Issue 137, Dec 2024

Roundup of major energy and electricity news and developments in South Africa: 25 Nov to 8 Dec 2024

1. IRP stakeholder engagements resume after minister identifies major deficiencies.

2. NERSA concludes public hearings on Eskom application for 66% price increase.

3. Court sets aside ministerial determination and NERSA concurrence for new coal power.

4. Municipal electricity innovation enabled by smart, dispatchable, distributed energy resources.

5. Fossil fuel energy sector in South Africa experiencing governance challenges.

6. Reasonably robust growth expected for the solar PV sector in South Africa.

7. After years of procrastination Eskom to dispose of home loan portfolio to African Bank.

To see an archive of all energy and electricity sector roundups to date, please visit www.eebi.co.za/news

1. IRP stakeholder engagements resume after minister identifies major deficiencies.

On 26 November 2026, with only three days’ notice (two of which were over a weekend), stakeholder engagements resumed on the draft Integrated Resource Plan (IRP) for electricity, after new Energy & Electricity Minister Kgosientsho Ramokgopa identified significant deficiencies in the earlier Draft IRP 2023. The first draft was released in for comment in January 2024 by Minister Gwede Mantashe, and by the closing date of 6 March 2024, over 4300 submissions, including 250 substantive submissions, were received, prompting a comprehensive review. “We are doing a review. I said to the team, we will sit with those who have made substantive contributions. We are not re-opening for public consultation. We are simply deepening that conversation because some of the submissions raise issues around the assumptions and the modelling, and therefore how you arrive at the aggregate of the [energy] mix”, the minister stated. The targeted stakeholder engagement sessions were held from 26 to 28 November 2024, in Pretoria and Cape Town, where the modelling team presented the outcomes of the review based on public comments received earlier. These sessions aimed to refine the IRP to address energy security, cost reduction and environmental sustainability, based on a number of revised assumptions. The government plans to finalise the updated IRP by the end of March 2025, following further government, business, labour and community engagement processes at NEDLAC, and final approval by the cabinet after “policy adjustment”. The target date of 31 March 2025 for the finalisation and publishing of IRP 2025 is considered optimistic, with the possibility that it may in fact take several months longer.

2. NERSA concludes public hearings on Eskom application for 66% price increase.

The National Energy Regulator of South Africa (NERSA) has concluded public hearings regarding Eskom's application to increase electricity tariffs by 66% over the next three years. The proposed increments are structured as follows: 36.15% for 2025, 11.81% for 2026, and 9.1% for 2027. The hearings, held across various provinces, witnessed widespread opposition from civil society groups, municipalities, political parties, and business and industry associations. The Organisation Undoing Tax Abuse (OUTA) criticised Eskom for focussing on achieving cost reflective prices through massive price increases, instead of focussing on cost reductions and improved efficiencies. OUTA said this was an attempt to transfer the financial burden of its inefficiencies onto consumers. The organisation recommended that NERSA reject the proposed increases and urged Eskom to prioritise operational efficiency and cost reductions in areas such as energy procurement, staffing, operations and maintenance. Municipalities in Gauteng collectively opposed the tariff hike, expressing concerns over the potential economic strain on residents and businesses. They emphasised that the recent 12.75% tariff increase had already placed significant financial pressure on communities, and an additional hike could lead to widespread discontent and unrest. Eskom defended its application by citing the need to address a revenue shortfall resulting from previous regulatory decisions that were not in its favour. The utility argued that the proposed increases are essential to ensure financial sustainability and maintain reliable electricity delivery. NERSA is expected to announce its decision on Eskom's application by 20 December 2024. The outcome will significantly impact South Africa's energy landscape, balancing Eskom's financial requirements with the economic well-being of consumers, business, industry, agriculture and the broader economy.

3. Court sets aside ministerial determination and NERSA concurrence for new coal power.

In a landmark judgement handed down on 4 December 2024, the Pretoria High Court invalidated a determination by Minerals & Energy Minister Gwede Mantashe, and the subsequent concurrence thereto by NERSA, to procure the 1500 MW of new coal-fired power generation envisaged in South Africa’s Integrated Resource Plan for Electricity, IRP 2019. Judge Cornelius van der Westhuizen indicated that Minister Mantashe and NERSA had failed to present evidence that they had given any consideration whatsoever to the environmental and health impacts of coal combustion. The judge ruled that while the minister and NERSA were empowered to give effect to government policy in respect of security of supply, in so doing they had failed in their constitutional and legal obligations to consider the associated negative environmental and health impacts, particularly in respect of children, thereby infringing upon their constitutional rights to health and a safe environment. Judge Van der Westhuizen emphasized that the Minister’s determination and NERSA’s concurrence were therefore “unlawful and invalid”, and ordered them to cover the legal costs incurred by the applicants. The case, known as the “Cancel Coal” litigation, was initiated by environmental organisations including the African Climate Alliance, the Vukani Environmental Justice Movement in Action, and groundWork. They argued that the government's plans for new coal-fired power plants posed significant threats to constitutional rights and were unnecessary given the availability of cleaner, more cost-effective renewable energy alternatives. This ruling represents a significant victory for environmental activists and sets a precedent for future energy planning in South Africa. It underscores the necessity for thorough assessments of environmental and health impacts, especially concerning vulnerable populations like children, in government decision-making processes.

