Warning over Eskom price hikes in South Africa – as rooftop solar nears 6,000MW
Solar installations in South Africa continue to surge, with the total installed solar capacity at 5,790MW at the end of June 2024, according to solar rental group GoSolr.
The group—which is backed by billionaire Patrice Motsepe’s African Rainbow Capital Investments and Standard Bank—published its Q2 “light paper” outlining the state of solar in the country.
According to its findings, South Africa added 350MW of new solar capacity in the second quarter of the year, up from 5,440MW in Q1.
Overall, 586MW of rooftop solar has been added since the start of the year.
Solar now accounts for 6.52% of South Africa’s energy mix and is set to account for one-fifth (20%) of Africa’s solar capacity.
Solar adoption in South Africa is also shifting from crisis response to load shedding to other factors, in step with a global transition to renewable energy.
However, South Africa lags behind quite significantly and still playing catchup.
The new capacity being added through rooftop solar comes even as load shedding has subsided in the country, with Eskom hitting 91 days of no load shedding at the end of the quarter.
To date, the load shedding suspension has continued, hitting 132 days of no outages by Tuesday (6 August).
“The surge in private renewable energy generation has contributed to this improvement by reducing demand for power from the grid and giving Eskom more room for plant maintenance,” GoSolr said.
However, the group warned that even though load shedding has been kept at bay, the overarching electricity crisis in South Africa is far from over.
This is not only from a capacity point of view but also from a pricing point of view, where Eskom still faces the mountainous task of getting its finances under control, and sharp electricity price hikes are expected to follow.
Pricing crisis
The group noted that Eskom is driving electricity prices higher to reduce its mountain of debt while meeting its operational costs and future maintenance and development goals.
As a result, South Africans will have seen at least a 33.8% increase in electricity prices over the last two years.
“Eskom will continue to push for price increases; it has to. The question is how much it will get,” GoSolr said.
“An unofficial draft document recently revealed that Eskom plans to ask for an increase of up to 44%, which it would like to implement as soon as April 2025.”
The group said that price increases are fundamentally related to three key elements: consumption, cost, and debt.
On point one, power consumption is lower in South Africa as a result of load shedding. As more households and industries move towards procuring alternative energy and becoming more energy efficient, consumption from Eskom decreases further.
On the second point, Eskom’s costs are rising, GoSolr said.
“A significant cost on the horizon is that Eskom needs to build new transmission lines — about 14,000 kilometres worth, the bulk of which will commence in 2028.
“To do this while refurbishing existing assets and accommodating new generation capacity, the utility needs R350 billion over the next decade. To put this into perspective, Eskom’s assets (property, plants and equipment) are currently worth R672 billion.”
Looking at debt, GoSolr noted that Eskom’s debt costs are enormous: it paid over R37 billion in net finance costs in 2023 against R259 billion in revenue.
“The debt burden on Eskom is significant. Some R254 billion in debt relief agreed by the government will help. This debt relief is subject to strict conditions, but if these are met, Eskom can expect a reduction in its net finance costs.”
However, Eskom has already lost R4 billion from this for not meeting the conditions.
It said Eskom remains under pressure to raise its tariffs to remain operational and reach financial sustainability.
Proposed tariff changes
On top of applications for massive price hikes, Eskom is also pointing to other changes to tariffs.
GoSolr pointed to potential problems with a proposed tariff restructuring by Eskom, where it wants to reverse its revenue streams from 30% service charges and 70% energy charges to 70% service charges and 30% energy charges.
“In essence, Eskom wants to charge more for fixed grid connections—called capacity or availability charges—and less for usage,” the group said.
Under this proposed structure, low-energy users would see significant increases in their electricity bills, while heavy users would see big cuts—a short-term win with long-term consequences, most notably, pushing energy users to go off-grid completely.
Prepaid users in Johannesburg would know the sting of such a change, where a R200 service charge was slapped on their monthly bills—an amount payable regardless of actual energy usage.
Another issue is Eskom’s proposal to eliminate Incline Block Tariffs (IBT), which currently benefit low-energy users by offering cheaper pricing at lower use levels.
Amid these worries, though, GoSolr said that there are some positive developments—primarily that energy regulator Nersa would still need to approve these proposed changes.
It also noted Eskom’s unbundling, paving the way for IPPs to gain market access, and the utility’s moves to strengthen its grid.
“Nersa is taking over tariffs, which civil society is monitoring. With some luck, the processes behind tariff allocation will be more transparent, and more IPPs will be given access to supply electricity to the grid,” it said.
Read: Big storm brewing over Eskom price hikes in South Africa
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