Self-Generation of power seen mitigating South Africa’s energy crisis

Bloomberg | Self-generation of electricity by South African 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 1,000 megawatts of additional generating capacity from privately owned auxiliary power systems could be added annually in Africa’s most industrialized economy, said Goolam Ballim, chief economist at Standard Bank Group Ltd. That’s equivalent to a one-stage reduction in power outages, known locally as load-shedding.

Eskom Holdings SOC Ltd., which provides most of South Africa’s electricity, has been struggling to meet demand since 2008, and has subjected the nation to blackouts every day so far this year to protect the grid from collapse. While the utility has said an additional 4,000 to 6,000 megawatts of capacity is needed, new projects have been slow to come online.

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

While self-generation will alleviate pressure on the grid, it’s 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 396 billion rand (US$22.4 billion) of debt, with details due to be announced in the February 22 budget. If the plan significantly stabilizes the utility’s balance sheet, it can afford some 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 South African economy once we have a stable power supply,” he said. It’s “quite plausible” that supply will stabilize later this year and into 2025, he said.