Eskom is being replaced — and that’s good for everyone

South Africa can end load-shedding if it does the right things for a long time. This includes households and businesses reducing their reliance on Eskom’s electricity supply.

This is feedback from energy analyst Chris Yelland, who told Classic Business that, in the long term, if the country continues to reform the electricity industry, load-shedding will become a thing of the past.

While unplanned breakdowns — unplanned capacity loss factor (UCLF) — are down this year compared to the same period last year, this is offset by increased planned maintenance outages — planned capacity loss factor (PCLF).

Yelland explained that this means that the availability of the Eskom fleet — its energy availability factor (EAF) — this year is similar to that of the same period last year.

Despite the similar EAF, South Africa is experiencing less load-shedding this year than last year.

Lower demand is the reason for the reduced load-shedding. Simply put, businesses and households use less Eskom power.

“It is quite clear that demand for Eskom’s electricity is declining and has been for several years. This does not mean the country is using less electricity. It just means it is not coming from Eskom,” Yelland said.

This means that alternative sources of electricity, such as rooftop solar and commercial installations, supplement Eskom’s electricity generation.

This reduces the need for electricity generated by Eskom and reduces its burden, enabling it to conduct more maintenance.

Simply put, households and businesses are replacing electricity generated by Eskom with power from their own alternative sources or private providers.

This trend is only set to accelerate as the cost of electricity from Eskom keeps rising, strengthening the business case for alternative sources of energy.

As a result, the utility finds itself in a debt spiral where it has to reinvent itself to compete with private players and relook at its business model.

Ongoing reforms to the country’s transmission grid will aid the private sector’s efforts and open the grid to competition on a level playing field.

Apart from opening the transmission grid, the Electricity Regulation Amendment (ERA) Bill currently in Parliament will enable the private sector to play a significantly greater role in electricity generation in South Africa.

Yelland noted that this does not mean Eskom is being privatised. It just means private participation is set to grow to an appropriate level.

As a result, Eskom’s assets will ultimately be owned by the state but financed, operated, and maintained by private companies.

“This is a welcome step forward because things cannot continue the way they have been,” Yelland said.

“I think the momentum growing on the restructuring and reform of Eskom is very important. The opening up of this industry for the private sector to play its rightful role is vital.”

Yelland said that this process, if seen through to the end, will make load-shedding a thing of the past in South Africa.

“The problem of load-shedding can be resolved. We just have to do the right things for a long time and put this industry in the right place. It looks to me like it is heading that way.”

“Longer-term, I believe that if we do the right thing, as we are at the moment and not be distracted, we can solve this problem and create a country where electricity is not a stumbling block to investment.”

This article was first published by Daily Investor and is reproduced with permission.