By • Mike Dickson | New Earth Energy
Since the second half of 2019, the electricity crisis has worsened. We are plagued by almost daily load shedding across the country. Eskom’s Energy Availability Factor dropped to 65%, meaning 35% of its nominal generating capacity is not available, the highest ever!
This caused by Eskom’s financial and operational issues. Eskom’s debt ballooned to R450billion due to mis-management, poor planning and corruption. Eskom is not able to properly service and maintain its dilapidated fleet of thirteen coal-fired power stations which make up more than 80% of its nominal generation capacity of 44.2 Gigawatt. Moreover, internal corruption has been (and probably still is) rampant as we can see in the summons issued against former CEO Brian Molefe and other senior executives as well as Eskom board members to recover R3.8 billion looted funds.
The increasing frequency and severity of load shedding throughout South Africa does not only paralyse Eskom’s commercial and industrial customers but also affects Eskom’s ability to stay financially afloat. The loss of income is making it impossible for Eskom to pay for much needed maintenance, invest into the completion of new power stations, and pay R70-90 billion every year to service its debt. Steep tariff increases will be needed which in turn reduce demand, increasing Eskom’s financial trouble, requiring higher tariffs.
This has become a vicious circle or as previous CEO Phahamani Hadebe put it so vividly in August 2019, “Eskom is in a Death Spiral”. While everybody is well aware of the dynamics of this death spiral, it is not likely that any action is forthcoming as our National Treasury can’t afford the required bailout of R200-250 billion.
So, what are the implications for Eskom’s residential, industrial and commercial customers, like us?
First, we have to expect steep tariff increases, coming every year. After the 9% increase on 1st April this year, Eskom is preparing a 10-15% increase on 1st April, 2021, just 7 months from now, following its court victory for recovery of a loss of R69 billion government support in 2019. The only way to avoid this impact on our bills is by reducing our electricity consumption. Energy audits are able to pinpoint areas of excess consumption. Energy efficiency measures, like replacing electric stoves with gas, electric geysers with solar, conventional lights with LED, etc are some of the ways to cut your bills in the future.
The 2nd implication is that the scourge of unplanned and frequent periods of load shedding will continue. Investing into a UPS to keep computers and communications running is straightforward and easy to set up. Additionally, you may want to look into generating your own electricity through a roof-top solar system with battery back-up storage to protect you against rainy days.
Prices for such installations have dropped significantly over the past years, and with the added tax benefit of 100% write-off of the cost in the year of installation, the payback period is usually less than 5 years. What you can’t put a price on is your peace of mind!
Third, we have to expect that centralized power supply will make way to de-centralized supply through so-called “small-scale embedded generation”. Solar will be the key technology because it can be deployed cheaply and quickly. An independent power provider will design, install, run and maintain a tailor-made system on your site.
Your price for electricity will be fixed for (usually) 10 years, with only an inflation adjustment.
In summary, looking at our experience over the past 20 years, it is highly unlikely that Eskom will be able to escape the “Death Spiral”.
The days of centralized power supply are numbered. It is critical that our businesses and families get ready for the shift to our own power and decentralized electricity from renewable sources.
The low costs of such systems and generous tax incentives will help. What are we waiting for?