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

At a macroeconomic level, the key drivers <strong>of</strong> electricity consumption
are income and price. Income is the dominant driver <strong>of</strong> electricity
consumption in South Africa but as real electricity prices continue to
rise they may have more impact
• <strong>Economic</strong> growth has proven to be one <strong>of</strong> the main drivers in South Africa and by contrast electricity prices (from 1986 to 2005)
had almost no effect (Blignaut & Inglesi-Lotz , 2011).
• But <strong>Price</strong> elasticity has not been constant over time. When real electricity prices rose sharply in the early 1980’s, the price
elasticity <strong>of</strong> electricity demand in South Africa was significantly negative (meaning that consumers decreased demand significantly
in response to price increases). From the mid-1980s to 2007 however, there was a steady decline in real electricity prices and over
this period they had increasingly little influence on consumption (Blignaut & Inglesi-Lotz, 2011).
• It seems likely therefore that as real electricity prices rise (as they have done since 2008), consumers will again become more
sensitive to price and prices will again play an important role in determining electricity consumption in South Africa
8
Relationship between income (GDP) and
electricity consumption in SA , 1993 to 2006
Source: (Inglesi-Lotz & Blignaut, 2011 a)
Macroeconomic Drivers <strong>of</strong> Consumption
<strong>Price</strong> and income elasticities <strong>of</strong> electricity
demand, 1986 to 2005
Source: (Blignaut & Inglesi-Lotz, 2011)
Vulnerability <strong>of</strong>
sectors to rising
electricity prices
©2012 Deloitte Touche Tohmatsu Limited. All rights reserved.
2