questionnaire used to collect data from the target group, selected from concerned government organizations, industry and academics in Pakistan. The results indicates the existence of economic, technical and organizational barriers to industrial energy efficiency and highlights stakeholders opinion about policy tools that can be adopted for promoting industrial energy efficiency in Pakistan. Based on results analysis, the paper explores key barriers and drivers to industrial energy efficiency in Pakistan. The paper also investigates that there is great scope for adoption of voluntary policy tools linked with incentive-based mechanism in energy intensive industries of Pakistan.
ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN SWAZILANDpaperpublications3
Abstract: The issue of causality between electricity consumption and economic growth (GDP) has been a topic concerning energy economists’ for a number of years given that the results have important implications for policy makers. This interest has been stimulated by the persistent increase in the awareness of global warming and climate change. Furthermore, this issue is currently of fundamental importance given the very real threat of global warming and hence the need to cut electricity consumption to reduce emissions to help stem climate change. Renewable energy plays a vital role in economic growth. Energy consumption is, in Africa, one of the mostly consumed capital goods for economic growth realization, and it has nowadays become a need for the society to function properly.
Cointegration relationship betweeCOINTEGRATION RELATIONSHIP BETWEEN ECONOMIC ...aeijjournal
Energy dependent small developing island states are besieged to sustain potential rate of growth. This is
due to increase in energy prices and lack of evidence based policy on long term sustainable energy use.
This paper examines the long run relationship between economic growth, export and electricity
consumption in Fiji over the period 1981-2011. Employing Granger causality test it is found that there is
cointegrating relationship between economic growth, export and electricity consumption. The casual
relationship between the variables was investigated within the error correction model framework. We
found that in the long run causality runs from electricity consumption and export to economic growth.
Based on this empirical analysis some important policy implications are suggested.
A Review of Restructured Power Development and Reform Programme in Indiaijiert bestjournal
The power sector is one of the most important infrastructural aspec ts of the Indian economy. But of late,it has been facing some serious problems such as old worn-out and poor distributi on network leading to frequent outages,skewed tariff structure,huge Transmission & Distribution (T &D) losses largely due to outright theft & unmetered supply,high LT/HT line ratio,overloaded DT/ Lines,lack of accountability at feeder level and in distribution setup of State Electricity Boards (SEBs). Henc e,the Government identified Distribution Reforms as the key area to bring about the efficiency & commerc ial availability into the power sector. The Government took various initiatives in this direction;one of these is the introduction of Accelerated Power Development Programme (APDP) in February,2000. The main objective of thi s programme was to initiate a financial turnaround in the performance of the State owned power sector .
The document provides a political economy analysis of the binding constraints to renewable energy investment in Ghana. It identifies the main constraints as the financial instability of the off-taker, faulty power sector regulation, and lack of access to appropriate finance. Potential policies to address these include privatizing the revenue arm of the power sector, establishing a competitive off-taker market, and creating renewable energy financial instruments. However, stakeholders have differing views on these policies and their implementation faces challenges such as ideological opposition, lack of political will, and concerns over cost increases.
IRJET- The Power of Electricity and it’s Problems in IndiaIRJET Journal
1) The document discusses electricity generation and its role in India's economic development. It highlights how all sectors rely on electricity for basic needs and operations.
2) The major sources of electricity in India are described as hydroelectric, thermal using coal and gas, and nuclear. However, problems have arisen due to delays in projects, financial issues of state electricity boards, and high transmission and distribution losses.
3) While generation capacity has increased significantly over time, gaps remain between targets and achievements. Issues like cost recovery and inefficiencies have also contributed to regular power shortages across the country.
This document discusses India's growing energy needs and the role of renewable energy in meeting those needs. It notes that India's population and economic growth are driving up demand for energy, but the current system relies heavily on fossil fuels and is failing to provide reliable electricity access across the country. The document argues that India needs to shift towards renewable resources like solar and wind to achieve its goals of high economic growth and universal access to energy in a sustainable manner. It assesses India's Renewable Purchase Obligation policy, which requires utilities to source a certain portion of energy from renewables, and finds many states are failing to meet these targets. The document recommends increasing India's national renewable energy target and setting ambitious but differentiated state-level targets tailored
This document summarizes Taiwan's energy sector challenges. Taiwan imports over 99% of its energy needs and relies heavily on fossil fuels like coal and petroleum. This dependence raises issues around energy affordability, environmental responsibility, and energy security. To address these non-market issues, Taiwan is pursuing policies to improve energy efficiency, develop renewable energy, and mitigate energy dependence. However, challenges remain around incentivizing renewable adoption, balancing stakeholder interests regarding nuclear power, and reducing reliance on imports given Taiwan's limited domestic energy resources.
The document provides an overview of the solar energy industry and forecasts for the US solar market. It discusses how solar photovoltaic costs are decreasing and several solar companies expect to reach grid parity by 2015. Conservative forecasts show average US electricity prices reaching 16 cents/kWh by 2015, making solar competitive in many areas. The US Department of Energy's Solar America Initiative aims to achieve grid parity for solar electricity across all sectors by 2015 through research, partnerships and funding to solar companies.
The document summarizes the U.S. Department of Energy's perspective on the trajectory of the U.S. solar market. It predicts that solar energy will reach grid parity and widespread adoption by 2015, driven by declining costs and rising electricity prices. Residential and commercial solar are projected to have lower levelized costs of energy than grid electricity by 2010 in many areas. The DOE's Solar America Initiative aims to achieve this through reducing costs across the solar industry and increasing private investment in solar companies and manufacturing. A temporary shortage in silicon feedstock prices is expected to end by 2010.
This document discusses developments in India's energy sector, including problems and prospects. It provides an overview of India's legislative framework and policies related to different energy sectors such as electricity, coal, oil and gas, renewable energy, and nuclear energy. The key laws and policies are described, including the Electricity Act of 2003, Integrated Energy Policy of 2006, and provisions for renewable energy. The existing institutional structure governing India's energy sector, comprised of four main ministries, is also briefly outlined. In summary, the document analyzes India's energy legislative framework and the structure managing the country's energy development, resources and supply.
