By: Mike Kantey

In 2007, Mary Haw and Alison Hughes, of the University of Cape Town’s Energy Research Centre, provided a succinct overview of the backbone for forward planning in electricity production – the projected growth in gross domestic product (GDP).

GDP growth is seldom, if ever, expo- nential over a long period. If one examines other developed regions of the world, it is easy to see that GDP growth increases, reaches a peak and then declines.

Yet, in his presentation to an Energy Summit on September, 25, 2007, power utility Eskom’s Keenan Lakmeeharan blithely assumed that uninterrupted economic growth would be borne out by reality.

Owing to economic growth and government’s Accelerated and Shared Growth Initiative for South Africa (AsgiSA), it was calculated that the load would grow at an aggregated value of 4% a year from the load of 34 807 MW in 2007 to 93 776 GW in 2030.

Buoyed up by this Utopian dream, the Department of Energy, with input from the National Treasury, provided Table 1 for GDP growth during the public consultation process leading up to South Africa’s Integrated Resource Plan in 2010 (the IRP2010). Note that the figure for 2009 reflects the negative impact of the global financial crisis.

If one had looked simply at the real figures for 2008 and 2009, however, as well as the modest forecast for 2010, one could easily have foreseen that the overall growth ahead would have been rather more ragged. On October 28, 2010, however, Finance Minister Pravin Gordhan revised the forecast for 2010 to 3%, while projecting 3.5% in 2011, 4.1% in 2012 and 4.4% in 2013 – still a wildly hopeful trajectory.

This view was reinforced back in the heady days of 2007 by the then director- general of the Department of Public Enterprises, Portia Molefe, who said that “electricity growth [was] revised from 2.3% to 4% to align with AsgiSA’s 6% GDP growth target”.

In other words, both government and Eskom’s own assumptions were based not on the arithmetic extrapolation of actual, empirical evidence, but the imperatives of a devoutly wished-for macroeconomic policy. Molefe provided the department’s projected figures for electricity demand as follows:

Yet in his media statement of August 25, 2011, Eskom CEO Brian Dames stated that electricity demand growth over the period was about 1.4% year-on-year. According to the Business Report of July 6, 2012, the peak demand was fore- cast at 34 105 MW, or 256 MW below the stated figure for 2007. In effect, there was zero growth in electricity demand over the period 2008 to 2012, thanks to the collapse of the global economy, massive electricity price increases and a natural drive for conservation and energy efficiency.

In an article written for Applied Energy, Roula Inglesi shows how a dramatic increase in electricity prices can lead to as much as a 27% drop in demand, even with a modest and constant 4% growth in the economy. Arjun Makhijani, of the US, has shown conclusively that, despite real growth in the US economy over 50 years, energy growth remained fairly constant. Industrial energy use stayed about the same between 1973 and 2004, but the value of industrial production more than doubled. The ratio of energy demand growth to GDP growth declined from about 0.9 in the mid-1950s to 1973 period to about 0.5 by 2000. As in the 1973–1985 period, this increase in efficiency was driven partly by price and partly by regulations.

In effect, ‘business-as-usual’ in the industrial sector has meant economic growth without energy growth for over three decades. A part of this is perhaps due to the migration of energy-intensive industries to countries with cheaper energy supplies. But a central factor has been an increase in the efficiency of energy use in industry.

In a nutshell, the underlying assumptions of a robust economy and a concomitant high demand for electricity have proven false. Is it not true to say that the IRP2010 has to be completely overhauled to exclude nuclear power, since we have everything we need in Medupi and Kusile, the Ingwe Falls hydro- power project, a raft of exciting renewable- energy projects, and a massive find in gasfields? The table on page 81, from the redundant IRP2010, proves exactly that.

Kantey is a media and development consultant based in Plettenberg Bay - mike.kantey@gmail.com