As winter puts extra pressure on Eskom’s power plants, the utility fears losing revenue as many clients move to solar energy to avoid unreliable power supply.
Consumers moving to solar energy is affecting Eskom and municipalities, which rely on electricity revenue from paying customers in residential and industrial areas.
Following Eskom’s rolling blackouts, and fears of a national blackout brought on by stage six load-shedding several times this year, many businesses and residential areas took up the installation of solar panels on roofs and backup power batteries to mitigate the impact of load-shedding.
Businesses have also had to spend large amounts finding alternative power sources.
Eskom started load-shedding in 2008. The rotational blackouts are expected to continue until 2027, as forecasted by the utility in its medium-term adequacy report.
Those outages have intensified, with regular outages since January lasting as long as 12 hours a day.
However, the country has experienced less load-shedding during winter compared to the first few months of the year. Eskom has attributed this to, among others, lower demand, improved generation capacity, increased open-cycle gas turbines, diesel deliveries and warmer-than-usual weather.
Some experts have attributed the decrease in load-shedding to people and businesses moving to off-grid solutions to avoid load-shedding.
In a response to the Mail & Guardian, Eskom said although the grid benefited from the move by many households and businesses to solar energy, it feared that the move would leave it with non-paying clients who will continue to financially burden the utility.
It said that the utility stood to lose out on paying customers and would be left with non-paying customers which also affects municipalities.
As at 31 March, Eskom was owed R57 billion by municipalities. This is caused by municipality customers who were not paying for services and those who illegally connected electricity to their homes.
Solar tax
In March, during a briefing with the standing committee on appropriations, the South African Local Government Association (Salga) said the government’s new solar tax incentive could strip local municipalities of their paying customers, adding to the already unsustainable costs of the power crisis by eroding their most important revenue source.
Finance minister Enoch Godongwana’s 2023 budget outlined that the solar tax would mean that individuals would be eligible for a tax rebate of 25% of the cost of any new and unused solar photovoltaic (PV) panels purchased and installed at a private residence for which a certificate of compliance was issued from 1 March 2023 to 29 February 2024.
“If the government’s solar tax incentive for households works well, it could strip municipalities of most of their paying customers,” adding to the damage the power crisis is doing to their revenues, Salga said.
Salga, which represents municipalities, said their revenue from the sale of electricity has already been harmed by the move of customers off the grid.
“Without measures to mitigate the effects of load-shedding, municipalities’ ability to deliver services will be compromised,” the organisation said.
National Treasury published an accompanying document explaining that the government proposed the incentive programme to encourage households to invest in clean generation capacity, which could help solve South Africa’s energy crisis.
“The incentive will only be available for one year to encourage investment as soon as possible,” the document said.
Big losses for Eskom
The move to solar energy helps the grid to recover and lessens load-shedding, but according to energy analyst Tshepo Kgadima, who spoke to the M&G on Wednesday, the demand for alternative energy could bankrupt Eskom.
“My educated guess and assessment is that more than 7,000MW of electricity demand, which ordinarily would have been served by Eskom, has migrated off-grid. There will be another 5,000MW of demand migrating off-grid in the next 12 months.
“Eskom will inevitably experience a drastic loss of revenue with sales of electricity falling from 193TWh to below 150TWh, which in monetary terms will amount to a colossal loss of approximately R79 billion a year.”
In May, Godongwana announced that Eskom’s financial woes increased because the utility spent more than it was supposed to.The chief expense was diesel, which was used to limit load-shedding stages.
“Eskom’s debt stock swelled to R439 billion — about a 10% increase over the year — due to the weakening rand and borrowing activities. It earned less revenue than anticipated and spent more, especially on diesel [R21.36 billion], which was more than double the previous financial year,” Godongwana said.
Eskom has been trying to recoup its money owed to it from municipalities and through the help of Nersa’s tariff increases, which would help it reduce its debt.
The embattled utility is looking to get back more than R350 billion with the tariff hike. The increase in tariff hikes is also the reason why many Eskom customers are moving away from the utility to solar energy with battery storage.
According to a research by Valev’s global economy project — a company that collects data on retail fuel and electricity prices across the world — although South Africa’s electricity prices are much higher compared to its neighbouring countries, it is a lot cheaper than the UK, Belgium, Denmark and Germany as well as island nations the Cayman Islands and Bermuda.
Kgadima said, “Eskom’s exorbitant and extortionist electricity tariffs and inordinately long stages of load-shedding forced businesses and industries and domestic electricity consumers to urgently seek off-grid alternatives.”
Energy expert Chris Yelland told the M&G that while it is likely that Eskom’s wealthier residential customers will opt for solar, the power utility is already unable to meet its commitments, meaning it won’t necessarily be losing customers.
“I think everybody is the winner in these circumstances because, for example, the more people install rooftop solar PV, the less load-shedding there will be,” said Yelland.
“It will help Eskom, it is not able to meet its commitments already, so it’s not like it will be losing customers.”
Yelland explained that Eskom already has a 5 000–6 000MW shortfall in electricity demand and is unable to supply its customers.
Mandisa Nyathi is a climate reporting fellow, funded by the Open Society Foundation for South Africa.