Self-generation could mitigate SA’s energy crisis

Self-generation of electricity by SA businesses and households is likely to reduce rolling blackouts without compromising the state power utility’s business model, according to the continent’s biggest bank.   

As much as 1,000MW of additional generating capacity from privately owned auxiliary power systems could be added annually in Africa’s most industrialised economy, said Goolam Ballim, chief economist at Standard Bank. That is equivalent to a one-stage reduction in load-shedding. 

Eskom has been struggling to meet demand since 2008, and has subjected the nation to blackouts every day so far in 2023 to protect the grid from collapse. Though the utility has said an additional 4,000 to 6,000MW of capacity is needed, new projects have been slow to come online. 

Businesses and households that “have realised nobody is coming” to help them are turning towards self-generation, a practice likely to support economic activity in 2023, Ballim said. Standard Bank sees the economy growing 1.3% this year, a full percentage point more than the Reserve Bank’s estimate.  

While self-generation will alleviate pressure on the grid, it is unlikely to pose a structural threat to loss-making Eskom’s revenues and sustainability within the confines of a planned debt restructuring, according to Ballim.

The government plans to take over between one- and two-thirds of Eskom’s R396bn debt, with details due to be announced in the February 22 budget. If the plan significantly stabilises the utility’s balance sheet, it can afford customer losses over the near to medium term, Ballim said. 

“On the industrial and commercial scale, there will still be plenty of latent demand and further demand will emerge in the SA economy once we have a stable power supply,” he said. It’s “quite plausible” that supply will stabilise later this year and into 2025, he said. 

Bloomberg
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