New Bill to seal Eskom’s fate

Eskom is gradually being replaced by the private generation of electricity, and the Electricity Regulation Amendment (ERA) Bill, if signed into law, will accelerate this trend.

The National Assembly passed the ERA Bill on 14 March, which makes provision for a state-owned Transmission System Operator (TSO) to be established.

This TSO will operate the national transmission grid, manage supply and demand, and create an open-market platform that will allow for the competitive trading of electricity.

Energy expert Chris Yelland said the importance of this Bill lies in the fact that, once signed into law. it will create a level playing field in South Africa’s energy sector.

This means that all generators – not only Eskom – will have equal access to the grid. 

This includes independent power producers, municipal electricity generators, and “prosumers” – customers of electricity who also generate electricity.

The passing of this Bill comes as Eskom struggles to meet electricity demand in South Africa and the consequent rapid rise of private electricity generators seen over the past few years.

Eskom’s latest interim results showed that the utility’s sales have continued their decline as South Africans with the means to continue to reduce their reliance on the utility and turn to the private sector for alternatives. 

Eskom’s results for the six months to the end of September 2023 revealed that the utility’s sales volumes declined by 5.9%.

The utility attributed the decline to the following –

• Supply constraints, which led to load-shedding and load-curtailment
• Lower electricity demand from customers at times due to difficult economic conditions 
• The impact of increased embedded self-generation, such as solar PV and wind

Research from RMB Morgan Stanley shows that the private sector will effectively replace Eskom’s generation fleet in the next two years. 

The utility’s performance has deteriorated markedly over the last few years, with 2023 seeing record levels of load-shedding.

Therefore, the private sector has been filling the void left by Eskom in a similar fashion to how private airlines filled the void left by the collapse of South African Airways.

The country is experiencing a boom in solar installations, with South Africa set to become the world’s tenth-largest solar PV market in the world in 2024.

Eskom has estimated that rooftop solar additions totalled 2.6 GW in 2023. However, the BloombergNEF database tracked an additional 676 MW. This takes the total for 2023 to about 3.3 GW.

Furthermore, BloombergNEF forecasts that South Africa will add solar capacity of between 4.0 GW to 4.5 GW in 2024, reaching a cumulative capacity of about 36 GW in 2030.

The immense increase in rooftop solar power generation capacity has begun to impact Eskom’s revenue as fewer private sector clients rely on the utility for electricity. 

The surge in the installation of solar panels on houses and business premises has cut Eskom’s sales by 2.3%, according to Public Enterprises Minister Pravin Gordhan. 

With the ERA Bill set to up the competitiveness of the sector even further, Eskom’s generation will need to improve or, ultimately, step aside as the private sector takes over.

This is the fate former Eskom CEO Andre de Ruyter sees the utility headed for.

Earlier this year, De Ruyter said the only logical outcome of Eskom’s reform and restructuring is that the company will be unbundled into three divisions – generation, transmission and distribution.

He said the utility will continue to generate electricity for a considerable time. However, it will inevitably become smaller as coal power stations reach the end of their lifespan and are decommissioned. 

“Mechanical equipment has a limited lifespan, and the new generation capacity will increasingly be provided by the private sector – that is a well-established fact,” he said.