Silver lining about electricity in South Africa

There is a glimmer of hope in the midst of South Africa’s energy crisis – individuals and businesses are becoming more efficient in their use of electricity.

2022 was the worst year on record in terms of load shedding, with a constant 4,000MW to 6,000MW deficit during peak demand.

It is estimated that load shedding in 2022 reduced potential real GDP growth by 5% and cost South Africa 600,000 potential jobs.

Things were not always like this.

As recently as 2001, Eskom was awarded the Power Company of the Year Award at the Global Energy Awards in 2001.

In 1994, Eskom provided the most energy per capita globally at some of the cheapest rates.

Yet, in 2019 Eskom provided only 65% of the electricity per capita than it did in 1994.

The country’s growing population played a role, but the biggest factors were the minimal additional generation capacity added to the grid and corruption and mismanagement, which crushed Eskom.

The situation is causing tremendous damage to South Africa, but there is a silver lining according to efficient Group’s chief economist, Dawie Roodt.

South Africans are becoming increasingly efficient in their use of electricity. This is measured using the GDP produced per 100 units of electricity.

In 2007, 100 units of electricity enabled you to produce 100 units of economic production. In 2022, 130 units of economic production can be produced with the same amount of electricity.

This indicates greater efficiency in using electricity and a reduction in using Eskom’s supply in economic production.

The private sector, in particular, has become increasingly independent of Eskom and self-sufficient.

The announcement of a 125% reduction in taxable income from investment in renewable energy by businesses aims to accelerate this trend even further.

In short, the private sector is taking over the supply of electricity in South Africa. Data collected by PwC supports this.

Over the last three years, 4,550MW of private solar generation capacity has been added to the grid. It is expected to increase to 6,850MW by the end of 2023.

Private-sector renewable generation will be almost on par with the total capacity of the government’s Renewable Energy Independent Power Producer Programme (REIPPP).

It indicates that privatisation, although quietly, is occurring in South Africa’s electricity supply.

However, as PwC notes, there are still significant hurdles to feeding private renewable energy into the grid, and South Africa will require coal-fired power for the foreseeable future.

Solar generation will make a difference, but it is “not going to solve our problems”, according to PwC. It has to be combined with other sources of generating electricity.