South Africa has a new SOE owned by Eskom

Eskom has today launched Eskom Green, a renewable energy business that will eventually be unbundled and act as a stand-alone, wholly owned subsidiary.

Until that happens, the new business will form part of Eskom Holdings, focused on increasing the supply of renewable energy in South Africa.

Eskom announced this move on Tuesday, 9 June, saying in a press statement that Eskom Green will accelerate the development of utility-scale renewable energy projects.

Eskom Green will also support large power user customers in achieving their decarbonisation and energy transition objectives.

Essentially, customers will be able to contract with Eskom Green for their core renewable energy requirements.

Eskom Green will take responsibility for delivering against that requirement using its own renewable generation.

This generation will be supplemented by storage and firming arrangements that support round-the-clock supply where customers need it.

Eskom noted that the pricing determination will be clear and transparent, where the wholesale tariff is passed through to the customer at cost. 

“The network, wheeling and other regulated wholesale charges levied by the transmission and distribution operators will not be absorbed by Eskom Green and are not marked up,” it explained. 

“The charges will be presented as a distinct line item separate from the price of energy that Eskom Green generates and sells.”

“This way, the customer has full transparency on what is paid for energy and what is paid for network use.”

To start with, Eskom Green’s offering will target large industrial energy users in the mining and manufacturing sectors through Section 34 Integrated Resource Plan (IRP) allocations and direct bilateral Power Purchase Agreements.

“The business is set to increase the supply of renewable energy to enable customers to lower their carbon footprint in their energy consumption,” said Eskom Renewables Group Executive Rivoningo Mnisi.

Eskom CEO Dan Marokane explained that this new entity is built on decades of power generation skills and expertise that the nation has invested in. 

“We have been playing in this space for some time, and we are now putting a stake in the ground – this is a development that South Africa can be proud of,” said Marokane.

Eskom’s greener future

While Eskom Green currently forms part of Eskom Holdings, it will be separated from the organisation as part of its unbundling strategy. This strategy will see Eskom be separated into three units – generation, transmission, and distribution.

Once unbundled, Eskom Green will become a wholly owned subsidiary with an independent board.

The launch of Eskom Green comes as South Africa’s electricity market is steadily being opened up to players other than Eskom, effectively ending the state-owned utility’s monopoly.

In light of this increased competition, experts have warned that Eskom will need to reconsider its offering if it wishes to remain competitive.

This is particularly true given the increasing number of South Africans seeking alternatives to the state-owned utility’s product, due to its high electricity tariffs and history of unstable supply.

With the IRP also envisioning the staged winding down of the utility’s coal-fired power plants, the time has come for Eskom to adapt to broader market changes, and Eskom Green is set to play a vital role.

Over the past few years, South Africa has seen a boom in alternative energy investments, such as rooftop solar panels for households.

Even large power users like mining companies have started seeking alternatives, investing billions in reducing their reliance on Eskom’s coal-fired power.

With Eskom Green, the utility aims to tap into this burgeoning renewables market and compete with new players set to enter South Africa’s electricity market.

In its announcement, Eskom said a total of 17 high-priority projects have been identified for implementation across the utility’s existing coal-fired power station footprint.

The utility aims to leverage its existing infrastructure to deliver approximately 6 GW of additional capacity by 2030.

This includes at least 2 GW of renewable energy and pumped storage projects expected to advance from 2026.

Eskom Green also plans to advance a further pipeline of up to 32 GW of cost-competitive renewable energy and storage projects by 2040.