Territorial oil disputes, rising fuel prices, nuclear disasters and choking smog levels have brought energy issues sharply into focus in recent years. Opinion polls have highlighted the concerns from all countries about the safety, affordability and sustainable supply of energy. This paper from Ipsos Business Consulting considers the energy challenges facing ASEAN countries up to the end of this decade and how they will shape the region in subsequent years. As the ASEAN economies continue to grow, so too will consumption rates of energy and hence, fossil fuels. This could create further strains on overloaded grids and further pollution in the skies and waterways. Ipsos will consider some the technologies and trends that could help to avert this disastrous scenario.
energy crisis introduction (Autosaved)Faizan Ahmed
- Pakistan has faced chronic electricity shortages since the mid-2000s due to a combination of factors. Demand grew significantly but investment in generation did not keep pace, and existing plants were not upgraded for efficiency. Tariffs were kept artificially low for political reasons, preventing full recovery of costs. This contributed to the problem of "circular debt" where fuel suppliers were not paid due to utility arrears. By 2011, the electricity deficit exceeded 7,000 MW at times and the circular debt had ballooned to over Rs. 500 billion, severely impacting the economy and social stability. Alternative energy sources will be needed to resolve the crisis.
A new report just issued by the New England Coalition for Affordable Energy says New England is at a much greater risk for higher energy costs in the short-term because of lack of new pipelines.
Electricity generation in South Africa is changing, but whether the electricity grid will be able to adapt to these changes is uncertain. This paper presents an alternative frame for the current electricity challenges by focusing on the electricity grid. Using the International Futures forecasting model, the African Futures Project has built three scenarios to 2050 to inform policymakers of the long-term implications of grid decisions. With coordinated planning, improved operational strategies and coherent policies, renewable energy can contribute significantly to the energy mix by 2050, help increase economic growth and benefit all South Africans. These interventions, however, will only be successful if there is a clear plan for the structure of the electricity sector.
Why Policy Matters - Renewable Energy Market Momentum at Risk - June 2015Scott Clausen
The U.S. has implemented policies that have successfully attracted hundreds of billions of dollars in private investment to the renewable energy sector. This investment has enabled rapid scaling of the industry and significant cost reductions. However, continuing uncertainty around policies like the PTC and ITC is jeopardizing future investment and growth in the renewable energy sector by making long-term planning difficult. Extending these policies would provide certainty and allow the U.S. renewable energy momentum to continue.
Eskom is applying for new electricity tariffs for the 2014-2018 period (MYPD3). Key points:
- Eskom needs higher tariffs to cover rising costs of primary energy (especially coal), operating costs, maintaining and replacing aging power plants, and financing new generation capacity.
- The application proposes average annual increases of 13% for Eskom's costs and 3% more to support new independent power producers, for a total average increase of 16% per year.
- The increases are aimed to move tariffs closer to full cost recovery while balancing affordability. Protection for low-income households is proposed through lifeline tariffs and cross-subsidies from larger users.
- The document analyzes the power sectors in Kenya and Uganda, projecting strong growth in electricity demand driven by economic growth targets.
- Peak electricity demand in Kenya is projected to grow at an 11.3% CAGR to 3,163MW by 2020, while Uganda's is projected to grow 8.75% to 948MW.
- Significant potential exists for power sector companies as infrastructure developments, private sector participation, and a shift to renewable energy are expected to reduce costs and improve reliability of electricity supply.
ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN SWAZILANDpaperpublications3
This document summarizes a study on the relationship between electricity consumption and economic growth in Swaziland. It begins by introducing the topic and noting Swaziland's reliance on imported energy. It then reviews literature on the causal relationship between energy use and GDP, finding mixed results. Some studies find energy consumption causes growth, others find growth causes energy use, while some find bidirectional causation. The document outlines the study's methodology, which will use an autoregressive distributed lag model and bounds testing approach to analyze data on Swaziland's GDP, electricity consumption, and other variables from 1980-2010 to determine the relationship.
Assessment of Energy Losses and Cost Implications in the Nigerian Distributio...Dr. Hachimenum Amadi
Energy shortages is the major challenge facing the industrial sector in Nigeria. This paper assessed the energy shortages due to technical losses in the Nigerian distribution network and the cost implications. The study was carried out based on network data collected over the period 2011-2015 from three electricity distribution companies (DisCos) drawn from the three major industrial cities of Nigeria. These data were simulated on the Electrical Transient Analysis program (ETAP) Version 12.6. The calculated energy losses for these cities for the said period are 108,959.87 MWH, 149,256 MWH and 72,743.08 MWH respectively. The corresponding revenue losses are N2,434,164,012, N3,538,754,758.8 and N1,699,751,530.1 respectively. The paper suggested remedial measures to reduce energy losses, mitigate losses arising from unannounced electricity cuts as well as achieve a more efficient and reliable electricity distribution network. The outcome of this research provides a data bank for policy makers and future researchers in the areas of electricity generation, transmission and distribution.
Final proof electricity ijbel vol 2-201308819641377
This document discusses a study examining the causal relationship between electricity consumption and economic growth in six economic corridors in Indonesia from 1984-2010. It provides background on electricity infrastructure and policy in Indonesia, reviews previous literature that has found mixed results on the causal relationship between electricity consumption and GDP in Indonesia, and describes the methodology used in this study, which employs Granger causality tests and error correction models on annual time series data from the six corridors. The key findings were uni-directional relationships between electricity consumption and economic growth in some corridors but not others. The study aims to better inform regional electricity and development policies in Indonesia.
The renewable energy target solar administrative reportLuiz Cruz
The document discusses the progress and developments of renewable energy in Australia in 2016. Some key points include:
- Investment in both small and large-scale renewable energy installations continued strongly in 2016, with increased confidence in the large-scale renewable energy target. Over $4 billion in new renewable energy projects were committed.
- The small-scale renewable energy scheme saw a continued rise in average system sizes, driven by strong growth in commercial solar installations. Overall installation rates were high in the fourth quarter of 2016.
- 2016 saw some new challenges in regulating the renewable energy market as technologies advanced and new business models emerged that were not anticipated when legislation was originally drafted.
