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By Ntando Thukwana

Moneyweb: Senior Financial Journalist

Load shedding hours spiked 300% in 2022

The economy could have been 17% larger if load shedding was never implemented, says Africa Energy Chamber.

Since the start of load shedding 15 years ago, South Africa experienced its worst year of power supply last year, with the number of power outage hours soaring 300% compared to 2021, crippling the country’s already fragile economy.

This is according to a new report by the African Energy Chamber (AEC) published this week that looked at South Africa’s power generation sector. The report found that South Africa’s electricity outage hours reached new records for the past three consecutive years.

Unprecedented levels of load shedding

With various stages of load shedding on 205 days recorded in 2022, and the country already seeing unprecedented levels of power cuts so far in 2023, the situation is expected to worsen as the peak demand winter season looms.

“Eskom saw close to 50% of its total nominal generation capacity of roughly 46 000MW go offline due to breakdowns and/or maintenance [between] late December 2022 and early January 2023, whereas South Africa’s demand in peak times averages between 28 000MW and 34 000MW,” the report notes.

Although there was some reprieve during the weekend and at the start of this week, which coincided with a nationwide protest by the EFF, South Africa had seen over four straight months of rolling power cuts.

The impacts of load shedding have been damaging to South Africa’s economic growth, leading to a contraction in GDP of 1.3% in the last quarter of 2022, when Eskom implemented intensified power cuts.

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The power outages have shrunk the potential size of the country’s economy by almost a fifth, since 2008 when they were first implemented, according to an energy specialist at Africa’s biggest fund manager, Bloomberg reported on Thursday.

If the insufficient electricity generation crisis is not addressed, South Africa looks to experience load shedding every week this year, and economic prospects of economic growth will be dismal, Lungile Mashele, a sector specialist for energy and infrastructure at the Public Investment Corporation (PIC), was quoted as saying.

Economy could have been 17% larger

The costs associated with load shedding have resulted in an annual reduction in GDP of between 1% and 1.3% since 2007, while the estimated losses reach between $85 million (R1.5 billion) to $230 million (R4.1 billion) per day, according to the AEC report.

It further noted that South Africa’s economy could have been 17% larger than it is today if load shedding never needed to be implemented.

“As such, the power outages have been a major hindrance to the economic betterment of South Africa,” it said.

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Other points of contention in the country’s energy crisis include the expenditure needed to maintain Eskom’s ageing and previously unmaintained power plants, as well as diesel costs, all of which have led to high electricity tariffs.

January saw the National Energy Regulator of SA (Nersa) grant Eskom approval to implement an 18.65% average electricity tariff hike.

The increases are unlike the period between 2000 to 2007, when Eskom’s tariff raises were largely linear.

“However, since the first load shedding was implemented … average Eskom electricity tariffs has seen an exponential growth of 460% by 2020,” said the AEC.

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“The 2020 average tariff was about 110 c/kWh and the same year saw Eskom win a major legal battle where Eskom was allowed to increase average electricity tariffs to 128.24 c/kWh under court order, to allow the state player to manage its mountain of debt through increased revenues via increased tariffs,” the chamber noted.

This article originally appeared on Moneyweb and was republished with permission. Read the original article here.

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