More flexible and intelligent grid infrastructure could help the country overcome the “frighteningly” large supply-demand energy gap looming in the next few years, says Jayendra Naidoo, executive chairman of investment company J&J Group.
Naidoo was speaking at the Energy Indaba, in Sandton, yesterday, on the impact energy conservation measures will have on South African businesses if viable solutions aren't found.
He said addressing the energy shortfall would require a new pact between government, business and Eskom to mitigate the economic impact.
Failing this, said Naidoo, who engages with government on behalf of Business Leadership SA and Business Unity SA, the country will see a negative power environment for investment and employment in key sectors.
He noted that South African business in general is more inclined to wait for the right policy environment and incentives from government, before investing in emerging technologies. However, the timing is right for a more bold approach:
“The energy sector is one that offers such phenomenal opportunities worldwide that there's room for companies to become risk takers and make investments in new technological solutions lying ahead.”
Naidoo added that the externalities of power generation, such as carbon emissions and air pollution, are now being priced in, resulting in significant changes. “There's huge pressure on the way in which we produce, distribute and consume power, not only to produce more as economic needs grow, but to do so in a way that's sustainable and involves significant behaviour change.”
This will require both an upgrade to infrastructure, as well as altered consumption patterns, said Naidoo. “The whole electricity sector is based on a notion that no longer exists today, and that is the notion of cheap and abundant fossil fuel based power.
“When these grids were started, they were based on large-scale development, so the utility and all the activities around it were aimed at maximising the demand for power,” he explained.
“Now we're at the stage where we have to go into rehab and the huge problem is there's vested interest in every part of the industry.”
According to Naidoo, the current intermediate relationship between the provider, supplier and consumer is very basic, with a grid infrastructure that doesn't require much intelligence in the system as a whole.
Speaking earlier, deputy energy minister Barbara Thompson confirmed that infrastructure is a major stumbling block in the secure and sustainable supply of energy.
“The electricity distribution industry (EDI) requires urgent reform to meet SA's growth targets and to hedge against further infrastructure deterioration.
“Our country is faced with a maintenance and refurbishment backlog that is growing at an alarming rate of R2.5 billion per annum. The 2008 statistics estimate the backlog at R27 billion; today the backlog figure is more than R30 billion.”
She said the energy department will take over the EDI restructuring process, following the disbanding of EDI Holdings in March, and is working with national treasury to identify appropriate funding mechanisms.
Naidoo predicted a number of energy-related changes in the consumer industry in future. “At minimum you'll have product labelling detailing how much energy a product uses, which is happening already, and the sources of the power used to create it, such as renewables or coal. Consumers will be able to express their preferences through the products they buy.”
He also foresees the introduction of licences for power use, forcing businesses and consumers to invest in devices that allow lower power consumption. “We could see a new scorecard emerging: like the BBE scorecard, you'll also have a power scorecard.”
In addition, users will have the right to choose for themselves an energy mix that suits their particular parameters, comprising a blend of renewable, coal and other sources, Naidoo suggested.
“Saying you want a bit of green energy and a bit of brown energy and so on requires significant intelligence in the system and smart grids and meters, which connect producers and consumers through mobiles and the like. These things are all going to happen.”
According to Naidoo, there are massive opportunities for governments and the private sector to embrace these technologies.
“The future for energy on the continent is quite exciting and there will be new winners, while some old companies will be the losers. It all depends on what we do as we engage with the issue in future.”
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