Former Eskom consultant Matthew Cruise expects electricity prices to double in South Africa over the next five years and urges consumers to move away from the state power utility by adopting their own personal power systems.
Cruise was speaking at a roundtable hosted by solar installer group, Hohm Energy, for which he also consults.
The energy expert said his estimation is based on the trend where Eskom and municipalities see a price increase close to inflation year-on-year, rising costs of diesel and coal contributing to the cost of electricity in the short to medium term, and ageing power stations coming offline.
He also pointed to the recent price hike trends by the National Energy Regulator of South Africa’s (Nersa) – up 17.9% last year, and in 2022, the average increase is expected to be 17.1% and will be introduced in July.
As old power stations such as Camden, Hendrina, Arnot, Grootvlei and Komati come offline due to reaching end-of-life, the ability to meet the peak demand of 32,000MW will be reduced as they have 7,885 MW of combined capacity, Cruise said.
Eskom has again implemented stage 2 load shedding for the entire week during the peak hours of between 17h00 to 22h00 due to a continued shortage of generation capacity. The power utility is on course for its worst year of outages.
The problem with renewables on a large scale
Cruise said that the renewable energy planned to come onto the grid over the next five years is equal to less than one-fifth of the coal that will be taken offline over the same period. He added that renewables also do not contribute much to public demand.
The latest Renewable Energy IPPP window 5 has a combined capacity of 2,583MW (608 MW wind, 75MW solar) and will come online after 18 months. A further bid window 6 is anticipated to have a generation capacity of 2,600MW.
The Risk Mitigation IPP Procurement Programme (RMIPPPP) was released to the market in August 2020. The aim was to alleviate the electricity supply constraints and to reduce the extensive utilisation of diesel-based peaking electrical generators in the medium-to-long term.
It is a direct response to fill the 2,000MW short-term electricity supply gap and includes 1,500MW of new coal and 513 MW of battery energy storage.
Cruise said that the government is not doing enough to encourage independent power producers (IPPs) in South Africa, despite this programme. He said that batteries to store renewable energy for peak hours are not viable due to how expensive they are. He noted that gas turbines, among other power generation methods, are being looked at more intensively.
South Africa needs utilities that can switch on and supply the peak demand to mitigate load shedding and have constant power, he said.
The former Eskom consultant said that the recommended solution is for home and business owners to take control of their electricity needs with a solar and grid-tied battery installation.
“Getting a system that takes care of 80%-90% of the electricity needs is recommended – with a lifeline to Eskom to recharge the battery during cloudy weather. The result is the home, and the business owner becomes immune to load shedding and price increases.”
He added that it is the best year to invest in a solar or battery installation as solar equipment prices have historically declined but are turning upwards after 2021.
Cruise said that the costs of the system, when financed through a bond or rent-to-own model, balance out, resulting in minimal impact on one’s monthly budget.
According to Hohm Energy, a household that spends roughly R1,500 on Eskom each month can save R1,215 (while electricity costs R2.50 kWh) on electricity if they add a 3.6kWp, 3.6kW inverter and a 2.8kWh battery to their household.
Overall the system, including VAT, will cost R118,450 and can, in some cases, be paid off as part of a bond.
Cruise said that when looking at how countries such as Germany and Australia have incentivised people to move to renewables and install solar panels with rebates or make the cost of the system tax-deductible, South Africa is moving in the opposite direction.
Eskom is saying it wants to remain an attractive option for consumers, and it is doing that by charging fixed-line costs to people who are taking their need for power into their own hands.
Eskom is in a ‘death spiral’ where demand from wealthier people is diminishing as they move away from fossil fuels. The utility then increases the price of electricity to account for a large portion of its income base leaving.
The load is then placed on the middle class to pay for most electricity from the utility. The middle class then follows in the footsteps of wealthier households as prices increase again, said Cruise.
Subsequently, the brunt of paying for the state provided power is on the shoulder of the poorest in South Africa.