Nearly all of South Africa’s power is provided by this one company, now operating at less than half its installed capacity. This story isn’t just one of aging coal plants. It is also about the pitfalls of a state-owned monopoly in a system where corruption is endemic.
Eskom was lauded in the 1990s, with the Financial Times naming it “power company of the year” in 2001. South Africans enjoyed some of the cheapest electricity in the world until the first year of load-shedding, or planned blackouts, in 2007. Between 2008 and 2012, prices doubled. By 2021, they had more than tripled, even before the Russia-Ukraine war sent energy prices soaring around the world.
How did things go so wrong? South Africa is the third-largest user of coal for electricity generation in the world. It gets much more of its power from coal than other emerging economies such as China, India and Brazil. Within Africa, only Botswana comes close.
In 1998, the government consulted energy experts and published a white paper, predicting demand would outstrip supply by 2007. It didn’t invest in more energy infrastructure, and things have only gotten worse. Some wealthy South Africans have invested in solar panels, but they are too expensive for most.
All this has led to a fall in per capita electricity consumption over the past decade. And gross domestic product per person has stalled. While the failing energy system isn’t the only brake on the economy, it has obvious impacts on farming, manufacturing, construction and trade. The South African Reserve Bank recently estimated that the blackouts could cost the economy as much as $51 million each day.
Corruption stymies progress. Last December, the president authorized an investigation into Eskom. The National Defense Force was deployed to plants to tackle sabotage, theft and graft. In the past few weeks, Eskom’s outgoing head, de Ruyter, was suspended early after accusing the government of fueling and covering up corruption within the company. India and China score similarly high on Transparency International’s Corruption Perceptions Index, but neither has one centralized power company.
There is no quick fix. Building new coal plants — even if that wasn’t a disaster for carbon emissions — could take more than a decade in South Africa, based on its record. That’s what happened with the Medupi plant in Lephalale and the Kusile in Delmas. The African Development Bank doesn’t expect Medupi to break even over its lifetime, and Eskom continues to run up large debts. Repairs to old and worn plants cost time and money that the nation doesn’t have.
The country’s best shot is solar photovoltaics (PV). If, that is, Ramaphosa delivers on his promised financial assistance for solar power for households and tax incentives for businesses.
Happily, the calculus around solar power gets better by the day. Prices have fallen by almost 90 percent since 2009 and are likely to tumble further. The International Energy Agency has called it the “cheapest” electricity in history. South Africa has abundant resources to tap. Large-scale solar PV plants take just under two years to build. These could extend the existing grid.
And South Africa has a head start. It generates the most solar energy in Africa — more per person than other emerging economies, including India and Brazil.
It would be better still to decentralize parts of the energy system. Mini-grids to power small communities, or off-grid solar units for individual households, will be essential in electrifying remote areas across sub-Saharan Africa, as well as archipelagoes such as Indonesia and the Philippines. Many experts expect renewables to bring energy to more people across Africa and Asia in the decades ahead.
Storage is one of the biggest challenges. The long-term solution is the deployment of battery networks, which can be expensive. While prices have plummeted since the 1990s, batteries still add extra capital costs to solar projects that, in the medium term, will require government subsidies.
In the short term, South Africa might need to balance solar PV with diesel generators, which Eskom already relies on heavily. Though not ideal, this might be a necessary stopgap.
Coal is too often promoted as a consistent, dependable energy source, despite its dire effects on the climate. But the centralization of energy supplies is a liability for many low- and middle-income countries plagued by poor governance. Coal supplies and prices fluctuate, and old infrastructure crumbles without continuous long-term investment.
South Africa’s government has promised to support a new wave of solar projects. To do this efficiently, it must diversify both its providers and its sources of electricity.
