The theme for this year’s World Consumer Rights Day (WCRD), today, 15 March is “empowering consumers through clean energy transitions” – and it could not be more relevant in our current unstable energy environment.
The crippling costs of keeping lights on and businesses afloat in South Africa during rolling black-outs are critical trigger points for the South African consumer. As demand for energy increases, and the world moves towards a low-carbon future, there is a unique opportunity for African countries, in particular, to embark on an inclusive energy transition and chart a course toward a sustainable future.
This entails diversification of energy sources as well as suppliers of energy and particularly seeing traditional consumers as a key part of private production.
Making the consumer the focal point of a just and vital energy transition is therefore a welcome move, given the global push to change how we utilise energy, in response to climate change and the need to decarbonate.
Consumers are finding themselves in the eye of the storm in terms of both availability and pricing of energy, which has escalated considerably.
In the past, consumers have passively sat downstream of the energy supply chain, accepting what they received; but it is now abundantly clear that this linear approach can no longer work. The transition to a just and sustainable energy future cannot be the exclusive mandate of national utility producers
From consumer to prosumer
With tremendous pressure to find cleaner, cheaper energy sources and to decentralise renewable energy generation, increasing consumer participation in the energy value chain has the potential to ensure demand stability of energy sources.
This metamorphosis from paying client into co-producer is inevitable, given the increased demand for energy at high costs.
Consumers stand to lose the most if energy transition remains unpredictable and expensive – it is imperative that they take an active role in the decentralisation and generation of energy.
In Africa, it is estimated that energy demand will rise as high as 30% by 2040, compared to a 10% global increase in the same period, mainly driven by population growth and industrialisation. Empowering the consumer on this continent is therefore a logical, and prudent, step forward.
Policy direction through tax relief
For a long time, energy provision has been the sole mandate of mainly state-owned entities. The colossal failure of this approach makes it mandatory to widen participation to other key stakeholders in the energy transition agenda.
Energy systems worldwide are under tremendous pressure to decarbonise and decentralise, and ideally, a public energy utility provider can steer operations to ensure stability and consistency of energy supply from different sources.
In South Africa, Eskom is patently unable to handle its product – electricity – or its pricing, distribution, and promotion, putting the country’s energy supply at risk; with dire consequences to end users. While the national utility still holds the primary mandate to provide power, decentralising power production is a strategic way of de risking the energy supply chain and ensure a stable energy supply.
In a smart move this month, South Africa’s Finance Minister Enoch Godongwana’s 2023 budget speech endorsed earlier sentiments by the South African Revenue Service (SARS), to provide tax relief to domestic and industrial consumers to generate additional electricity through investment in renewable energy; particularly solar.
The last time policies on renewable energy surfaced was in 2016, and then only for commercial investors. It’s welcome news that domestic households will now also be given these tax relief incentives to generate solar power to the value of 25% of the total cost of the solar panels.
This relief for private consumers to generate additional capacity is not far-reaching enough, but is a noticeable move in the right policy direction. Guaranteed energy supply is crucial for economic development and growth. South Africa already labours under a low-growth economy, and loadshedding has severely constrained both domestic and commercial consumers and productivity.
Any threat to energy availability is a threat to sustainability and survival and the policy change to back this up is timely and necessary. Widening energy transition participation to include consumers is clearly a risk-mitigation measure to help secure and stabilise power availability, as it is in many other countries facing similar challenges; and for South Africa, this also ensures eased pressure on Eskom.
Consumers as producers
The average consumer is not only a key player in the energy game, but is increasingly taking on the role of an active producer as well.
Bringing on board both residential and commercial consumers from a policy perspective underscores government’s role as enabler, rather than sole authority.
SARS has already embraced this ideal and is considering giving tax breaks to both corporate and private consumers for energy generation.
A similar win-win in Cape Town, where the municipality enters into private power purchase agreements with commercial power producers and future residential producers, is good news.
As consumers become more involved, stronger players in the energy value chain will emerge, including financing, driving the energy transition, promoting stability and cheaper power.
Cost savings cannot be underestimated – consider NERSA’s new energy tariff of 18.65%, which kicks in from 1 April this year.
Power to the poor
The poor should also not be left behind in this energy transition. There are pioneering proposals that townships and informal settlement can be empowered to generate solar energy from their rooftops for their own use, thus freeing themselves from the unreliable dependence on local authorities to supply them with power.
Exactly how this would work is being investigated, as most informal settlement dwellings are not big enough to generate their own power.
What could be done, for example, is to create energy hubs in these informal residential areas, where a formal larger entity such as a school, clinic or government civic centre could become the energy hub and supply a radius of consumers in that area with solar power.
The empowerment of consumers as crucial stakeholders in energy transition is the best step in the right direction. It will ensure a just transition to a sustainable energy future – and a much better consumer experience.
By Alice Makochieng, Strategy Consultant and Lecturer in the Department of Management Practice, Nelson Mandela University.