South Africans are dumping Eskom – and it shows in one graph

 ·14 Jun 2024

South Africans are bidding farewell to Eskom due to declining demand for its electricity, which has resulted from years of load shedding and inflation.

Eskom has greatly improved in 2024, with fewer breakdowns and a 50% cut in diesel usage. South Africa has experienced well over two months without load-shedding, the longest streak since 2021.

Some attribute this to political interference, but Eskom has made key changes to improve stability and match demand.

Aggressive maintenance at power stations has led to an energy availability factor of over 65%.

Unplanned breakdowns have decreased by 9% compared to last year, and diesel spending is down by 50% in April 2024.

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

Trade & Industrial Policy Strategies (TIPS), an economic research institution, said that Eskom’s electricity output decreased by an average of 0.7% per quarter, or 2.7% annually, from the first quarter of 2020 (just before the pandemic) to the first quarter of 2024.

Even before this, its production had already started declining, with a decrease of 0.4% per quarter (1.7% annually) from the first quarter of 2011 to the first quarter of 2020.

The shortfall in supply was partially offset by private producers, some of whom contributed to the grid.

Off-grid supply also increased rapidly, although it is not consistently monitored. Eskom and the National Treasury estimate that private off-grid capacity, including rooftop solar and plants established by mines, refineries, and other major users, now exceeds five gigawatts or about 10% of Eskom’s nominal capacity.

This has increased significantly from less than 5% five years ago.

The growth in capacity outside of Eskom has played a crucial role in achieving even slow growth from mid-2022 to the end of 2023, a period during which load shedding reached new peaks.

In the first nine months of 2023, South Africa imported over R16.5 billion worth of solar panels, equivalent to over 4,500 MW of generation capacity.

RMB estimates that the private sector will add over 6,000 MW to the grid from the beginning of 2023 to the end of 2025 and 19,300 MW from 2025 to 2030. 

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

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.

In turn, Eskom is forced to make the same or more revenue from fewer clients, and the only way is to increase prices.

According to an economic bulletin published by the South African Reserve Bank (SARB) – written by economists Zaakirah Ismail and Christopher Wood – since load shedding started in 2008, electricity pricing has increased by a shocking 450%, drastically outstripping CPI by 352%, with inflation recorded at 98% over the same period.

Despite this, Nersa also granted Eskom a further 12.74% tariff increase effective in April 2024.

According to independent energy expert Mohammed Madhi, Eskom is harming itself by increasing electricity prices beyond the inflation rate.

He said that we have already reached the point where the cost of renewable electricity is lower than Eskom’s rates.

Madhi predicts that within the next eighteen months, renewable energy will become cheaper than Eskom’s baseload pricing.

If Eskom continues to raise prices, Madhi believes that in eighteen months, there will be no demand for its baseload electricity.

Both companies and households will be able to install renewable energy with battery backup, producing cheaper electricity than Eskom.

Read: Prepaid electricity nightmare for South Africa

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