24 February 2012

South African industry stumbles under rising energy tariffs and international demands for 'green' products

Submitted by Annemarie Roodbol

Rising energy prices and an ever-increasing pressure to conform to international environmental and climate change demands. These are some of the main challenges facing big industry in South Africa, according to Barry Bredenkamp, senior manager: Energy Efficiency at the South African National Energy Development Institute (SANEDI). He is one of several of the continent's foremost power experts who will be addressing large power users at the African Utility Week (AUW) conference and exhibition to be held in Johannesburg in May.

Energy costs
"When we speak about rising energy costs, it is about much more than a hike in the electricity tariff," says Bredenkamp. "Rising gas, fuel and water supply tariffs all have a knock-on effect on a number of sectors including agriculture and manufacturing. China is seen as our major manufacturing competitor, but South African companies have the capacity and the skills needed to compete with the Chinese. However, our high electricity costs are detrimental to the global competitiveness of a number of our industries in South Africa."

Furthermore Bredenkamp points out that the current electricity tariffs in South Africa are not cost-effective.

"On average it is cheaper to supply electrical power to a large industry than to a private household. Similarly households are generally charged a flat-rate tariff per kilowatt hour regardless of the time of day energy is consumed. Power usage charges should be structured in such a way that power is cheaper in off-peak times than during peak times, thus encouraging a change in lifestyle to better suit the national supply and demand curves for electricity."

Daniel Claassen, producer of the Large Industry conference track at African Utility Week adds: "Unfortunately it is often the large power users who are threatened with punitive measures if they don't reduce their overall electricity consumption. At the same time they are expected to contribute significantly to the country's economic growth. Managing the rising cost of energy in all sectors has recently become an important issue. Many fear what the availability and increasing cost of electricity will do to their bottom line, while others argue that this same issue is a driver for energy efficiency to move forward."

Carbon disclosure
Bredenkamp adds that many companies comply with international environmental and climate change demands.

"However, we do not necessarily have the policing structures in place to ensure that a larger number of companies conform to the carbon disclosure guidelines. Companies listed on the stock exchange are required to disclose their annual carbon footprint in terms of the JSE Sustainability Index. This provides an opportunity to showcase their efforts and successes in this area, but at the same time keep an eye on how their competitors are doing. After all, no one, especially shareholders, wants to be seen as the 'bad guy' in a report of this nature.

"Those companies not on the stock exchange have no commitment to fill in these reports. There are no mechanisms or structures in place to ensure that they comply with international benchmarks. This is probably a key contributor to South Africa being the 17th largest per capita greenhouse gas emitter in the world today."

According to Bredenkamp non-compliance to international demands for companies to operate in an environmentally friendly manner, may at some stage in the not too distant future further negatively impact on South Africa's ability to do business with global partners.

"South Africa is increasingly becoming less competitive in selling products to overseas markets and we therefore seriously need to address the rate at which electricity tariffs are increasing. Energy efficiency will lead to less emissions and, at the same time, reduce the need for very expensive new generating capacity, which, in turn, could assist in relieving pressure in this area."

African Utility Week
To address these problems effectively, dialogue between manufacturers, policy makers and utility suppliers are important. "AUW brings together like-minded people who can address these and other challenges facing the country and then work together to find common solutions," says Bredenkamp.

African Utility Week will focus on all aspects of the utility service sector on the continent with dedicated tracks on: Metering, Renewables, Water, Large Industry, Infrastructure Investment, Transmission & Distribution/Smart Grids, Generation and Waste Management.

Event dates:
Conference: 22-23 May 2012
Exhibition: 21-23 May 2012
Pre-conference workshops: 21 May 2012
Site visits: 24 May 2012

Website: www.african-utility-week.com

Event location: Expo Centre, Johannesburg