As South Africa’s energy industry transitions to a more competitive, market-based power system, the need for efficient pricing signals was expressed during industry organisation the Energy Intensive Users Group of South Africa’s inaugural convention, co-located with the C&I Solar+Storage Summit, held this week in Sandton.

In a panel discussion, speakers explored pricing implications in network infrastructure development, open market development and associated structural adjustments.

One of the points stressed was that, as the country moved to a more competitive market-based power system, it would force the realisation that there needed to be more clarity and more precise thinking on how different services were priced on the network, and force those that were out of sync with the economic realities to adjust.

It was noted that there would not be a way to coordinate the behaviour of thousands of economic agents in the power system, in the way it was done in the past, through central planning. Instead, efficient pricing signals were called for, which would influence people’s behaviour.

Energy Council of South Africa CEO James MacKay said pricing was not the starting point of the conversation, but rather, the conversation needed to start with what would make up the country’s energy system, how it made itself more competitive and how to expedite this.

He mentioned one area of risk as the level of capital investment required to get over the next five to ten years efficiently and effectively, with estimates that more than R2-trillion was required over the next five to ten years on new generation, transmission, distribution and other technologies.

MacKay warned that, historically, government spending on the electricity sector had only been about 20% to 25% of this amount yearly. Therefore, the rest of the funding would have to come from the private sector.

However, MacKay warned that investors were in a global race and game and that South Africa had to compete with countries that were often more efficient. He stressed that the country would have to bolster its position if it wanted to be more competitive in this regard.