The state of our national grid paints a black picture for businesses

In the last few months, Eskom has declared power emergencies on a number of occasions and resorted to load shedding throughout the country for the first time since 2008. This is because energy demand is outstripping Eskom’s supply during certain peak times; the reality is that security of supply in South Africa is severely threatened. This year also saw the first time that Eskom conducted maintenance in both summer and winter and, as this continues, further load shedding is expected throughout South Africa. In addition, electricity tariffs have more than trebled since 2007 and are expected to rise continuously by at least 8% annually, doubling in the next 7 years. With the additional power plants, Medupi and Kusile, running years behind schedule and 10s of billions of Rands over budget and with new investments in additional energy plants coming too late, there doesn’t seem to be a light at the end of this dark tunnel for South African energy-users.

Further diminishing any hope in South Africa’s grid, Energy analyst Chris Yelland commented on the problematic state of the grid in February 2014 AFP article, entitled ‘Eskom is Holding back the South African Economy’, saying that “some of these are structural problems, some are political problems, some are just bad management… the bottom line is Eskom is not structured appropriately”. The same article describes how the South African economy “the biggest in Africa and a top emerging market, is being held back badly by a crisis at the sclerotic state-owned electricity provider Eskom”. It is therefore undeniably clear that the negative impacts of our ailing electricity grid on the economy are grave—and businesses are facing increasingly serious risks as a result.

Unstable electricity supplies severely threaten the survival of small and medium enterprises

Sasol and the University of Pretoria carried out a study in 2006 that examined the impacts of the 2006 electricity crisis on Cape Town based SMEs (a crisis that directly cost the Cape Town economy about $900 million). The study, entitled The Impact of Electricity Crises on the Consumption Behaviours of Small and medium Enterprises, surveyed 250 SMEs and found that SMEs are particularly vulnerable to external events such as electricity crises. The SMEs surveyed felt the impacts of the electricity crisis so extensively that the authors concluded that “unstable electricity supplies severely threaten the survival of small and medium enterprises”. A large majority of the SMEs surveyed (89%) were heavily dependent on a steady supply of electricity and most (80%) reported significant losses of trade or productivity during the crisis. SMEs contribute roughly half of SA’s GDP and employ more than half of the formally employed population; further highlighting the extent to which stable and affordable electricity supply is not only relevant but essential for South African businesses and the South African economy.

Figure 1: Van Ketelhodt & Wocke, 2006

Damages that affect businesses during electricity crises include, but are not limited to, damaged computers and other electronics, perishables damaged in refrigerators, non-delivery to clients and facilities becoming unable to operate. Other effects include increasingly expensive electricity tariffs.

Not nearly enough businesses are taking the critical actions needed to reduce their long-term risks

Shockingly, the research revealed that despite the widely felt negative impacts, only 19% of the surveyed companies considered the long-term impacts of unstable electricity supply in their business plans and about 20% hadn’t considered any change in electricity related behaviour at all. Almost 70% of all the respondents felt that there was not much they could do to improve their electricity consumption, and instead showed a tendency to wait for the crisis to pass without reducing their long-term vulnerability and risks. These are common misconceptions that will continue to cost businesses greatly. Other prominent misconceptions that the study revealed include: the thought that the crisis was only temporary in nature and the expectation for very long payback periods and limited initial financing options for alternative energy sources.

What these companies do not know is that there is in fact a lot that can be done to significantly reduce the risks associated with unstable and increasingly expensive electricity supply

The crisis is by no means temporary; Eskom’s supply already outstrips South Africa’s energy demand (on one occasion in June 2014 outstripping it by 8000MW), since demand continues to grow and increased capacity is slow and limited, it is clear that the worst is yet to come. Therefore, plans to reduce long-term business risks are absolutely essential. In addition, with the drastic decreases in the cost of Solar PV technology, Terra Firma Solutions has seen some of its Solar PV clients experiencing payback periods as short as two years and attractive funding options for the initial investment abound.

Another critical way to reduce the impacts and risks of unreliable electricity supply is information; information about the national grid and information about a company’s own energy-use. Terra Firma Solution’s Energy Efficiency Software, for example, enables companies to achieve exactly this by monitoring energy-use, optimising efficiency and, as a result, being well-equipped and prepared to face the challenges associated with the current energy crisis. The benefits of energy efficiency improvements are therefore substantial and far-reaching, allowing companies to experience incredible savings while significantly reducing their future risks.

Companies of all sizes can simply no longer afford to be left in the dark about actions to reduce long-term risks associated with South Africa’s electricity grid.

Ultimately, it is irrefutable that the costs associated with not monitoring and managing a company’s energy-use and not exploring alternative energy options are not only high but, as Van Ketelhodt & Wocke’s concluded, the costs are so high that they threaten the very survival of many South African enterprises.