Business

Eskom shooting itself in the foot

Repeated significant increases in the price of electricity are pushing South African households and businesses to invest in alternative energy sources. 

This risks further eroding Eskom’s revenue base, forcing it to hike prices to compensate for lost revenue.

Rooftop solar installations more than doubled in South Africa at the height of load-shedding in 2023 but have slowed sharply as Eskom’s operational performance improved. 

However, South Africans are once again turning to solar power as a result of elevated electricity prices. 

This is feedback from the executive head of Standard Bank LookSee, Marc du Plessis, who said the platform is seeing renewed interest in its offering thanks to electricity price hikes. 

On 30 January, the National Energy Regulator of South Africa (NERSA) approved electricity tariff increases for Eskom, which are well above inflation. 

NERSA announced a 12.7% tariff increase, which will be introduced for the 2025/26 financial year, followed by 5.36% in 2026 and 6.19% in 2027. 

This has further widened the gap between Eskom’s electricity tariffs and inflation, placing immense pressure on South African households.

Eskom had asked for a 36% increase in electricity charges for its direct customers and a 44% increase in wholesale tariffs for municipalities. 

While the approved increases are significantly lower than what Eskom had applied for, the effective 24% hike over the next 3 years will deepen the financial strain on families already struggling with escalating costs.

“What’s important to remember is that Eskom customers are already paying almost 34% more for electricity than they were 2 years ago,” du Plessis said. 

“These significant increases erode the positive effects of cooling inflation and recent interest rate cuts, as well as any near-term economic improvements.” 

However, this is not just about the immediate impact on electricity bills – it’s also about the long-term strain these ongoing tariff hikes place on household budgets.

NERSA’s public hearings on Eskom’s tariff proposals drew what the regulator called “an overwhelming level of interest from the public”, underscoring the growing concerns of South Africans.

“This upward trend in electricity bills highlights the urgent need for more sustainable and affordable energy solutions to alleviate the financial burden on households.” 

Eskom CEO Dan Marokane

Solar boom is not over

The rising price of electricity from Eskom has made solar power increasingly attractive to households and businesses.  Solar installations reduce monthly electricity bills and provide long-term protection against tariff hikes. 

“We have seen interest in solar offerings starting to climb again in the second half of 2024, and we believe this is due to concerns surrounding electricity prices,” du Plessis said.  

Interest in LookSee’s Solar Loan started climbing in July as many municipalities rolled out their annual electricity tariff hikes. 

Du Plessis said LookSee expects this trend to continue as households look for sustainable ways to protect their budgets. 

“We continued to see a steady increase with additional spikes in interest following reports that Eskom would continue asking for another significant increase in electricity tariffs.” 

This renewed interest tripled the average number of visits to LookSee’s Solar Loan finance page. 

Du Plessis explained that while the price of electricity from Eskom is rising, the price of installing a solar system is coming down in some cases. 

Lower component prices and enhanced finance options have improved the affordability – and thereby accessibility – of residential solar installations, driving increased demand. 

“With demand at more manageable levels, we have seen the cost of components dropping by up to as much as 30% since the beginning of the year.” 

The increased interest in solar may rise further on the back of load-shedding being implemented once again on 31 January as the utility suffered from several breakdowns that require extended repair times. 

The shift away from Eskom-supplied electricity is eating into the company’s sales, which have steadily declined by around 2% a year since 2022. 

Eskom’s declining share of electricity generated in South Africa can be seen in the graph below, courtesy of Nedbank. 

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