Should I Invest in Solar Now That ESKOM Seems to Be Stable?

The question on everyone’s mind: "Should I stay or should I go now? If I stay there will be trouble, if I go there will be double." This classic tune resonates with the dilemma many South Africans face regarding investing in solar energy, especially now that ESKOM appears to be "stabilising". Let’s delve into the current situation to help you make an informed decision.

Current Loadshedding Status

Eskom is celebrating over 80 days without loadshedding, the longest period since early 2022. This turnaround in generation has allowed Eskom to address its core issue: a lack of profitability. As demand for its power declines with the rise of new energy producers, Eskom has been forced to hike tariffs, which in turn drives customers away, creating a cycle of diminishing returns.

Despite a declining demand, recent findings indicate that City Power has implemented load reduction measures due to exceedingly high electricity usage levels in Johannesburg. These measures include:

- Rolling out ripple relay systems to cut electricity to geysers in homes under threat.

- Reducing load at substations with high consumption.

- Intensifying cut-off operations against illegal connections

What does this all mean?

Elections and Energy Stability

No surprises for guessing the South African economic climate for 2024 is looking pretty rocky at first glance. Economists are predicting a sluggish 1% growth in 2024 as the South African economic climate battles both global and domestic challenges.

In recent developments, the formation of a Government of National Unity (GNU) has brought about discussions regarding its potential impact on monopolies, such as ESKOM. Experts suggest that changes in government could lead to improved efficiency in state-owned enterprises like ESKOM. The extent of these improvements will largely depend on the policies and decisions made by the coalition government concerning energy and public utilities.

On the flip side, GNU could shift the focus towards deconcentrating the economy, which involves reducing protections and subsidies for large, inefficient monopolies. Eskom's revenue will continue to fall, leading to potential restructuring and retrenchments. Former CEO Andre de Ruyter and other experts have warned that continuous price hikes will only accelerate customer migration from Eskom’s grid, leaving only those unable to afford alternatives. The big question is, would this approach make South Africa more competitive by fostering a fairer market environment? The anticipated changes could lead to a reduction in the dependence of businesses on government support, promoting a more dynamic and efficient energy sector.

Usage and Generation Insights

The Eskom se Push app provides a sobering historical view, showing that high-level loadshedding occurs on average for 9 out of 12 months annually. February of this year saw one of the highest levels of loadshedding to date.

Interestingly, current data shows a 30% decrease in demand from what was projected in 2020 for 2024, reflecting our struggling economy. This lower than expected demand has contributed well to the reprieve from loadshedding, which we have seen in recent months.

Recent data indicates that ESKOM’s daytime renewable generation is between 3 and 4GW, accounting for 10 to 15% of the country’s load.

Rumours and Future Prospects

Several rumours are circulating that could impact your decision:

- A Power Ship in Maputo is currently providing power for Mozambique, reducing the country's reliance on the Southern African electrical grid. It is also important to note that Mozambique has announced plans to end its hydroelectric power supplies to South Africa once the current power purchase agreement expires in 2030. This decision will affect the supply from the Cahora Bassa facility. The end of Mozambique’s hydropower supply to South Africa could raise risks for South Africa’s economy, particularly its industrial sector.

- ESKOM has provided generators to the mines, either selling power at discounted rates or having the mines cover diesel costs.

-Eskom is working on increasing the length of new transmission and distribution lines to up to 800km per year in the next three years, a significant increase from the 300km achieved last year. This is part of their effort to reinvent themselves and ensure a more reliable power supply for South Africa’s growing needs.

- An ESKOM price increase is expected in July, projected to be between 13-25%.

Conclusion: To Invest or Not to Invest?

While ESKOM seems to be making strides towards stability, there are so many factors affecting an outcome, underlying issues of high demand, political uncertainty, and historical loadshedding patterns suggest that reliance on the grid alone remains risky.

Eskom's financial woes are compounded by a crisis of non-payment, particularly from municipal customers, and the high costs associated with inefficient power production. The utility’s reliance on the Regulatory Clearing Account (RCA) for tariff hikes has been criticised for not incentivising efficiency. The inclusion of expensive costs like Open Cycle Gas Turbine (OCGT) costs has particularly been seen as a misuse of the RCA.

Despite reducing diesel expenditure recently, Eskom still faces significant financial losses, posting a R24 billion loss last year and projecting more losses ahead. With the National Treasury tightening control and customers steering away from Eskom power, the utility needs clearly needs to resolve its deep financial and operational challenges.

Investing in solar energy provides a level of independence and reliability that ESKOM currently cannot guarantee. By investing in solar, you mitigate the trouble of loadshedding and potential price hikes, securing a more stable and predictable energy future for your home or business.

If you stay with the current system, you face ongoing uncertainties. If you go solar, you might incur upfront costs but gain long-term security and savings. The choice is yours, but as the song goes, "If I stay there will be trouble, if I go it will be double." Weigh your options carefully and consider the peace of mind that comes with energy independence.

The ModTech Energy Team