Energy

South Africans waving Eskom goodbye

South Africans are saying goodbye to Eskom. The power utility is experiencing declining demand for its electricity amid a months-long reprieve from load-shedding.

Eskom’s performance has greatly improved in 2024 compared to last year, with unplanned breakdowns declining and its diesel usage being cut in half. 

This has resulted in South Africa experiencing over two months without load-shedding – the longest streak since 2021. 

Some South Africans have questioned how Eskom has managed to prevent load-shedding for such an extended period, attributing it to elections and political interference. 

However, the utility has made some key changes that have improved the stability of its supply of electricity and enabled it to match demand. 

Eskom has undergone an aggressive maintenance programme at its worst-performing power stations, helping it achieve an energy availability factor of over 65%. 

The utility has also recorded a 9% reduction in unplanned breakdowns of its units compared to last year and spent 50% less on diesel in April this year than in April 2023. 

However, one of the biggest reasons South Africans experience less load-shedding is a reduction in demand for electricity from Eskom. 

Since the government abandoned monopolistic control of electricity generation, households and businesses have sought independence from Eskom’s grid. 

This has been compounded by South Africans reducing their electricity usage more generally by using gas stoves and heaters, energy-efficient lightbulbs, and solar geysers. 

Eskom’s latest Weekly Systems Status Report shows that electricity demand is down 6% year-to-date. Peak demand has declined even further, with a nearly 8% decrease in electricity usage at peak times. 

The declining demand for Eskom’s products can be seen in the graph below. 

“It is quite clear that demand for Eskom’s electricity is declining and has been for several years. This does not mean the country is using less electricity. It just means it is not coming from Eskom,” energy analyst Chris Yelland said.

This means that alternative sources of electricity, such as rooftop solar and commercial installations, supplement Eskom’s electricity generation. 

This reduces the need for electricity generated by Eskom and reduces its burden, enabling it to conduct more maintenance. 

Simply put, households and businesses are replacing electricity generated by Eskom with power from their own alternative sources or private providers. 

This trend is only set to accelerate as the cost of electricity from Eskom keeps rising, strengthening the business case for alternative sources of energy. 

In the same status report, Eskom revealed, based on its calculations, how much rooftop solar has been installed in South Africa. 

The utility said that 5,490 MW of rooftop solar had been installed in South Africa by the end of April, over 2,000 MW more than a year before. 

However, growth has slowed dramatically in the past two quarters as many South Africans who could afford solar have already got, and the government’s tax incentives have come to an end. 

This slump can be seen in data recording how many new projects have been registered with Nersa in the first quarter being only a quarter of the peak seen at the beginning of 2023. 

The past two quarters have only seen around 600 MW registered, respectively, compared to a massive 2,467 MW in the first quarter of 2023. Despite this decline, there is set to be over 6,000 MW of rooftop solar installed in South Afirca by the end of the year. 

The amount of new generation capacity registered with Nersa can be seen in the graph below. 

Source: Gaylor Montmasson-Clair

A sustained reduction in demand for Eskom’s electricity, without the utility making the necessary organisational changes, will result in it entering a death spiral. 

Partner and renewable energy expert at BDO Nato Oosthuizen said that despite Eskom’s improved performance, it is still in dire financial straits. 

However, as the private sector starts to entrench its alternative energy footprint with the increase and expansion of solar rooftop solutions, Eskom’s revenue will take a hit. 

The impact is compounded by private Independent Power Producers (IPPs) servicing the mining, industrial, corporate and private markets, some of Eskom’s biggest customers. 

Oosthuizen explained that as the country starts to feel the impact of this progression, a decline in Eskom’s revenue will become increasingly evident, and the trend may accelerate. 

This could spell even tougher financial times ahead for the utility, and some difficult decisions may need to be considered, such as business restructuring and perhaps even retrenchments, he said. 

This has led some, including former Eskom CEO Matshela Koko, to say that the utility is in a death spiral as many of its best-paying customers turn to alternative energy solutions.

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