1 / 34

Current and Forthcoming Issues in the South African Electricity Sector

Current and Forthcoming Issues in the South African Electricity Sector. Ioannis N. Kessides The World Bank. Eskom efficient even by advanced industrial country standards. It generates some of the lowest-priced electricity in the world

flannery
Download Presentation

Current and Forthcoming Issues in the South African Electricity Sector

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Current and Forthcoming Issues in the South African Electricity Sector Ioannis N. Kessides The World Bank

  2. Eskom efficient even by advanced industrial country standards • It generates some of the lowest-priced electricity in the world • Executed one of the world’s most successful electrification programs • Has been exhibiting robust financial and operational performance

  3. Emerging problems • Structural inefficiencies and financial problems in the distribution segment • Tight demand/supply balance • Market structure not conducive to economically efficient investment decisions • Sector’s regulatory structure lacks coherence and independence • Eskom’s vertical and horizontal market dominance is an impediment to competition • Eskom’s size and market dominance impede the development of a regional electricity market

  4. Price, cost, and financial performance • Eskom’s tariffs very low by international standards • In contrast to most state-owned utilities, Eskom has been entirely self-financed • During the past 20 years, Eskom earned 8-12 percent pre-tax rate of return • Debt/equity ratio declined from 2.06 in 1980 to 0.3 in 2003 • From late 1980s to 2003 Eskom’s tariffs increases consistently below inflation

  5. Continuity and quality of supply • Deterioration of Eskom’s generation plant performance in the late 1980s • Significant improvements in plant performance following the 90:7:3 program • Continuing significant problems in distribution system performance • NER’s surveys reveal substantial customer dissatisfaction with interruption frequency and durations

  6. NER’s customer surveys • 53 percent of respondents unhappy with interruption frequency and durations • 48 percent dissatisfied with response times to repair faults • 28 percent not adequately consulted about planned outages • 47 percent dissatisfied with power quality

  7. Labor productivity • Substantial reduction in number of Eskom’s employees since the early 1980s • Still Eskom’s labor productivity well below levels in advanced industrial countries

  8. Capital productivity • From 1980 to 2000, Eskom had excessive reserve margins • Eskom’s load factor declined precipitously from 1975 to 1993 • Prolonged gross inefficiency in investment raises questions about the sector’s governance structure

  9. Security of supply • By 2002 South Africa’s high spare capacity came to an end • Forward reserve margin declined from 30 to 10 percent between 1998 and 2003 • Currently, a very tight demand/supply balance

  10. Environmental performance • Heavy reliance on low-grade coal has significant environmental implications • Because of cost considerations, Eskom’s coal-fired station mostly not fitted with scrubbers • Eskom is responsible for the bulk of sulfur dioxide pollution in South Africa • During the past decade substantial reduction of particulate emissions

  11. Electrification Program • One of the world’s most ambitious and successful electrification programs • Impressive gains in coverage within the span of just a few years • Dramatic reductions in the capital investment costs of rural connections • Significant urban-rural electricity divide remains • Sustainability challenges beyond 2000

  12. Performance problems in the distribution segment • Structural fragmentation • Significant disparities in quality of service standards across the country • Lack of financial viability • Operating inefficiencies, lack of technical capacity, theft, and non-payment problems • Restructuring of the electricity distribution system • Progress towards creating the six REDs painfully slow

  13. Scope for integrating electricity markets in Southern Africa • Complementarity of primary energy resources • Benefits of regional integrated resource planning • Prerequisites for successful integration of electricity systems • Structural weaknesses of bilateral electricity exchange in SAPP

  14. Policy challenges • Case for radical electricity restructuring in South Africa not very compelling? • Continuing inefficiencies in the distribution segment will undermine system security and reliability • Eskom’s extreme horizontal and vertical market dominance is cause for concern • Effective regulation is likely to prove challenging

More Related