South Africans kissing Eskom goodbye

Energy analyst Tshepo Kgadima said South African households and businesses are dumping Eskom for more affordable solar energy solutions.

Recent data showed that Eskom and municipalities’ revenue from electricity sales are under pressure because of an increase in rooftop solar.

Eskom revealed that installed solar rooftop PV in South Africa increased from 983 MW in March 2023 to 4,412 MW in June 2023.

The 349% increase in solar rooftop PV reduced the residual load Eskom needs to meet during the day.

It translates into less load-shedding and more available energy for Eskom to restore its pumped hydro and diesel storage.

However, it also means that these customers pay far less for electricity from Eskom and municipalities, putting their revenue under pressure.

Many municipalities rely heavily on electricity revenue to pay their bills, and solar and battery backup is taking this money away from them.

Earlier this year, the South African Local Government Association (Salga) warned that the government’s solar tax incentive will aggravate the situation.

Salga said the incentive will drive solar installations and strip municipalities of their biggest paying customers.

They warned that increased solar and battery backup installation would erode Eskom and municipalities of their most important revenue source.

Speaking to Business Day TV, Kgadima said that although Eskom and municipalities lose money from people getting off the grid, it has become necessary for households and businesses.

He said Eskom does not have a comprehensive plan to return enough capacity to service and has also not let go of “extortionate tariffs”.

“As long as electricity prices continue to rise at the current rate, residential customers will find alternatives to Eskom,” he said.

The banking sector is facilitating the move to renewable energy by financing solar installations and off-grid solutions.

The impact of the increased use of solar PV and battery backup on the demand for electricity from Eskom is telling.

Kgadima said yesterday the electricity demand in South Africa was around 27,000 MW. A few years ago, it was 32,000 MW.

The low demand translates into lower electricity sales. In the 2016 financial year, Eskom sold 214 TWh of electricity.

By 2022, total sales have declined to 198 TWh. Kgadima predicted that it had declined further in the last financial year.

Eskom’s lower electricity sales clearly illustrate that many South African households and businesses are generating their own electricity.

Kgadima said the migration away from Eskom will accelerate as the cost of producing solar power is lower than what Eskom charges.

“The price per kilowatt hour of a solar installation, financed by a bank, is much lower than what you need to pay Eskom or your municipality,” he said.

Energy analyst Chris Yelland said the private sector has added tremendous electricity generation capacity in South Africa.

These include households and businesses installing rooftop solar and agricultural and industrial companies building solar farms.

There have also been rapid developments in virtual electricity wheeling in South Africa, with companies like Vodacom and Discovery leading the way.

These developments make South Africans less reliant on Eskom for their electricity needs, which does not bode well for the power utility.

Efficient Group chief economist Dawie Roodt said Eskom’s poor performance means the private sector is taking over its functions.

“Eskom is poorly managed and cannot provide reliable electricity. The private sector is stepping in to fulfil this duty,” he said.

“Eskom has already lost a third of its market. It will continue to lose customers and eventually come to an end,” Roodt said.

Although Eskom’s generation part is set to die a slow death, its transmission network will survive and remain in state hands.

Building a national electricity network is very costly and time-consuming, and this is where a state utility makes sense.

“The transmission network is a natural monopoly. The state will most likely remain the owner of this network,” Roodt said.