Eskom death spiral

Eskom is facing a death spiral, with demand for the power it produces declining and the utility effectively incentivising wealthier households with solar to go fully off-grid.

Impower energy expert Matthew Cruise described the situation as a death spiral in an interview with 702, explaining that increasing tariffs will encourage more people who can afford it to go off-grid.

As a result, the power utility will have fewer good customers — those who can pay their electricity bills on time — from which it can generate revenue, leading to further tariff increases.

Cruise said Eskom’s electricity sales declined by 3% between 2023 and 2024 and have declined for the past decade.

“This is despite increased electricity availability and reduced load-shedding for a significant period,” he stated.

According to the Council for Scientific and Industrial Research, Eskom’s electricity sales have declined by between 1% and 3% each year.

Cruise noted that Eskom’s tariff increases have led to some energy-intensive businesses in the country closing down due to the high cost of electricity, further reducing its customer base.

“Even if Eskom’s power stations were fully functional, it would still face declining energy use because customers are leaving the grid,” said Cruise.

Another factor incentivising many wealthier households to ditch Eskom entirely is the power utility’s crackdown on solar power users in the country.

The National Energy Regulator of South Africa (Nersa) recently approved Eskom’s retail tariff plan, which requires Eskom Direct customers with solar panels to adopt the Homeflex time-of-use (ToU) tariff.

This could further incentivise wealthier Eskom direct customers with installed solar power systems to ditch the utility entirely, as it features an unavoidable fixed fee that is higher than plans with flat tariffs.

Tariffs are also high during peak demand periods to discourage these users from consuming grid power.

Additionally, Eskom now requires its direct customers with rooftop solar to install extra equipment and obtain new approvals.

EE Business Intelligence managing director and energy expert Chris Yelland warned in an interview with 702 that this is expensive. It also gives these customers nothing in return, further incentivising them to ditch Eskom.

He explained that many of Eskom’s wealthier customers have invested in solar power systems to protect themselves from power interruptions and load-shedding.

“Let’s say they paid R150,000 and now Eskom says to them: you need to now pay another R30,000,” said Yelland.

“Their choice is to either pay R30,000 to Eskom and get nothing in return, or invest that R30,000 in upgrading their system.”

He explained that the R30,000 could be used to increase battery storage or install a generator for very gloomy periods with low solar generation.

“People will say to Eskom: Go ahead. I want nothing further to do with you,” said Yelland.

Yelland is deeply concerned about how this could impact poorer electricity users in the country.

“I think it’s vitally important that South Africa keeps richer people on the grid to subsidise the poor who have to stay on the grid. I worry that Eskom may actually be making a big mistake here,” he stated.

A MyBroadband forum member informed us of Eskom’s plan to implement the changes in December last year after attending a community meeting hosted by the utility under the guise of explaining small-scale embedded generation (SSEG) rules.

“It was mentioned on multiple occasions that connecting a power plant to the national grid is a violation of the law, irrespective of whether you have configured it to feed back or not,” they said.

“Their point is it is capable of feeding into the grid, and so needs to comply with their standards.”

The power utility’s customer relations officer, who hosted the meeting, asked community members to fill out Eskom’s Application Form for SSEG, adding that they would be contacted for a quote afterwards.

The Eskom officer added that applicants would be charged for a new bidirectional meter and a conversion fee to migrate them to the Homeflex tariff.

“We shall fit you with a new smart meter, which has the additional benefit of providing at least 10 amps supply during load-shedding at stages one to four, and credit you with units generated from your generator,” Eskom said.

The quotes that came through after submitting the application form were fairly hefty.

The MyBroadband forum customer was quoted R27,000 to comply with Eskom’s requirements, while a neighbour had to pay R50,000.