How to avoid paying Eskom more for less

Despite considerable public outcry, it seems likely that Eskom's new tariff increase of 18.65%, approved by the National Energy Regulator of South Africa (NERSA), will be implemented on 1 April, 2023.

We explore what this means for consumers, and how you can potentially avoid footing this increase.

Tip: Considering installing a solar power system? A personal loan could help make this a reality.

An unreasonable burden

The upcoming Eskom increase is unfair to South Africans, says Matthew Cruise, head of business intelligence and public relations at Hohm Energy.

“While we were experiencing stage 6 load shedding, Eskom announced a 33% overall increase in the price of electricity, which would be implemented within 15 months. This amounts to an effective doubling of the price of electricity over four years.

“Over the same period, the electricity supply gradually decreased to half of what it was before load shedding.”

Cruise says there may be a slight reduction to the tariff increase, but we’re likely to face a hike of at least 15% this year.

Added to this will be the annual municipal electricity tariff increases. These have been above inflation for the last couple of years, at 18% in 2021 and 17% in 2022.

Assuming that NERSA affords municipalities another 7% increase this year, the overall increase to the consumer will likely be 26% or more in 2023.

Possible solutions to the energy crisis

Amid the Democratic Alliance and Afriforum threatening court action, and the government pursuing a state of emergency to sort out the mess we’re in, Vietnam’s solution to a similar problem offers light in the darkness.

"Vietnam had similar issues with grid constraints. To solve the problem, the Vietnamese government incentivised its citizens to install solar by giving them a 20-year feed-in tariff that guaranteed the citizens an eventual return on investment.

"Within six months in 2019, 9,000MW worth of solar capacity was installed privately by home and business owners. No money was put down upfront by the Vietnamese government, and they are paying their citizens with the revenue they earn from selling the electricity," says Cruise.

According to the World Economic Forum, this equates to nine stages of load shedding being removed from the grid; and empowers citizens to sustainably provide for their own electricity needs.

Besides learning from the Vietnam example, Cruise says Eskom should unbundle so the country can move towards a democratised energy market as quickly as possible.

Finally, he suggests a significant investment to change natural gas to electricity infrastructure, which would inject thousands of megawatts into the grid in a short amount of time.

The City of Cape Town’s plan

To lighten the load for its residents, the City of Cape Town recently announced an incentive tariff for feeding solar PV electricity back onto the grid. This tariff will bring the return-on-investment period for a typical solar system down from five to four years, says Cruise.

Beverley van Reenen, the Mayoral Committee Member for Energy, says the city is working on a three-phase procurement for load-shedding protection to buffer residents in the first four stages of Eskom's load shedding.

“Progress has been made on the first phase, with a 200MW procurement of embedded renewable energy via independent power producers (IPPs) concluded last year.

“Tenders are to be awarded in the coming months, with technical proposals received from IPPs currently being evaluated,” she says. 

Cape Town is working with the Centre for Scientific and Industrial Research (CSIR) on grid integration studies to determine when and where these IPPs will feed power into the city's grid.

Van Reenen says the second phase takes the form of the city's Power Heroes programme, an initiative based on paying residents incentives for voluntary energy savings, such as automated remote shutdown of power-intensive devices at peak times.

The “demand response tender” for this programme, launched in October last year, is currently being evaluated and will be awarded within the coming months.

The third phase will be launched around March in the form of a dispatchable energy tender, expected to yield around 500MW for Cape Town's grid.

This tender will go a long way towards ending load shedding over time, given that a single load-shedding stage requires the city to shut down around 60MW, says Van Reenen.

“The tender will focus on renewable energy and dispatchable technologies, such as battery storage and gas. These sources need to generate power for a significant portion of the day to support the city's load-shedding protection efforts.”

Currently, about 70% of the city's electricity tariff income is used to buy bulk electricity from Eskom. The tarrif hike will impact the price to consumers dramatically.

“Over the years, the city has streamlined its operations, trimmed fat, and cut costs to ensure that customers are as buffered as possible from Eskom's constant double-digit increases,” Van Reenen says. “Affordability remains a key pillar of our budget strategy.”

“However, it must be weighed against providing a reliable service, the changing landscape of renewables, the investment required for buffering projects, and the maintenance and repairs required.”

Tips for households

Cruise says that while plans are being made, households would do well to care for their energy needs themselves.

“Over the past 15 years, the price of solar equipment declined by 90%, up until last year, when prices started increasing due to increasing demand and limited equipment supply.

“At current prices, you are guaranteed to make four times your investment back when you install a solar system and pay it off over five years.

“When a system is designed to last 15 years or more on the inverter and battery, and the solar panels are guaranteed to last 25 years, you make more than 400% return on investment,” he calculates.

Banks now offer to finance solar systems, so homeowners can end up with zero net difference to their monthly budget, as the money they save from electricity pays for the finance repayments.

“This makes the investment question a solid yes, financially. Given that you become immune to load shedding by going solar, the benefits of installation become obvious,” Cruise concludes.

Tip: Find out how to protect yourself from damage inflicted by load shedding.