- With only a few years until the 2020
Barriers, Drivers and Policy Options For Improving Industrial Energy Efficien...CSCJournals
Energy demand in Pakistan is far greater than its indigenous energy supply, leading to prevailing energy crises in the country. The industrial sector, as one of the largest consumers of energy in Pakistan has significant potential for widespread adoption of energy efficiency measures. However, past policies and plans on energy efficiency have not been widely adopted by the industrial sector of Pakistan. This paper identifies and addresses policy-related implementation and institutional gaps. A questionnaire used to collect data from the target group, selected from concerned government organizations, industry and academics in Pakistan. The results indicates the existence of economic, technical and organizational barriers to industrial energy efficiency and highlights stakeholders opinion about policy tools that can be adopted for promoting industrial energy efficiency in Pakistan. Based on results analysis, the paper explores key barriers and drivers to industrial energy efficiency in Pakistan. The paper also investigates that there is great scope for adoption of voluntary policy tools linked with incentive-based mechanism in energy intensive industries of Pakistan.
ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN SWAZILANDpaperpublications3
Abstract: The issue of causality between electricity consumption and economic growth (GDP) has been a topic concerning energy economists’ for a number of years given that the results have important implications for policy makers. This interest has been stimulated by the persistent increase in the awareness of global warming and climate change. Furthermore, this issue is currently of fundamental importance given the very real threat of global warming and hence the need to cut electricity consumption to reduce emissions to help stem climate change. Renewable energy plays a vital role in economic growth. Energy consumption is, in Africa, one of the mostly consumed capital goods for economic growth realization, and it has nowadays become a need for the society to function properly.
Cointegration relationship betweeCOINTEGRATION RELATIONSHIP BETWEEN ECONOMIC ...aeijjournal
Energy dependent small developing island states are besieged to sustain potential rate of growth. This is
due to increase in energy prices and lack of evidence based policy on long term sustainable energy use.
This paper examines the long run relationship between economic growth, export and electricity
consumption in Fiji over the period 1981-2011. Employing Granger causality test it is found that there is
cointegrating relationship between economic growth, export and electricity consumption. The casual
relationship between the variables was investigated within the error correction model framework. We
found that in the long run causality runs from electricity consumption and export to economic growth.
Based on this empirical analysis some important policy implications are suggested.
A Review of Restructured Power Development and Reform Programme in Indiaijiert bestjournal
The power sector is one of the most important infrastructural aspec ts of the Indian economy. But of late,it has been facing some serious problems such as old worn-out and poor distributi on network leading to frequent outages,skewed tariff structure,huge Transmission & Distribution (T &D) losses largely due to outright theft & unmetered supply,high LT/HT line ratio,overloaded DT/ Lines,lack of accountability at feeder level and in distribution setup of State Electricity Boards (SEBs). Henc e,the Government identified Distribution Reforms as the key area to bring about the efficiency & commerc ial availability into the power sector. The Government took various initiatives in this direction;one of these is the introduction of Accelerated Power Development Programme (APDP) in February,2000. The main objective of thi s programme was to initiate a financial turnaround in the performance of the State owned power sector .
The document provides a political economy analysis of the binding constraints to renewable energy investment in Ghana. It identifies the main constraints as the financial instability of the off-taker, faulty power sector regulation, and lack of access to appropriate finance. Potential policies to address these include privatizing the revenue arm of the power sector, establishing a competitive off-taker market, and creating renewable energy financial instruments. However, stakeholders have differing views on these policies and their implementation faces challenges such as ideological opposition, lack of political will, and concerns over cost increases.
IRJET- The Power of Electricity and it’s Problems in IndiaIRJET Journal
1) The document discusses electricity generation and its role in India's economic development. It highlights how all sectors rely on electricity for basic needs and operations.
2) The major sources of electricity in India are described as hydroelectric, thermal using coal and gas, and nuclear. However, problems have arisen due to delays in projects, financial issues of state electricity boards, and high transmission and distribution losses.
3) While generation capacity has increased significantly over time, gaps remain between targets and achievements. Issues like cost recovery and inefficiencies have also contributed to regular power shortages across the country.
This document discusses India's growing energy needs and the role of renewable energy in meeting those needs. It notes that India's population and economic growth are driving up demand for energy, but the current system relies heavily on fossil fuels and is failing to provide reliable electricity access across the country. The document argues that India needs to shift towards renewable resources like solar and wind to achieve its goals of high economic growth and universal access to energy in a sustainable manner. It assesses India's Renewable Purchase Obligation policy, which requires utilities to source a certain portion of energy from renewables, and finds many states are failing to meet these targets. The document recommends increasing India's national renewable energy target and setting ambitious but differentiated state-level targets tailored
This document summarizes Taiwan's energy sector challenges. Taiwan imports over 99% of its energy needs and relies heavily on fossil fuels like coal and petroleum. This dependence raises issues around energy affordability, environmental responsibility, and energy security. To address these non-market issues, Taiwan is pursuing policies to improve energy efficiency, develop renewable energy, and mitigate energy dependence. However, challenges remain around incentivizing renewable adoption, balancing stakeholder interests regarding nuclear power, and reducing reliance on imports given Taiwan's limited domestic energy resources.
The document provides an overview of the solar energy industry and forecasts for the US solar market. It discusses how solar photovoltaic costs are decreasing and several solar companies expect to reach grid parity by 2015. Conservative forecasts show average US electricity prices reaching 16 cents/kWh by 2015, making solar competitive in many areas. The US Department of Energy's Solar America Initiative aims to achieve grid parity for solar electricity across all sectors by 2015 through research, partnerships and funding to solar companies.
The document summarizes the U.S. Department of Energy's perspective on the trajectory of the U.S. solar market. It predicts that solar energy will reach grid parity and widespread adoption by 2015, driven by declining costs and rising electricity prices. Residential and commercial solar are projected to have lower levelized costs of energy than grid electricity by 2010 in many areas. The DOE's Solar America Initiative aims to achieve this through reducing costs across the solar industry and increasing private investment in solar companies and manufacturing. A temporary shortage in silicon feedstock prices is expected to end by 2010.
This document discusses developments in India's energy sector, including problems and prospects. It provides an overview of India's legislative framework and policies related to different energy sectors such as electricity, coal, oil and gas, renewable energy, and nuclear energy. The key laws and policies are described, including the Electricity Act of 2003, Integrated Energy Policy of 2006, and provisions for renewable energy. The existing institutional structure governing India's energy sector, comprised of four main ministries, is also briefly outlined. In summary, the document analyzes India's energy legislative framework and the structure managing the country's energy development, resources and supply.
