Review of proposals for practical power sector restructuring and reforms in a dynamic electricity supply industry

Muhammad T. Khan, George Alex Thopil and Jorg Lalk

Renewable and Sustainable Energy Reviews, 2016, vol. 62, issue C, 326-335

Abstract: South Africa׳s electricity supply industry (ESI) remains a vertically-integrated monopoly despite global trends towards restructuring. The monopolistic nature of the ESI could hinder the development of distributed power systems as penetration of renewable electricity increases. The research aims to rationalise South Africa׳s ESI evolution; propose practical power sector restructuring in the short-to-medium term; and to determine their potential impact. The research methodology included a single case study instrument, with embedded sub-units of analysis. Primary research data was gathered using semi-structured interviews with industry experts in addition to which secondary data from government documents and archival records were used for triangulation. Research results conclude that South Africa׳s ESI grew due to techno-economic industrialisation factors, while Apartheid-era policies influenced the ESI in only some specific respects. The vertically-integrated status quo was sustained in the post-transformation period due to government׳s focus on social imperatives; lack of regulatory & policy certainty; and conflicts in political ideology. South Africa did not experience the pre-conditions that triggered global power sector reforms in the late 20th century but these pre-conditions are now becoming evident. Privatisation of Eskom Generation and introduction of wholesale and retail competition are not practical in the short-to-medium term, proving the infeasibility of the standard model of reform locally. The introduction of an Independent System and Market Operator (ISMO) using a single-buyer model is seen as the most favourable and practical option, with the ISMO owning transmission infrastructure. The research suggests that ESI changes will increase system efficiencies, economic performance and private sector involvement, but will not reduce electricity tariffs. The scenarios, challenges and proposals identified in this research are also applicable to other countries in Africa and other developing regions of the world, that have similar social and political backgrounds, ensuring sustainable supply of electricity.

Keywords: Monopoly; Unbundling; Vertically-integrated utility; Power sector reform; Eskom; Southern Africa (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.rser.2016.04.056

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