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South Africa's state-owned power utility, Eskom, appears to be trapped in an existential crisis as the country witnesses a significant shift towards solar energy. With its best-paying customers increasingly opting for alternative sources like rooftop solar PV systems paired with battery backup, Eskom's financial stability hangs in the balance.
The trend is starkly evident in the power utility's latest Weekly System Report, which points to a 7% decline in demand for Eskom power in the initial weeks of 2024 compared to the previous year. This decrease is even sharper—over 9%—when renewable energy from the Independent Power Producer's Programme is accounted for separately.
The adoption of rooftop solar in South Africa has indeed surged, doubling its capacity from 2,586 MW at the end of 2022 to an impressive 5,203 MW by December 2023. This remarkable increase brings both good and ominous tidings for South Africa. While rooftop solar installations have been instrumental in mitigating higher load-shedding stages on sun-lit days, they translate to a tangible decline in revenue for Eskom. Recent financial results from Eskom show over a 2% slump in sales due to the adoption of solar energy—a testament to escalating challenges.
This rapid migration away from Eskom by large paying customers and households echoes the emerging consensus of experts, foreseeing a transition towards privately generated electricity at the expense of state utility services. Prominent voices like Dawie Roodt, an award-winning economist, and former CEOs of Eskom, Matshela Koko and Andre de Ruyter, warn of Eskom's gradual fade into obsolescence—similar to erstwhile giants like SAA and SAPO.
The gravity of the situation is underscored by Eskom's reduced electricity sales. Where the company once garnered about R1 billion in weekly revenue from sales under Koko's leadership, it has now shrunk to a mere R800 million. Koko's blunt assessment paints a bleak picture of Eskom's future, terming it a 'death spiral'. He isn't alone in his foreboding outlook; de Ruyter has also emphasized the unsustainable trajectory Eskom is on. He points to the potential prospect of Eskom serving a marginalized customer base, predominantly of those unable to afford electricity, proliferating the already severe non-payment issues that afflict the utility.
Indeed, Eskom's hardship is exacerbated by the ballooning debt from municipalities, having escalated from R13.6 billion in 2018 to a staggering R70 billion by the end of September 2023. With municipal payment levels plummeting further, Eskom finds itself at a precipice.
The unfolding scenario in South Africa is emblematic of a larger global shift towards renewable energy and decentralized power generation. While wealthier South Africans employ solar alternatives to escape the clutches of load-shedding and high electric costs, the less affluent remain bound to Eskom's diminishing grid. This imbalance underscores the need for a nationwide approach to address energy access and the financial sustainability of utility providers in the renewable era.