Eskom electricity price pain

South African households’ monthly electricity bills are set to double over the next five years, with costs heading for R4 per kilowatt hour (kWh) or higher.

One Energy director, Teresa Kok, says Eskom is facing an inevitable death spiral that will result in persistent above-inflation electricity tariff hikes.

This makes a solar power system particularly attractive as the cost per kWh is set to remain at less than R1 for the next 15 to 20 years.

Kok says solar offers an affordable means of escaping South Africa’s high electricity costs.

South Africa’s major metros hiked electricity prices from 1 July 2024 by an average of 13.29%.

“Every single municipal cost-of-supply study and Eskom’s inevitable death spiral as more users defect from the grid and its revenue base plummets confirms that the double-digit, above-inflation and extortionate electricity tariff hikes are here to stay for years to come,” says Kok.

She explained that this trend will continue as more customers move to self-generation and alternative energy sources.

“The cost of Eskom’s electricity supply will continue to escalate at massive above-inflationary increments as Eskom and municipalities scramble to make up for the declining sales volumes to cover their fixed costs and debt burden,” added Kok.

She said that at the current trajectory, the price of grid electricity is heading towards R4 per kWh.

She added that solar costs less than R1 per kWh and will remain fixed at that price for the next 20 years.

Kok said most solar users break even on their installation in under four years, after which they will enjoy free electricity for the next 15 years or more.

The table below shows the expected monthly household electricity bills increases over the next five years and the accumulative costs of paying these bills.

Kok highlighted that a simple solar system comprising a 5kW Fox ESS hybrid inverter, 10kWh of battery storage, and a 5kW solar array costs roughly R140,000.

It will generate an average of 25kW per day, or 750kW per month, while the batteries provide 9kWh of usable storage to provide power during the nighttime hours.

The system takes households 90% off-grid. Assuming a monthly bill of R3,000, customers will save roughly R2,800 monthly.

“That’s R33,600 per year, in year one, without factoring in tariff increases,” said Kok.

“Your solar system fully pays for itself in 4 years. After this, every kWh your system generates is free electricity and an incredible investment in your grid independence and financial security.”

On a rent-to-own option over 72 months, customer repayments will amount to approximately R3,000 per month, depending on their credit rating and the interest rate at the time.

Kok said customers without a solar system will spend approximately R280,000 on grid electricity over the next five years — double that of the system — without the ongoing financial benefit provided by solar power.

While the system’s efficiency will decline as it ages, the decline is almost negligible, at roughly 1% per annum.

The system will generate around 9,000kWh in year one. In year 20, it should still generate 7,200kWh.

It will produce an average of 8,100kWh per year over the 20-year period, or 162,000kWh in total.

At an initial cost of R140,000, the average cost per kWh over the 20-year period is R0.86.

“Even after 20 years, your panels will still generate at 80% of the initial efficiency,” added Kok.

However, it should be noted that these cost estimates don’t include the cost of servicing and maintaining a solar power system.