Tito’s Electricity Sector Bombshells – Free Market Pricing and Decentralise Private Grid Operators

In his interim budget speech earlier today, new Finance Minister, MR Tito Mboweni made two major announcements concerning the energy industry in South Africa.

He stated that a new national electricity grid could be established with independent power producers. This is the first sign that Government is now considering partial decentralisation of electricity production, transmission and distribution – outside of Eskom.  Electricity can be produced, transmitted and distributed by IPP’s. IPP’s are currently creating 61,000 jobs as a result of the finalisation of Round 4 the country’s renewable energy program (REIPPP).

Mboweni also stated that electricity prices could be set free. Government is considering long-term reforms in electricity. “Reviews of administered prices in other sectors such as energy are underway,” Mboweni confirm. It is unclear whether this would mean that electricity pricing will be determined on an open market.

The two bombshell announcements lead into one another as the market determines electricity tariffs in a competitive decentralise supply network. If such a move does go ahead, it will unlock significant investment in the South African energy sector and could mean lower electricity prices.

Author: Bryan Groenendaal

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