Eskom is being replaced

Eskom is selling less electricity each year as the increase in private sector renewable generation and rooftop solar, combined with substantial annual price hikes, reduces the number of “good” customers available.

The state-owned power utility’s latest annual results show that electricity sales decreased by 3% year-on-year, and this trend is expected to continue as more private sector renewable projects come online.

According to Impower energy expert Matthew Cruise, Eskom’s electricity sales have decreased over the past decade.

Electricity sales peaked at 219,979GWh in 2015/16 and declined to 183,311GWh in 2023/24 — a decline of nearly 37,000GWh.

The intense load-shedding experienced in South Africa in 2022 and 2023 pushed wealthier residents — those who can reliably pay for the electricity they use — to install solar power systems.

Many businesses also chose to go off-grid by installing solar power systems or signing power purchase agreements with private players to meet their power demands.

According to Cruise, a business in the private sector that opts for a solar system, but doesn’t install batteries, will see a return on its investment in roughly two and a half years.

“After that, you are getting power for free,” he told 702. “This is problematic for Eskom as it feeds into the Eskom death spiral.”

The shift means that many of Eskom’s customers who could reliably pay for their electricity are not contributing to the utility’s revenue collection, or have significantly reduced their reliance on Eskom.

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

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

This presents a challenge for the power utility, considering its costs have increased significantly over the past few years. This means it must raise prices to meet its operational costs.

However, doing so will likely push more South Africans who can afford it to move off-grid, further reducing the potential revenue Eskom can recover.

Incentivising households to go off-grid

Eskom is effectively incentivising South Africans with solar power installations to go completely off-grid, requiring direct customers with rooftop solar to install extra equipment and obtain new approvals.

According to EE Business Intelligence managing director and energy expert Chris Yelland, installing the new equipment and obtaining the required sign-offs can be expensive.

Moreover, it gives these customers nothing in return, encouraging them to ditch the power utility entirely and further adding to Eskom’s revenue collection woes.

He explained that many wealthy Eskom customers have invested in solar power systems to provide electricity during 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,” he said.

Yelland explained that these customers are left with a choice: spend the R30,000 obtaining the approvals and installing Eskom’s required extra equipment, or use the money to upgrade the system to go off-grid.

For example, R30,000 could be spent on increasing battery storage or installing a generator to provide power during the extensive gloomy periods when these customers would need the grid.

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

Yelland also raised concerns over how the decision would impact poorer electricity users in South Africa, warning that Eskom could be making a big mistake.

“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,” he said.

South Africa’s energy regulator also approved Eskom’s retail tariff plan in early 2025. It requires Eskom’s direct customers with rooftop solar to adopt the Homeflex time-of-use (ToU) tariff.

The Homeflex ToU tariff includes an unavoidable fixed fee that is higher than plans with flat tariffs. It also carries higher charges during peak hours to discourage these customers from consuming grid power.

These changes could further incentivise wealthy customers to upgrade their solar power systems and ditch grid power.