Territorial oil disputes, rising fuel prices, nuclear disasters and choking smog levels have brought energy issues sharply into focus in recent years. Opinion polls have highlighted the concerns from all countries about the safety, affordability and sustainable supply of energy. This paper from Ipsos Business Consulting considers the energy challenges facing ASEAN countries up to the end of this decade and how they will shape the region in subsequent years. As the ASEAN economies continue to grow, so too will consumption rates of energy and hence, fossil fuels. This could create further strains on overloaded grids and further pollution in the skies and waterways. Ipsos will consider some the technologies and trends that could help to avert this disastrous scenario.
energy crisis introduction (Autosaved)Faizan Ahmed
- Pakistan has faced chronic electricity shortages since the mid-2000s due to a combination of factors. Demand grew significantly but investment in generation did not keep pace, and existing plants were not upgraded for efficiency. Tariffs were kept artificially low for political reasons, preventing full recovery of costs. This contributed to the problem of "circular debt" where fuel suppliers were not paid due to utility arrears. By 2011, the electricity deficit exceeded 7,000 MW at times and the circular debt had ballooned to over Rs. 500 billion, severely impacting the economy and social stability. Alternative energy sources will be needed to resolve the crisis.
A new report just issued by the New England Coalition for Affordable Energy says New England is at a much greater risk for higher energy costs in the short-term because of lack of new pipelines.
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Economic Impacts of Electricity Price Increases in South Africa, Stephen Labson slEconomics
1. slEconomics
Economics Consulting in Utilities and Infrastructure
Electricity Supply Industry Insights
Dr Stephen Labson - August 2012
2. slEconomics is a boutique economics The author of this review – Dr. Stephen
consulting firm providing specialised Labson, has 20 years experience in
advice to governments, regulators and energy, utility and infrastructure
corporate clients in the area of utilities economics gained through advising
and infrastructure. We are based in governments, regulators and leading
Sydney Australia and have an corporate clients in Australia, Africa,
international network of associates to Asia and the United States
bring global experience to local
initiatives. Dr. Labson earned his PhD in economics
at the University of California at
Berkeley, and has a publication record
Contact us: which includes over 20 articles – many
slabson@sleconomics.com appearing in leading international
+61 412 599 693 journals
www.slEconomics.com
slEconomics Pty Ltd 2
3. slEconomics Pty Ltd has undertaken this review with the purpose of highlighting what we see as some of
the more significant issues associated with electricity pricing in South Africa and its impact on the
economy.
In providing our note on this issue, we have had regard to a substantial body of research carried out by
others, and synthesized selected parts of their analysis so as to highlight what we believe are some of the
fundamental issues and implications at hand. While we have made extensive reference to others’ research
to illustrate the issues we wish to highlight, the views we have provided in this brief note may or may not
reflect the conclusions drawn by the authors of the research we have referenced. The views provided here
are those of slEconomics.
The structure of our note is as follows:
Executive summary
Section 1: Overview – Tariffs and the long term electricity price path
Section 2: Price increases and investment in the ESI – economic impacts
Section 3: The alternative scenario – assessing the impact of reduced power supply and constrained growth
Section 4: Concluding thoughts
slEconomics Pty Ltd 3
4. Crucial decisions will be made on tariffs that will have repercussions for the broader economy
While electricity prices will increase considerably during the course of MYPD 2 they will still not have converged to what many
would consider a sustainable medium to long term price path. For example, the Government’s Integrated Resource Plan 2010-
2030 places its conservative price path well above the levels that will have been reached at the end of MYPD 2.
In the coming year NERSA will need to decide on Eskom’s allowed revenue and average selling price for MYPD 3 .
Whatever the outcome of NERSA’s decision for Eskom’s MYPD 3 – there will be implications for the economy in general
and unique distributional impacts across various subsectors of the economy. There is no ‘business as usual’ option to fall
back on.
Investment in the Electricity Supply Industry
The IRP shows roughly a doubling in installed power generation capacity needed from 2010 to 2030. Even with the price
increases provided for under MYPD 2 further increases will be required if prices are to recover the cost of investment in new
capacity associated with the IRP. This is the case whether investment in the Electricity Supply Industry (ESI) is undertaken by
Eskom or the private sector.
Moreover, Government has stated in its National Development Plan 2030 that “Government has probably reached its limit of
fiscal and guarantee support for Eskom” . If one rules out further Government support for major capital projects in the
ESI,there are two basic options remaining:
Increasing tariffs to cost reflective levels; or
Constraining investment in the ESI and planning for consequential shortfalls in electricity supply.
These are policy choices to be made by South Africa, but there are a number of studies at hand that provide broad insights
into some of the more fundamental economy wide implications of the policy choices at hand.
slEconomics Pty Ltd 4
5. Economic impacts of a shortfall in supply
Our premise has been that if electricity prices are below the cost of supply investment in the ESI will be constrained with a
consequential constraint on energy supply in the long term. Research has been carried out by HSRC that assesses the
economic impact of electricity cuts on the South African economy. While the study was carried out in 2008 and would
not be expected to mirror a particular supply imbalance that might obtain in the future from a reduced capital expansion
plan for the ESI, the assumed 10% cut in electricity output examined in that study provides a reference point to track the
broad impacts on various sectors of the economy. (i.e. HSRC explain their modeling strategy as assuming that there is a
10% fall in electricity output consequent upon a reduction in the capacity of the sector.)
The impact on total output of the economy (i.e. real GDP) from a 10% shortfall in power supply is a reduction of 0.9% (i.e.
-0.9% real GDP) with similar decreases to employment (-1.4%) and household income (-1.2%) . However, we must caution
that these results cannot be directly compared to the results of studies that examine the alternative – electricity price
increases relating to price increases and capital investment as there would be numerous assumptions made that would
vary between the studies. Nevertheless, the HSRC study and other research we have examined does show that the cost
to the economy of a shortfall in energy supply is material – which is what one would naturally expect.
Impact of increasing prices
In reviewing quantitative studies undertaken on the effect of electricity price increases on the South African economy, one
will see that there are numerous and complex linkages to account for, and the findings of these studies provide a
divergent range of results. Nevertheless, in synthesizing the findings of various studies we believe there are a few
consistent and robust conclusions that can be drawn.
slEconomics Pty Ltd 5
6. First, and not surprisingly – output and employment in electricity intensive industries is adversely effected by an increase
in electricity prices all else constant – although perhaps not nearly to the degree that their share of electricity as an input to
production might imply.
