The migration from Eskom has begun

In normal circumstances, one might expect a state electricity producer to want to sell as much of its product as possible. But these are not normal times as stage 6 load-shedding becomes a feature of our lives, another tangible symptom of the death spiral that SA’s state-owned companies find themselves in.

In the scramble for solutions, the private sector is set to take a more prominent role in electricity production and rail and water concessions. It is a belated admission that the state, beset by corruption and policy drift, cannot do it alone.

Eskom’s death spiral is well illustrated in a statement by ratings agency Fitch which says the utility’s sales are likely to decline 2% a year until 2027 as independent power producers ramp up production. The utility produced 11.4% less power in the first four months of 2023 compared with the same period in 2022.

Fitch raises a question mark over Eskom’s credit ratings, with projected tariff increases deemed insufficient to fund the necessary capital expenditure. Meanwhile, 108 private projects with a combined capacity of 10GW are in the pipeline.

The migration from Eskom power has started and is likely to become a stampede. The increasing use of solar power, especially among wealthier consumers, will erode Eskom’s viability in coming years, while business is making its own plan.

With an unreliable power station fleet and unresolved issues of corruption, Eskom has had little choice other than to ask its customers to use less of what it produces. It hopes to do this by encouraging demand-side management, which will potentially entail the installation of smart meters that allow Eskom to switch off geysers and home appliances should the need arise. Eskom chief engineer Edison Makwarela says smart meters and loadlimiting could be done remotely and would cost R16bn to install at every user. Eskom’s initiative aims to spare about 1,500MW.

Another two stages of load-shedding could potentially be averted when new rules on light bulbs come into force in a year’s time, with new regulations essentially banning the sale of all but energy-saving LED lights. This spells the end for incandescent and fluorescent bulbs, which are cheaper, but which use much more electricity inefficiently. Business Unity SA energy expert Happy Khambule says electricity bills can be reduced by up to 40% by using LEDs.

The move to greater power efficiencies within the business community also makes good business sense, keeping a cap on spiralling energy prices and promoting responsible usage of what has become a scarce resource. Retail group Shoprite has shown how this can be done, spending R48.7m in the past year on its LED replacement project as part of its move to lessen consumption while installing renewable-power capacity.

This will be the trend in future, as another state-owned entity buckles under mismanagement and corruption, leaving consumers to fend for themselves as they do in so many other fields.