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State of the South African Electricity Industry in 2009
Frost & Sullivan, Dec 2009, Pages: 99
This report provides an overview of the entire South African electricity industry in 2009. The research focuses on the evolution of the industry in order to provide context to the current crisis facing power production in South Africa. The report covers the policies, regulation, tariffs, build programmes and structures of the industry as well as forecasting various trends such as generation growth, reserve margins, demand and mitigation strategies by Eskom. Quantitative information was collected regarding the overall industry as well as build programmes and contracts awarded. Finally the report forecasts tariff evolution to 2015 as well as the implications of Eskom's multi year price determination 2 application of September 2009
Research Overview
This Frost & Sullivan research service titled State of the South African Electricity Industry in 2009 provides a general overview of the state of the electricity industry in South Africa including generation, transmission and distribution services, policies, regulation, feedstocks and end users. In this research, Frost & Sullivan's expert analysts thoroughly examine the following markets by end users: utility (Eskom), municipalities, original equipment manufacturers (OEMs), contractors and service providers.
Market Overview
South African Electricity Industry’s ‘Security of Supply’ Crisis Will Continue Due to the Decrease in Reserve Margin
Eskom, the state-owned utility, dominates the South African electricity industry. Despite the build programme that Eskom has implemented, funding shortages and construction delays will leave the country exposed to security of supply issues until about 2013. The majority of build programmes are focused on coal-fired super critical plants. The electricity industry will continue to face the ongoing security of supply crisis, given the decrease in reserve margin goes to below 10 per cent.
“Growth in the electricity supply industry in South Africa is driven by investment in noteworthy infrastructure projects including new power plant integration and grid strengthening programmes,” says the analyst of this research. “Greater demand by large industrial end-users and residential end-users is boosting the investment programme to ensure the security and quality of supply for the country.” OEMs and electronic product code (EPC) contractors currently have significant opportunities as South Africa undertakes its largest-ever investment programme in public infrastructure development. The projected spend on new power plants alone is approximately $3.00 billion over the next five years.
However, the greatest challenge facing the electricity supply industry is the uncertainty about Eskom’s ability to find adequate capital to fund its build programme. Contractors have reported the expected revenue to be 20 per cent 30 per cent lower than predicted based on the delays in the major build projects. “Eskom contractors involved in the major build and grid strengthening programmes in South Africa should find a response to deal with the delays that the projects are currently facing,” explains the analyst. “End users should restrict consumption by demand-side measures or find a way of changing business practice in order to cope with the uncertainty of security of supply.” Large electricity consumers should try to examine other possible options to drive growth whilst decreasing their usage of electricity. In some cases, this could be accomplished by using equipment that is more efficient or better production processes. In case this is not possible, the market participants will need to examine the viability of continuing to do business in South Africa.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
By End-users:
- Utility (Eskom)
- Municipalities
- OEMs
- Contractors
- Service providers
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