▪ However, not all will remain constant if prices remain below cost reflective levels of supply. It seems unlikely to us that
the growth path provided for under the IRP can be achieved in such case, and constrained energy supply will place
limits on the South African economy and the jobs it creates.
▪ Moreover, if the revenue raised from increased tariffs is fed back into the economy by investment in the ESI the
negative impacts on the economy as a whole are significantly reduced, and perhaps reversed in many cases given the
size of the investment programme and the positive impacts it will have on the economy. Nevertheless, further analysis
would be helpful in better understanding the implications at the level of industries and households.
The economic cost of pricing below cost reflective levels
The results of quantitative studies such as those cited by us do not fully measure the real cost to the economy stemming
from prices that are below the cost of supply (e.g. related to inefficient use of electricity, induced adoption of technologies,
mis-allocation of capital, deadweight loss from taxation, etc).
▪ We are not aware of existing studies that fully quantify the types of costs suggested above for South Africa, but given
the magnitude of the issue at hand such costs are likely to be significant. If this part of the equation was fully
accounted for it may very well change a number of the adverse outcomes suggested by existing studies at hand. We
look forward to future research that explicitly addresses this important component of economic analysis.
Finally, as our intent is not to debate the many fine points of the findings of others, we think the fundamental conclusion to
be drawn here is that both theory and practice indicate that the economy wide negative implications of electricity price
increases within the current context are at worst rather small, and perhaps more likely to be positive in the long term as
prices move to cost reflective levels - thereby promoting allocative efficiencies in terms of energy use and capital
investment, and placing the ESI on a sustainable path in which it is able to provide reliable electricity supply for a growing
South African economy.
6
7. Overview – Tariffs and the long term
electricity price path
slEconomics Pty Ltd 7
8. South Africa’s National Energy Regulator (NERSA) has allowed Eskom to increase its standard average price by roughly 25% for
each year of the period covering MYPD 2 (NB. With tariffs increases for 2011/12 subsequently adjusted downward to 16.0 %)
2010/11 2011/12 2012/13
Allowed revenues from tariffs based sales (nominal R’m) 85 180 109 948 130 258
Standard average price (nominal c/kWh) 41.57 52.30 60.66
Percentage price increase (nominal) 24.8% 25.8% 16.0%
Source: NERSA Reasons for Decision Table 1 ,and NERSA RfD March 2012
While prices will increase considerably during the course of MYPD 2 – they will still not have converged
to what many would consider a sustainable medium to long term price path. For example, the
Government’s Integrated Resource Plan 2010-2030 places its conservative price path well above the
levels that will have been reached at the end of MYPD 2.
In the coming year NERSA will need to decide on Eskom’s allowed revenue and average selling price
appropriate for MYPD 3.
Whatever the outcome of NERSA’s decision for Eskom’s MYPD 3 – there will be implications for the
economy in general and unique distributional impacts across various subsectors of the economy. We
explore some of the key issues and implications in the material that follows.
slEconomics Pty Ltd 8
9. Adequate tariff levels plays a crucial role in the long term viability of a regulated business in that it provides the
foundation for investment and growth. The long term implications of this situation are highlighted in terms of
“virtuous and vicious cycles” of returns and investment in essential infrastructure.
Inadequate tariffs Adequate tariffs Adequate tariffs support investment in
the power sector - thus providing a
foundation for growth in the broader
Limiting Low Sustainable Reasonable economy. Strong economic growth
economic industry economic industry then provides ongoing support for
growth returns growth returns
adequate industry returns, and a cycle
of investment and growth to the
Declining Improving
Declining Improving future.
Vicious financial Virtuous financial
reliability of reliability
performanc performanc
supply cycle e
of supply cycle e
Alternatively, inadequate tariffs and
the consequential downgrading of
Limited ability Downgrade Ability to Better
to finance of credit finance credit credit ratings will place a hard
investment rating investment rating constraint on needed investment –
leading to deficient reliability of supply
and thus slowing overall economic
growth. Once in this downward spiral
Source: Adapted by slEconomics from Acil Tasmen 2004 it is difficult to obtain funding and
investment needed to reverse the
course of these actions
10. Government subsidies are often used to fill the gap between the revenue need of a utility and allowed
tariffs. Defining and measuring such subsidies is beset by a number of challenges. However, two
standard definitions applied within the context of the energy sector provide some level of guidance here.
WTO Agreement on Subsidies and Countervailing Measures Government support to Eskom
“Article 1 states that a "subsidy" exists when there is a • R350 billion in loan guarantees
"financial contribution" by a government or public body that • R60 billion subordinated shareholder loan
confers a "benefit". A "financial contribution" arises where: (i) a • A proposed R20 billion equity injection.
government practice involves a direct transfer of funds (e.g.
grants, loans, and equity infusion), potential direct transfers of
funds or liabilities (e.g. loan guarantees); ,,,” (source: Eskom Integrated Report 2011)
IEA Price gap methodology A point of reference:
The IEA defines an energy subsidy as any government action •Eskom average price (inclusive generation , transmission
that concerns primarily the energy sector that lowers the cost and distribution costs ) as of 2012/13 60. 66 c/kWh.
of energy production, raises the price received by energy
producers or lowers the price paid by energy consumers. •Levelised Cost of Electricity (new build) for large base load
pulverized coal plant with FDG* (exclusive transmission and
The latter is measured as the difference between the end user distribution costs ) = 59.1c/kWh
price and a reference price consistent with market outcomes
(i.e. price gap). NB. in looking at this simple comparison, we note that
transmission and distribution costs can add 60% or so to base
generation costs. Of course there are numerous other matters
to consider in a comparative assessment and this is
illustrative only.
Source: EPRI, Power Generation Technology Data for Integrated
slEconomics Pty Ltd Resource Plan of South Africa 10
11. The Government’s IRP sheds further light on
the ‘price gap’ between current (Eskom)
average electricity price and the long term
price path for generation and network costs
(NB. exclusive non-Eskom distribution costs).
Even with the increases provided for in
MYPD2 there will still be a considerable price
gap remaining .
