Electricity update: growth in electricity production and consumption slow in April

01 Jun 2017

Annabel Bishop

Chief Economic

Electricity generated rose 0.8% y/y in April, moderating from a 2.7% y/y in March. Electricity consumption rose 0.1% y/y in April compared to a rise of 2.7% y/y previously.  

Electricity update
In the first four months of the year, electricity generation rose 0.2% y/y whilst consumption fell by 0.3% y/y.

Weak activity in energy-intensive sectors, such as manufacturing, likely contributed to the reduced consumption. Manufacturing sector activity contracted in H2.16 and based on available date to date, the sector is forecast to have experienced another decline in Q1.17.

Concurrently, generation capacity has increased from Eskom and the Independent Power Producers (IPP).

Eskom’s improved plant maintenance and a reduction in unplanned breakdowns has led to increased energy availability. In addition, new capacity has come online as units of the new build programmes are synchronised to the national grid.

In its System Status update (January 2017) Eskom assessed that with its current operational surplus capacity it could meet increases in demand until 2021. It is plausible that electricity supply will remain stable with economic growth forecast to remain modest, rising to just 2.0% y/y by 2021 from 0.3% y/y in 2016.

The surplus capacity coupled with the weak economic growth environment have contributed to arguments against a new nuclear build. In April, the High Court ruled that aspects of the nuclear procurement process where unlawful and unconstitutional. However, efforts to commission new nuclear power plants are perceived to remain in place.

In this regard, in downgrading SA’s sovereign credit rating, Fitch stated that “(t)he treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the treasury will likely have to substantially increase guarantees to Eskom. This would increase contingent liabilities, which are already sizeable” (see figures 5 and 6).

Moreover, NERSA approved just a 2.2% tariff increase for 2017/18 for Eskom and this is expected to have negative implications for the financial position and raise Eskom’s borrowing requirement. Overall, S&P expects Eskom to use up R300bn of the (current) R350bn government guarantees by 2020 (see figure 5).  
Electricity update
Electricity update
Electricity update
Electricity update
Electricity update
Electricity update