Market research firm Fitch Solutions has weighed in on the energy crisis facing South Africa, with the entity warning that the risk of rolling power outages will remain high over the short to medium term due to the unreliability of existing power capacity and limited scope for sufficient maintenance.
The firm, which is a subsidiary of Fitch Ratings, said while many large-scale users will look to reduce their reliance on the state-owned power utility, Eskom, through the development of their own generating capacity, there is also the risk of businesses opting to reduce activity or cease operations in the market.
Fitch further warned that Eskom’s planned tariff increase will be ineffective in addressing revenue shortfalls. “Amid the ongoing electricity reliability challenges, we believe that Eskom’s planned high tariff increases will likely have the net effect of driving away its high-usage customers, thereby reducing overall demand, and eroding the utility’s revenue growth,” the entity said.
Eskom significantly ramped up its electricity loadshedding during August and September, with loadshedding at one point reaching stage 6 and leaving many businesses and households without power. For context, each stage of loadshedding represents 1 000MW of electricity demand being taken offline.
The power utility’s average annual energy availability factor (EAF) over the past eight years has been 72%. However, this has been gradually falling, with the average EAF estimated to have been as slow as low as 51% at the beginning of October. A new Eskom board was appointed this month with a mandate to improve the EAF.
Fitch said it expects large-scale users to accelerate efforts to reduce reliance on Eskom. “An example of firms looking towards developing their own power capacity is mining firm Anglo American partnering with EDF Renewables to form a joint venture (JV) called Envusa Energy. The aim of the JV is to develop up to 600MW of renewable power, with the potential to ramp it up to 3-5GW by 2030.”
In July, President Cyril Ramaphosa announced a host of changes aimed at tackling the crisis. Eskom also announced in September it would be launching three programmes aimed at securing at least 1 000MW of extra capacity to help reduce the burden on the utility.
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