Generation of Electricity in South Africa describes the current market, the latest developments and discusses factors influencing the success of the sector. The report profiles 19 role players, including Eskom and the National Energy Regulator of South Africa (NERSA). Also profiled are companies in the solar sub-sector, including Phelan Energy Group (Pty) Ltd which launched the largest solar farm in Africa near De Aar in the Northern Cape. The solar farm provides power to about 175,000 households and employs 50 full-time members of staff.
Generation of Electricity in South Africa
State-owned utility Eskom generates approximately two-thirds of the electricity produced in Africa and 95% of South Africa’s requirements. Eskom operates 23 power stations with a total capacity of 42,090MW. In efforts to reduce its dependence on coal-fired power, South Africa is shifting its energy mix toward renewable energy and natural gas, and is showing a renewed interest in nuclear power.
Independent Power Producers
Through the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Eskom has signed 65 power purchase agreements with Independent Power producers, which will add 4,900MW of capacity to the grid by 2020/21. Over the last five years, the REIPPPP has attracted approximately R194bn in private investment. However, in July 2016 the Eskom board announced that it will not sign any further power purchase agreements after the current round is finalised.
Although Eskom announced a loss of revenue of R11.7bn at the beginning of 2016, it reported that revenue for the year ended 31 March 2016 had increased 10.6% to R163.39bn. Despite this increase in revenue and profit after tax of R4.6bn for the 2015/2016 financial year, Eskom still describes the operating environment as “challenging.” It has to contend with the deteriorating condition of its ageing power plants, delays and escalating costs to complete its new build programme, increasing operating costs, credit ratings downgrades and stagnant, and in some cases, declining electricity sales to key customers.