Differential Electricity Pricing and Energy Efficiency in South Africa
By international standards the economy of South Africa is extremely energy intensive with only a few countries having higher intensities. SAâ€™s primary energy use per unit of GDP is amongst the highest in the world. The high energy and electricity intensity of the economy partly reflects SAâ€™s resource endowments (in particular the abundance of coal) but is also a function of the historical under-pricing of coal and electricity by the authorities. South African mining & industrial electricity efficiency is particularly concerning and considerably lower than the global average. This paper sets out to fill a significant gap in the South African energy literature by highlighting the importance of incorporating electricity demand factors as part of the countryâ€™s energy policy and electricity planning horizon. The paper focuses its attention on modeling the electricity consumption of SAâ€™s industrial and mining sectors given these account for the lionâ€™s share of electricity demand. A differential electricity pricing policy which targets electricity intensive industrial and mining activities (as practiced in China since 2004) is viewed by the author to be a superior policy to blanket electricity price increases administered by authorities in an effort to encourage electricity savings and improve energy efficiency in South Africa.
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