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Will Eskom avoid the utility death spiral?

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Eskom is looking to cut its use of private power and has proposed nuclear as the final solution, but it may be making a major business model mistake, write Graham Schwikkard and Aaron Burton of Datta Burton & Associates.

Since 2008, average electricity prices have increased by a massive 160% (after adjusting for inflation) and yet there are still no clear answers as to when this enormous growth will end. South African households are under continuing pressure to pay for basics, and businesses are finding their competitiveness being eroded. Eskom is looking to cut its use of private power and has proposed nuclear as the final solution, but it may be making a major business model mistake.

New builds of huge power stations go against recent and future trends in utilities. The rapid decline in renewable pricing is pushing them past the need for government subsidies and ‘feel good’ imperatives to become a real alternative. Critically, large-scale battery production and new technologies are driving down the price of storage, which will make renewables feasible on a larger scale within 15 years.

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