By Tracy Ledger
South Africa needs more electricity, more reliable electricity and cheaper electricity. These are basic prerequisites to support higher levels of socioeconomic development and increased standards of living. Reducing the cost of supply is a key (albeit not the only) prerequisite60 for municipal electricity distributors to improve financial sustainability, create room for long-term reductions in the real cost of electricity and fund the infrastructure expenditure necessary to improve service levels. The single biggest part (more than 85 per cent) of the cost of supply across municipalities is bulk costs, almost all of which are paid to Eskom. Given Eskom’s expected medium-term tariff trajectory – increases well above inflation – the most likely outcome is that financial sustainability and operational performance of municipal electricity distributors will deteriorate further. In addition, substantial Eskom tariff increases drive above-inflation municipal tariff increases, which act to reduce demand (as consumers self-limit) and increase the incentive for illegal connections, all of which add further financial pressure to municipal distributors.
At the same time, as the importance of municipalities accessing (more) cheaper electricity supply has grown (and the difficulties of accessing that from large-scale PPPs has not decreased), there has been an explosion in the quantum of installed behind-the-meter solar PV. This is particularly the case in Gauteng: Johannesburg, Ekurhuleni and Tshwane account for just over half of the national total of installed rooftop solar. The majority of these installations are residential, and most of them produce ‘excess’ electricity on average over a twelve-month period; electricity that could be produced by the system, but which is curtailed because it has no place to go. This excess electricity is potentially available to municipalities at a rate almost half that which is currently paid to Eskom (on the Megaflex tariff). We have estimated that the value of that excess power (based on existing installations) could be just over R2.5bn per annum by 2035, to the Gauteng municipalities.