It is not our intent to provide a view on the
exact level at which prices would become
cost reflective and we recognize the debate
over certain assumptions implicit to
INTEGRATED RESOURCE PLAN FOR ELECTRICITY 2010-2030 Revision 2 FINAL REPORT
estimating the price path . Nevertheless, we
think the balance of research clearly indicates
that there is still some way to go before the
price gap is closed.
slEconomics Pty Ltd 11
12. Fiscal constraints Efficient allocation of resources
Generically speaking, taxes might be As noted in a report to National Treasury*
raised to fund the ESI, but this is not “…continued sub-economic pricing (prices below long-run marginal
without its own set of adverse costs) in the industry ironically run the risk of increasing real costs
consequences. in the economy (by reducing allocative efficiency). Furthermore,
sub-economic energy prices benefit energy and capital intensive
However, in regard to funding major growth, and places labour and skills intensive development paths
investments in the ESI, we note the at a disadvantage. Proper economic pricing of power will reverse
recent view of Government in its skewed incentives in the long-term and support South Africa’s
National Development Plan 2030 that primary economic aim, which is to establish labour absorbing
“Government has probably reached development paths”.
its limit of fiscal and guarantee
support for Eskom. “ Further noting:
“Moving to cost reflective prices will save real costs in the
Simply put – the level of funds economy…by encouraging efficient use of energy and capacity
needed by the sector as a whole are (including demand side investments) which, if electricity service is
substantial, and of a magnitude that priced correctly, will be cheaper in real resource terms, than new
has implications for the sovereign. supply capacity…”.
We are not aware of existing analysis that fully quantifies the types of
costs suggested above for South Africa, but given the magnitude of the
issue at hand, such costs are likely to be significant.
slEconomics Pty Ltd * Administered Prices : Electricity : A Report for National Treasury by. Grové Steyn – 2003. 12
13. Price increases and investment in the ESI –
economic impacts
slEconomics Pty Ltd 13
14. In considering cost reflective pricing it is important to understand the various distributional implications of
increased electricity prices in terms of factors such as sectoral output, employment, and household
consumption.
In undertaking such analysis it is important to include the increased Capital
investment in the ESI that will be made possible by moving towards expenditure
cost reflective prices.
Pan-African Investment and Research Services (Pan-African) examined
these two factors both individually and jointly in a study carried out in Price
2011. Impacts of prices and investment are illustrated below. increases
Price impact (only) ESI investment impact (only)
Economy wide impacts from an 24.8% increase in electricity Economy wide impacts from an 18% increase in ESI
price (long term) investment (long term)
Real household consumption -2.37% Real household consumption 1.22%
Aggregate capital stock -1.82% Aggregate capital stock 0.52%
Real GDP -1.03.% Real GDP 0.75%
Average real wage -2.12.% Average real wage 1.05%
Unskilled employment -1.32% Unskilled employment 0.79%
Adapted from Pan Africa page 30 Adapted from Pan Africa
As illustrated here many of the negative economic impacts of price increases are of a similar order of
magnitude as for ESI investment. The net effects are shown on the following page. 14
15. Pan –African estimated the net impacts on key macroeconomic variables from an 18% increase in ESI
capital investment, combined with various levels of electricity price increases.
While the assumed level of investment does not quite off-set the negative impacts of a 24.8% increase in
electricity price, it does largely mitigate these impacts and reverses the outcome for smaller price increases.
Moreover, the assumed level of capex modeled here appears to us a rather lower then planned for, and to
this degree would further off-set the negative outcomes of the 24.8% scenario suggested by Pan-African.
Economy wide net impacts from an increase in price (various scenarios) and 18% increase in ESI investment
(long run)
Electricity price increase 24.8% 15% 10% 8%
Real household consumption -1.15 % -0.03% 0.56% 0.80%
Aggregate capital stock -1.3% -0.44% 0.01% 0.19%
Real GDP -0.28 % 0.22% 0.47% 0.57%
Average real wage -1.07 % -0.06% 0.46% 0.67%
Unskilled employment -0.53% 0.10% 0.43% 0.56%
Adapted from Pan African page 85
slEconomics Pty Ltd 15
16. The modeling carried out by Pan-African is
helpful in tracking the some of the broad
dynamics at hand at a level of sub-
industries.
For example, in the larger price increase
scenario of 24.8%, 17 of the 38 industries
reduce output, but equivalently 21
industries increase output as resources are
reallocated reflecting the change in
relative prices. Of course, aggregate
output (i.e.GDP) was shown to decrease
(and benefits in terms of economic
efficiencies of reducing distortionary price
subsidies are not explicitly accounted for in
this modeling).
Energy intensive industries such as
iron and steel, and non-ferrous metals
are, as one might expect, impacted
the most in terms of output under a
24.8% price increase.
Gold does not appear to be negatively
impacted in this study – and is perhaps
indicative of the anomalies that can
Source: Pan African table D4.3 result from these complex models.
slEconomics Pty Ltd 16
17. The table below is taken from a Deutsche Securities review of tariff increases in South Africa.
We have replicated part of the Deutsche
review to counterpoise the economists’ view
to the banker’s view. We think there are
some broadly consistent themes: for
example –
Even for industries that have large exposure
to electricity costs there are many cases
where those costs can be passed though and
the impact might not in all cases be as
extreme as the relative proportion of
electricity as an input might suggest –
although more rigorous analysis would be
required to adequately assess the impact of
trade exposed industries.
