• November 3, 2023 11:43 pm

Eskom Fears Revenue Dip as Appetite for Solar PV Grows

Jul 14, 2023
Eskom Fears Revenue Dip as Appetite for Solar PV Grows

Eskom Fears Revenue Dip as Appetite for Solar PV Grows. Eskom is concerned that it will lose revenue as numerous clients move to solar energy to avoid unreliable power supply during the winter months.

Eskom and municipalities, which rely on residential and industrial electricity revenue, are affected by consumers switching to solar energy.

Several businesses and residential areas installed solar panels on roofs and backup power batteries to mitigate the impact of load-shedding after Eskom’s rolling blackouts this year and fears of a national blackout caused by stage six load-shedding.

Eskom Fears Revenue Dip as Appetite for Solar PV Grows

The cost of alternative energy sources has also been high for businesses.

The Eskom load-shedding program began in 2008. Based on the utility’s medium-term adequacy report, rotational blackouts should continue until 2027.

Eskom Load Shedding stage 6

Since January, outages have intensified, lasting up to 12 hours a day on regular basis.

As compared to the first few months of the year, the country has experienced less load-shedding during the winter. According to Eskom, this has been attributed to a lower demand, improved generation capacity, increased gas turbine and diesel deliveries, as well as warmer weather than usual.

Load-shedding has decreased because businesses and people have switched to off-grid solutions.

Eskom replied to the Mail & Guardian that even though the shift to solar energy has benefited the grid, it remains concerned that it will be burdened with non-paying clients.

In addition to losing paid customers, the utility will be left with non-paying customers, which impacts municipalities as well.

Municipalities owed Eskom R57 billion as of 31 March. Residents of the municipality who have not paid for services and those who have illegally connected their homes to electricity are at fault for this.

Solar tax

South African Local Government Association (Salga) briefed the standing committee on appropriations in March that the new solar tax incentive could cause local municipalities to lose their paying customers, resulting in an increase in the already unsustainable cost of the power crisis.

The solar tax, according to the 2023 budget of finance minister Enoch Godongwana, will allow individuals to receive a 25% tax rebate when they purchase and install new and unused solar photovoltaic panels at their private residence between 1 March 2023 and 29 February 2024 for which a certificate of compliance has been issued.

“Municipalities may lose most of their paying customers if the government’s solar tax incentive works well,” Salga said, adding to the damage they are suffering from the power crisis.

By moving customers off the grid, Salga, which represents municipalities, said its revenue has already been adversely affected.

“Municipalities’ ability to deliver services will be compromised if no measures are taken to mitigate the effects of load-shedding,” stated the organization.

South Africa’s National Treasury released an accompanying document explaining the government’s incentive programme for household investment in clean energy capacity, which could help solve the country’s energy shortage.

“To encourage investment, the incentive will be available for only one year,” the document reads.

Big losses for Eskom

Solar energy reduces load-shedding and helps the grid recover, but according to energy analyst Tshepo Kgadima, Eskom could bankrupt as a result of the switch to alternative energy.

According to my estimates, more than 7,000MW of electricity demand has migrated off-grid in the past few years. Within the next 12 months, another 5,000MW of demand will migrate off-grid.

“Eskom will inevitably experience a drastic loss of revenue with sales of electricity falling from 193TWh to below 150TWh, which in monetary terms will amount to a colossal loss of approximately R79 billion a year.”

As Godongwana revealed in May, Eskom’s financial woes have increased due to higher spending than expected. Diesel, which was used to limit load-shedding, was the largest expenditure.

The weaker rand and borrowing activities led to an increase in Eskom’s debt stock of R439 billion over the past year. In the previous financial year, the company had earned less revenue than anticipated and spent more, especially on diesel [R21.36 billion], which had more than doubled from the year before.”

By increasing tariffs, Nersa is helping Eskom reduce its debt and recoup money it is owed from municipalities.

A tariff hike is expected to recover more than R350 billion for the embattled utility. Customers are also moving away from Eskom due to the increasing tariffs due to the utility’s increase in tariffs.

The global economy project of Valev — a company that collects data on fuel and electricity prices across the globe — found that, even though South Africa’s electricity prices are much higher than those of its neighboring countries, they are considerably cheaper than those of the UK, Belgium, Denmark and Germany, as well as the Cayman Islands and Bermuda.

Kgadima said, “Eskom’s exorbitant and extortionist electricity tariffs and inordinately long stages of load-shedding forced businesses and industries and domestic electricity consumers to urgently seek off-grid alternatives.”

While Eskom will likely lose customers to solar if it cannot meet its commitments, energy expert Chris Yelland told the M&G that the power utility is already unable to meet its commitments.

“With these circumstances, everybody wins, since, for example, more rooftop solar PV installations mean less load-shedding,” Yelland said.

“It will help Eskom, it is not able to meet its commitments already, so it’s not like it will be losing customers.”

It has already been reported that Eskom is unable to supply its customers due to a shortage of 5 000–6 000MW of electricity.

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