In a soon to be published white paper, Frost and Sullivan energy industry analyst Jeannot Boussougouth contends that there are different strategies that can be implemented in the short, medium and long terms. If successfully implemented, their combined effects will significantly reduce the demand on Eskom.

"The South African electricity crisis is expected to persist until at least 2012," Boussougouth notes. "Eskom and the South African government are planning to save about 3000MW by this time. But we require sound mitigating strategies to ensure that we develop an electricity infrastructure that will enable sustained economic growth."

In the short term, Frost and Sullivan believes that the electricity rationing programme (ERP) will help to reduce consumption. However, a long-term implementation of this strategy can only lead to a slow down in economic growth.

The ERP has been promoted based on the success of a similar initiative implemented by Brazil during its electricity crisis in 2000 and 2001. However, Boussougouth expresses caution about differences in the two situations, particularly since Brazil only implemented rationing for six months. The effects of the ERP on the South African economy could therefore be more severe than anticipated.

The use of generator sets as primary sources of power, rather than only as backup, is expected to increase significantly as a result of the ERP. Boussougouth expects the power rental sub-segment to grow by at least 20% a year over the next few years. An increase in co-generation projects through which industrial users produce their own power is also certain.

In the medium to long terms, South Africa should look to six potential strategies. Two of the most critical are diversifying the energy mix and pursuing sustainable energy imports.

"At least 75% of the electricity generated in South Africa comes from coal-fired power stations," Boussougouth points out. "This makes the local electricity sector vulnerable to unfavourable conditions in the commodity market."

Diversifying the energy sector must therefore be a priority. However, 59.7% of Eskom's new capacity is still expected to be coal-based. This means that encouraging private investment, particularly in renewable energy, will become ever more important.

The current prices of electricity make such investments unfavourable though, as producers cannot sell their power for what it costs to produce it. Boussougouth believes that to encourage investment, South Africa should follow the example of Ontario, where prices are subsidised.

"IPPs could sell their electricity to Eskom at a price that is cost-reflective," he suggests. "Eskom, because of its social obligations, would then sell this electricity to users at a lower price. The difference would be compensated by the state, as is currently the case in Ontario."

Continuous electricity imports are a second important strategy. One of the most encouraging developments in this sector is the Inga III hydro power project in the Democratic Republic of Congo (DRS).

"The DRC has massive hydro power potential, estimated at as much as 100 000MW," says Boussougouth. "South Africa is part of the Westcor consortium that is expected to invest USD6 billion in developing the 3 500 MW Inga III."

Along with other potential sources of power, such as the Mmamabula project in Botswana, this initiative could reduce the pressure on Eskom to fulfill all energy requirements through local projects.

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