Eskom getting replaced by private sector 

The South African economy is becoming less reliant on Eskom for its electricity supply, with data showing that load-shedding’s impact on energy-intensive sectors such as manufacturing is diminishing. 

Head of markets research at RMB, Isaah Mhlanga, told 702 that historically the correlation between the manufacturing sector’s performance and the load-shedding levels has been very strong. 

Higher stages of load-shedding would typically result in reduced manufacturing output. 

However, manufacturing volumes have remained relatively stable in 2022 and the beginning of 2023 despite the increased intensity of load-shedding. 

Mhlanga attributes this to the increased electricity supply from the private sector, as the amount of non-Eskom electricity supply has steadily increased. 

“In the future, we will have less and less of an impact on economic output from the unstable electricity supply,” Mhlanga said. 

According to data from Eskom, installed solar capacity has doubled in the last 12 months, reaching 4,400MW in June 2023 from less than 1,000MW in March 2022.

Mhlanga said this shows the importance of enabling regulations as the government removed the cap for licencing projects over 100MW in 2022. 

In the budget speech, the finance minister estimated that 2,500MW of solar generation capacity would be installed in South Africa in 2023.

The country has already surpassed this in the first six months of the year, with over 4,000MW of capacity registered.

“This is extraordinary. The private sector has responded not just for their own needs but also to decarbonise the production of goods to give them access to developed markets,” he said.

Mhlanga believes this trend will continue, with installed solar capacity increasing exponentially in the coming years. Over 9,000MW of private generation projects have received budgetary approval in 2023 so far. 

Head of markets research at RMB Isaah Mhlanga

Data from RMB Morgan Stanley shows that the private sector, through renewables, will generate more electricity than Eskom by 2025.

This is based on the assumption that Eskom will maintain an Electricity Availability Factor (EAF) of 53%, which is unlikely as the EAF has deteriorated markedly in the last 12 months.

In 2025, RMB estimates that Eskom will generate around 25,200MW of electricity, just over 47% of its nominal capacity.

Alternative energy sources will produce 26,600MW in 2025 – up from 13,300MW at the end of March 2023.

However, this does not mean that load-shedding will come to an end.

RMB estimates that the supply deficit will be significantly reduced but will remain around 400MW in 2025.

By 2030, even with alternative energy sources producing above 36,000MW, a shortfall of over 1,000MW will remain.

This will be predominantly due to the further deterioration of Eskom’s generating fleet.

Source: RMB Morgan Stanley, Anchor Capital


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