What is a kWh saved worth? Tariff escalation and savings NPV

Method

Tariff path

T_1 = T, T_(t+1) = T_t × (1 + g_near) for the first k increases, then × (1 + g_long)

Saving in year t

kWh_t = K × (1 − decay)^(t − 1), S_t = kWh_t × T_t

Present value

PV = Σ S_t ÷ (1 + r)^t, t = 1 … n

Value per kWh/yr saved

PV ÷ K

Levelised value

PV ÷ Σ kWh_t ÷ (1 + r)^t

Closed-form check (one escalation rate, no decay)

PV = K T ÷ (r − g) × (1 − ((1 + g) ÷ (1 + r))^n), and n K T ÷ (1 + r) when r = g

Assumptions

• Savings arrive at the end of each year; year 1 is valued at the year-1 tariff.
• The tariff is the all-in energy cost avoided per kWh. Demand (kVA) charges only fall if the saving also cuts the monthly peak.
• No tax, maintenance or measurement and verification costs; the result is the gross value of the energy saved.
• The near-term default (8.8% for two increases) follows NERSA's approved Eskom direct-customer increases of 8.76% for 2026/27 and 8.83% for 2027/28. Municipal increases differ.

Sources

• Engineering News: NERSA approves higher electricity increases for 2026/278.76% (1 April 2026) and 8.83% (1 April 2027) for Eskom direct customers; 9.01% for municipalities from 1 July 2026.
• Mining Weekly: NERSA approves a 12.74% increase for 1 April 2025The 2025/26 increase, for context on recent escalation.
• NREL: Simple levelised cost of energy calculator documentationPresent-value and capital-recovery conventions.