Alternatively, Deutsche’s comments on food
retailers’ exposure to electricity prices (i.e.
refrigeration) leads (us) to think of how cost
reflective electricity prices might further
drive uptake of energy efficient processes
Source: adapted from Deutsche Securities, March 2010 and tecnologies.
slEconomics Pty Ltd 17
18. Key findings from the Pan-African CGE analysis provides a broad indication of the impacts of price increases on output
and employment by sector (NB. ranges reported for min and max of sub- industries in each sector)
Output – long run net effect of a 24.8% increase in Employment – long run net effect of a 24.8% increase in
price and 18% increase in ESI capital expenditure price and 18% increase in ESI capital expenditure
Mining and quarrying: 0.16% to 0.97% (NB alternative Mining and quarrying: 0.28% to 1.62%
modeling by Pan-African finds a negative impact)
Manufacturing: -0.77% to 1.62%
Manufacturing: -1.22% to 0.84%
Agriculture, hunting, forestry and fishing: -0.6 % to – 0.48%
Agriculture, hunting, forestry and fishing: -o.64% to 0.2%
Electricity, gas and water : 0.26%
Electricity, gas and water : - 0.91% to – 0.44%
Transport, storage and communication: 0.62% to 0.02%
Transport, storage and communication: -0.84 %to -0.25%
Wholesale and retail trade: -0.24% to -0.76%
Wholesale and retail trade: -0.48% to 0.4%
Financial services: - 0.53% to 0.02%
Financial services: - 0.88 %to - 0.14%
Community and social services: - 0.88% to 0.14%
Community and social services: - 1.49% to -0.17%
Construction: 0.33%
Construction: -0.06%
Source: Pan African table 4.11 and 4.12 slEconomics Pty Ltd 18
19. The Pan African study illustrates (among many other matters) the linkage between price increases,
investment in the ESI, and economic impacts. Importantly, it demonstrates that if a price increase is
combined with capital investment many of the negative outcomes associated with the price increase
are largely mitigated.
Nevertheless, a 24.8% increase in the price of electricity is found to have a negative impact in terms
of output and employment all else constant. (i.e. ceteris paribus) which is only natural in this type of
economic analysis.
The problem is – all else will not be constant if electricity tariffs do not recover the full cost of supply.
In this case, the relevant point of comparison is the cost to the economy of deficient investment in
the ESI and consequential short fall in future power supplies. This component of the problem is
examined in the section that follows.
slEconomics Pty Ltd 19
20. The alternative scenario – assessing the
impact of reduced power supply and
constrained growth
slEconomics Pty Ltd 20
21. When electricity tariffs are insufficient to cover the cost of investment and government is constrained in its
ability to provide further support for the industry – the options at hand reduces to two broad choices.
• Eskom is in the middle of a significant capacity expansion
Reduced plan – supported with some R350 billion of Government
Increase tariffs investment in the
ESI loan guarantees.
• Government has recently stated that it will not be
able to provide further support to Eskom, and
electricity prices are not at a level that would
provide a return on investment in further capacity
whether undertaken by Eskom or the private
sector.
• However, analysis carried out for the IRP and
elsewhere clearly shows the significant need for
further phases of capacity expansion in the long
term to replace aging facilities and to support
economic growth.
• Unless prices are at a level that supports ongoing
investment in the ESI, real or de facto rationing of
power supply seem inevitable.
slEconomics Pty Ltd 21
22. The Human Sciences Research Council (HSRC) has Impact of a 10% reduction in electricity
undertaken a quantitative study that assesses the output
economic impact of electricity cuts on the South African
economy. Impact on GDP -0.9%
While the study was carried out in 2008 and would not Employment -1.4%
be expected to mirror a particular supply imbalance that
might obtain from a reduced capital expansion plan for Household income -1.2%
the ESI into the future, the assumed 10% cut in
Source: adapted from HSRC table 2
electricity output provides a reference point to track the
broad impacts on various sectors of the economy.
HSRC explain their modeling strategy as assuming that
there is a 10% fall in electricity output consequent upon NB. These results are the ‘best case’ from the
a reduction in the capacity of the sector. HSRC analysis. In this analysis the modeling
necessarily assumes a hypothetical market
The impact on total output of the economy (i.e. real clearing mechanism (we characterize as a
GDP) from a 10% shortfall in power supply is a shadow price) that allocates electricity supply.
reduction of 0.9% (i.e. -0.9% real) with broadly similar
decreases to employment and household income as They also show that administered rationing (e.g.
shown in the table opposite. targeted at sectors such as mining and smelting)
have even greater negative impacts.
slEconomics Pty Ltd 22
23. While there are numerous forward and feedback relationships to consider in fully assessing the economic
impact of a shortfall in electricity supply, some of the more significant relationships are reasonably direct
in effect and often modeled as follows:
Implicit or explicit
rationing of
Reduction in capital electricity (or shadow Industries reduce
Reduction in output of
stock in electricity price of electricity electricity used as an
electricity sector
sector increased) input to production
Increase in industries’
Industries reduce
prices from increased
Less demand for output, in line with
Aggregate impacts input costs (i.e.
output from reduced electricity
(GDP, BOP, wages, shadow price of
industries & consumed and ability
employment etc) electricity and/or
households to use substitute
costly substitution of
inputs
inputs)
slEconomics Pty Ltd 23
24. Reduction in output (and rank) from a 10% reduction in power
supply
HSRC provides a breakdown of some 109
sub sectors. For ease of presentation we
have taken the top 40 sub sectors in
terms reduction of output from the
HSRC study as shown opposite.
The reduction in power supply as
compared to a base case has a
measurable impact on electricity
intensive industries , and due to the
assumption of a 10% decrease in
electricity output ,coal mining and
industries that service electricity
production show a measurable decrease
in output from the base case.
Some 24 sectors of the economy reduce
output by 1% or more.
Source: adapted from HSRC Table 5.
slEconomics Pty Ltd 24
25. To give a better idea of the sector specific implications, HSRC provide their thinking as to some of the
key features of economic adjustment to a shortfall in electricity supply broadly consistent with the
quantitative analysis which we have taken a short excerpt from.
Mining: Adjustments would be difficult and the short-term impact of such a large cut is likely to be the closure of
marginal mines.
Agriculture: There are few significant ways of immediately reducing power use in agriculture, although milling and
some processing could be shifted to off-peak periods. Load shedding is extremely damaging to this already
precarious sector, especially in dairy, poultry and aquaculture.
Motor industry: As motor manufacturing involves ‘jobbing’, a power cut stops production but does not cause
damage. However, motor manufacturing is a major source of exports and relies on timeous delivery.
Food industry: The food and beverage industries involve batch and/or continuous processes. The critical problem
arises where stocks are damaged due to loss of refrigeration. This can have uncertain knock-on effects on agriculture,
and therefore on employment and rural livelihoods.
Chemicals industry: Particularly in continuous processes, power cuts can damage equipment, and certainly cause
delays. In many industries, a two-hour cut results in a disproportionate loss of production due to the need to clear
machinery and re-start processes. This will be the case particularly if machinery is damaged in the process.
slEconomics Pty Ltd 25
26. Other sectors are seen as having relatively more ability to adjust production processes and/or take up
energy savings methods and technologies.
