Eskom shoots itself in the foot

Demand for household rooftop solar is rebounding in South Africa as people look to reduce their reliance on Eskom to avoid steep electricity tariff increases. 

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

However, Standard Bank has said a new trend has emerged as electricity tariff increases drive renewed interest in solar installations.

Data from Standard Bank’s LookSee home efficiency platform shows a notable rise in visits to its Solar Loan finance page. 

While these visits do not represent actual applications from South African consumers, they indicate that households are now considering alternative energy sources to combat rising electricity costs.

“Interest in our Solar Loan started climbing in July as many municipalities rolled out their annual electricity tariff hikes,” executive head of LookSee, Marc du Plessis, said. 

“We continued to see a steady increase with additional spikes in interest following reports that Eskom was asking for another significant increase in electricity tariffs for 2025.”

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

Eskom’s latest Generation Adequacy Report also shows that rooftop solar installations continue accelerating. It estimated that installed rooftop solar was at 6,141 MW by the end of October, up from 5,203 MW at the end of 2023.

Du Plessis attributed this increase in the absence of load-shedding to the increasing pressure rising electricity tariffs are placing on households.

“The past 15 years have seen tariff increases far outpacing inflation, and Eskom is now asking for a 36% increase for direct customers and a 43.5% increase for municipalities for 2025.”

“These escalating prices are placing enormous strain on household budgets, and many are looking for ways to reduce their reliance on the grid. Solar power is the most effective way to do this,” he said.

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.” 

Standard Bank’s solar loan is based on the government’s Energy Bounce Back Loan Guarantee Scheme, which caps interest rates at prime plus 2.5%. This limited-time offer will expire in February 2025.

The bank is confident in demand for household solar recovering towards the end of 2024 and throughout 2025, developing an Energy Loan to help households finance solar installations, backup power and energy-efficient solutions.  

However, one major threat to this outlook is Eskom’s desire to make households with solar panels pay more for electricity. 

The utility has proposed increasing the fixed capacity charges, which would disproportionately affect people using less electricity. 

The changes included introducing an ancillary service and network demand charge in the variable energy charges. These are often terms ‘network costs’, which include transmission, distribution, and transformer costs. 

Currently, these costs are covered through variable and fixed tariffs. Eskom wants to move to a tariff structure with higher fixed daily network chargers independent of usage. 

This implies that South African households and businesses would face significantly higher fixed charges, regardless of their electricity consumption.

As a result, individuals with solar panels would end up paying much more than before since they would still be required to cover daily fixed costs to remain connected to Eskom’s grid.

Eskom stated that these charges are necessary to offset revenue losses caused by South Africans generating their own electricity through solar panels.

The utility noted that solar power systems typically generate most electricity during daylight hours.

This, according to Eskom, forces the utility to ramp up power generation quickly to meet evening demand, placing additional strain on the system and increasing operational costs.

The new electricity tariff plan also aimed to make Eskom’s electricity more attractive than households and businesses generating their own power.

This plan was first proposed in 2021, with it remaining in place with few changes. Eskom has since admitted that it would increase the electricity bill of low-consumption users. 

Eskom’s previous analysis of its proposed tariff changes showed that many households using less than 900kWh per month would pay more.

“If the network costs were used as is, this would have resulted in significant increases to low consumption users, so some scaling was done to limit this impact,” Eskom explained.

To reduce the impact, Eskom said the generation capacity charge would initially be at a 50/50 fixed-to-variable split in a phased approach.