- The unbundling of Eskom will enable the private sector to supply utility-scale electricity.
- South Africa’s electricity crisis intensified in 2023 due to extensive breakdowns at Eskom’s ageing power stations.
In a bid to tackle the age-long power crisis in the country, South Africa’s power utility firm, Eskom, plans to unbundle into separate generation, transmission, and distribution companies by Mid-2024. A new report by Research And Markets titled “Generation of Electricity in South Africa 2024” has shown that South Africa’s electricity crisis worsened in 2023 due to extensive breakdowns of Eskom’s ageing power stations.
The utility firm implemented a consistent 17-year record load shedding, which commenced in 2007 during President Thabo Mbeki’s second term. Despite its position as Africa’s most industrialised economy, in 2023, Eskom recorded a loss as it implemented the worst power cuts, with 204 days – around 27 per cent – without power.
South Africa experienced an outage of up to 10 hours daily, curbing economic growth and fuelling public frustration. This crisis was further exacerbated by the debt-laden Eskom facing financial and operational struggles, including ongoing theft and corruption. This included its municipal debt, which remains very high with an escalating load shedding.
The crisis persists despite regulatory changes unlocking opportunities for private and municipal investment in electricity generation. As a result of these issues, South Africa’s government pledged to split Eskom into three subsidiaries to make it more efficient. The regulatory moves to separate Eskom into three companies and to introduce competition in electricity generation gained pace in 2023.
Furthermore, the report outlined key trends showing a continuous poor financial and operational performance. On renewable energy, the report pointed out that renewable energy companies have capitalised on new commercial and industrial self-generation projects with small-scale embedded solar generation, predominantly residential, rapidly increasing in 2023.
In addition, the electricity generation report highlighted a declining contribution of coal-sourced electricity to total generation. Also, the lack of capacity on the national grid has constrained the introduction of a new utility-scale independent renewable energy power supply to Eskom.
The key opportunities, challenges and outlook from the report are outlined below:
Challenges
- Continued theft and corruption at Eskom.
- Eskom’s consistently poor financial and operational performance.
- Installing sufficient renewable energy and gas generation supply to reduce dependence on coal.
- The national grid is at capacity.
Key Opportunities
- Electricity trading provides remote markets for independent power producers.
- Private supply of distributed electricity generation capacity for large companies.
- Solar panel prices have dropped considerably, making embedded solutions more affordable.
Outlook
The ongoing electricity crisis has inflicted substantial economic losses and exacerbated challenges for private renewable energy producers due to the grid being at maximum capacity. The outlook for the electricity generation sector appears bleak, with the government projecting a supply deficit until 2027.
However, there may be some alleviation through removing regulatory barriers to private sector involvement and direct electricity procurement by municipalities. Also, the rising adoption of embedded rooftop solar generation and self-generation investments might contribute to mitigating the power supply shortfall.
The restructuring of Eskom will enable the private sector to contribute utility-scale electricity. Efforts are underway to ease Eskom’s debt burden through a plan devised by the Treasury, while Eskom itself is working on addressing municipal debt issues.