Property: Savings of up to 57% are possible in a 10,000m2 commercial office, and can be achieved quickly. Incentives
would help in this regard. The more critical concern is for the possible delay in building projects.
Retail : As with property, it should not be difficult to achieve a 10% cut in power consumption through simple
changes related to light bulbs or temperature control in air conditioning.
Residential : Savings of 15% to 20% should be possible through the implementation of a range of measures outlined
in this document, translating into about 26 million kilowatt hour (kWh). If radical improvements were made, up to
57% energy savings could be possible.
Adapted from HSRC pages 8 and 9
slEconomics Pty Ltd 26
27. The cost of unserved energy (COUE) refers to a methodology often used in the ESI to assign a value (or
shadow cost) of supply constraints, often carried out on a survey type basis. It is a methodology
particularly well suited to more sporadic and unanticipated supply disruptions measuring direct costs to
industry and end users (e.g. such as loss of perishable goods from loss of refrigeration, damaged
production process, lost time from employees, etc.)
The IRP assigns values from R75 kWh to R10 kWh. The higher value would perhaps be more relevant
for more sporadic supply outages where there is not scope to put into place contingency plans. The
lower value is perhaps more indicative of long term supply deficiencies where backup energy sources
can be planned for (i.e. small scale diesel generators, etc.).
The direct cost of power outages as typically measured by the ‘COUE approach’ is significant and does
represent an important aspect of the cost of insufficient electricity supply. However, it does not capture
the many linkages and adjustments made in an economy and would tend to overstate the long term
cost to the economy from insufficient supply. In light of this, it is a very helpful tool for estimating the
costs of short term supply disruptions, but perhaps not for long term structural adjustments to an
economy.
slEconomics Pty Ltd 27
29. The Government’s Integrated Resource Plan For Electricity shows roughly a doubling in installed power
generation capacity needed from 2010 to 2030.
Even with the significant price increases provided for under MYPD 2, further increases will be required if
prices are to recover the cost of investment in new capacity associated with the IRP. This is the case
whether investment in the ESI is undertaken by Eskom or the private sector.
Government has stated in its National Development Plan 2030 that “Government has probably reached
its limit of fiscal and guarantee support for Eskom” . If one rules out any further Government support for
major capital projects in the ESI, there are two basic options to consider going forward:
Increasing tariffs to cost reflective levels; or
Constraining investment in the ESI and planning for consequential shortfalls in electricity supply.
These are policy choices to be made by South Africa, but there are a number of studies at hand that
provide broad insights into some of the more fundamental economy wide implications of the policy
choices at hand.
slEconomics Pty Ltd 29
30. Our premise has been that if electricity prices are below the cost of supply investment in the ESI will be
constrained with a consequential constraint on energy supply in the long term.
Research has been carried out by HSRC that assesses the economic impact of electricity cuts on the
South African economy. While the study was carried out in 2008 and would not be expected to mirror a
particular supply imbalance that might obtain in the future from a reduced capital expansion plan for
the ESI, the assumed 10% cut in electricity output examined in that study provides a reference point to
track the broad impacts on various sectors of the economy. (i.e. HSRC explain their modeling strategy
as assuming that there is a 10% fall in electricity output consequent upon a reduction in the capacity of
the sector.)
The impact on total output of the economy (i.e. real GDP) from a 10% shortfall in power supply is a
reduction of 0.9% (i.e. -0.9% real GDP) with similar decreases to employment (-1.4%) and household
income (-1.2%) . However, we must caution that these results cannot be directly compared to the results
of the studies that examine the alternative – electricity price increases relating to price increases and
capital investment as there would be numerous assumptions made that would vary between the studies.
Nevertheless, the HSRC study and other research we have examined does show that the cost to the
economy of a shortfall in energy supply is material – which is what one would naturally expect.
slEconomics Pty Ltd 30
31. In the long run, economic theory and real world experience suggest that the economy as a whole benefits
from the application of cost reflective pricing . This is not to rule out targeted subsidies (e.g. such as Free
Basic Electricity, etc) but as a broad principle for the industry as a whole.
While we have not aimed to provide a view on the exact value at which prices would achieve cost
reflectivity – it seems clear that this level will not have been reached by the end of MYPD 2.
In reviewing quantitative studies undertaken on the effect of electricity price increases on the South African
economy, one will see that there are numerous and complex linkages to account for, and the findings of these
studies provide a divergent range of results. Nevertheless, in synthesizing the findings of various studies we
believe there are a few consistent and robust conclusions that can be drawn.
First, and not surprisingly – output and employment in electricity intensive industries is adversely
effected by an increase in electricity prices all else constant – although perhaps not nearly to the degree
that their share of electricity as an input to production might imply.
▪ However, not all will remain constant if prices remain below cost reflective levels of supply. It seems
unlikely to us that the growth path provided for under the IRP can be achieved in such case, and
constrained energy supply will place limits on the South African economy and the jobs it creates.
▪ Moreover, if the revenue raised from increased tariffs is fed back into the economy by investment in
the ESI the negative impacts on the economy as a whole are significantly reduced, and perhaps
reversed in many cases given the size of the investment programme and the positive impacts it will
have on the economy.
31
32. The results of quantitative studies such as those cited here do not fully measure the real cost to the
economy stemming from prices that are below the cost of supply (e.g. related to inefficient use of
electricity, induced adoption of technologies, mis-allocation of capital, deadweight loss from taxation,
etc).
▪ We are not aware of any studies that fully quantify the types of costs suggested above for South
Africa, but given the magnitude of the issue at hand such costs are likely to be significant. If this part
of the equation was fully accounted for it may very well change a number of the adverse outcomes
suggested by existing studies at hand. We look forward to future research that explicitly addresses
this important component of economic analysis.
Finally, as our intent is not to debate the many fine points of the findings of others, we think the
fundamental conclusion to be drawn here is that both theory and practice indicate that the economy
wide negative implications of a price increase within the current context are at worst rather small, and
perhaps more likely to be positive in the long term as prices move to cost reflective levels - thereby
promoting allocative efficiencies in terms of energy use and capital investment, and placing the ESI on a
sustainable path in which it is able to provide reliable electricity supply for a growing South African
economy.
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