The Economic Impact of Electricity Price Increases on ... - Eskom

An industry’s vulnerability to rising electricity prices depends, most
obviously, on its reliance on electricity as an input to production but
also on the extent to which it is able to mitigate against the impact <strong>of</strong>
rising electricity prices
Reliance on electricity as an input
<strong>The</strong> first group <strong>of</strong> criteria are indicators <strong>of</strong> the
firm\industry’s reliance on electricity as a factor input
• Direct electricity costs as a proportion <strong>of</strong> total inputs
costs
• <strong>Electricity</strong> intensity (i.e. electricity consumption per unit
<strong>of</strong> output)
• Direct and indirect electricity costs as a proportion <strong>of</strong>
total inputs costs
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Vulnerability Criteria
Vulnerability <strong>of</strong>
sectors to rising
electricity prices
Ability to mitigate against rising prices
<strong>The</strong> second group <strong>of</strong> criteria are indicators <strong>of</strong> the extent to
which a firm\industry is able to adapt to rising prices and
mitigate against the negative impact on its pr<strong>of</strong>itability
• Ability to pass on the cost (i.e. pricing power and price
elasticity <strong>of</strong> demand)
• Scope for electricity efficiency gains
• Potential to substitute electricity with cheaper energy
sources
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