4. Municipal electricity innovation enabled by dispatchable distributed energy resources.

The Dr. Beyers Naudé Local Municipality (DBNLM) in South Africa's Eastern Cape is pioneering an innovative electricity programme that leverages smart, dispatchable, distributed energy resources to provide affordable power to residents, while addressing financial obligations to Eskom. Developed in partnership with Utility Consulting Solutions, the programme integrates legal electricity trading mechanisms with small-scale embedded generation from local private partners. By collaborating with businesses, DBNLM harnesses electricity from rooftop solar panels and battery storage systems, delivering dispatchable power during peak demand periods. With this approach, the municipality aims to cap electricity tariff increases to a maximum of the annual Consumer Price Index (CPI) plus 1%, ensuring affordability for residents. Simultaneously, DBNLM will maintain its electricity procurement levels from Eskom, while securing a stable revenue stream to manage and reduce its Eskom debt. DBNLM is also said to be one of the first municipalities to compensate consumers monthly for the electricity they generate and plans to involve 12,000 households as co-generators. Visiting DBNLM recently, Deputy Minister Samantha Graham-Maré praised DBNLM for its commitment to public-private partnerships and innovative solutions that enhance municipal revenue and provide affordable electricity. She announced plans to replicate similar programmes in other municipalities nationwide. This initiative gives an indication of how renewable energy can contribute to accessible and affordable power for all South Africans, including providing free basic electricity to indigent residents. It underscores the potential of smart, dispatchable, distributed energy resources in revolutionising municipal electricity distribution.

5. Fossil fuel energy sector in South Africa experiencing governance challenges.

South Africa's fossil fuel industry is grappling with significant governance challenges, as evidenced by the recent suspensions of top executives at major energy companies. Exxaro Resources, a leading coal producer, announced the precautionary suspension of its CEO, Dr. Nombasa Tsengwa, pending an independent investigation into allegations concerning her workplace conduct and governance practices. Dr. Tsengwa is also the president of the Minerals Council of South Africa and deputy chair of the Energy Council of South Africa. Neither the Minerals Council nor the Energy Council have yet announced any changes to their leadership following this development. The board of Exxaro emphasised the seriousness of these allegations but refrained from presuming the investigation's outcome. In the interim, Finance Director Riaan Koppeschaar has assumed the role of acting CEO. Dr. Tsengwa, who took over as CEO in August 2022, has been instrumental in steering Exxaro towards cleaner energy minerals, including copper and manganese. Similarly, on 17 October 2024, PetroSA, the state-owned oil and gas company, suspended its CEO, Xolile Sizani, just eight months into his tenure. The suspension is linked to his decision to terminate a contentious offshore gas deal involving EquaTheza Oil and Gas, a joint venture partly owned by former National Director of Public Prosecutions, Bulelani Ngcuka. Sizani's suspension has raised concerns about the stability of leadership within PetroSA, especially given his brief period in office. These executive suspensions highlight the governance issues plaguing South Africa's fossil fuel sector. The outcomes of the ongoing investigations are anticipated to shed light on the depth of these challenges and their potential impact on the industry's future direction.

6. Reasonably robust growth expected for the solar PV sector in South Africa.

Private sector renewable energy projects registered with NERSA exceeded a milestone of 10 GW as of November 2024, according to statistics released by the Regulator for October and November 2024. Regulations require that all private sector embedded generation and wheeling projects greater than 100 kW must be registered with NERSA. The 10.15 GW figure thus excludes residential and small commercial and agricultural solar PV and battery energy storage systems. According to the South African Photovoltaic Industry Association (SAPVIA), the total registered capacity of all renewable energy generation facilities increased by 933 MW in September 2024, and 483 MW in October and November, reaching 10.15 GW. Of this, solar PV projects contributed 6.57 GW, accounting for approximately 65% of the total registered capacity. This trend highlights the private sector's pivotal contribution to the country's renewable energy expansion. The public sector is also making strides, with 495 MW of utility-scale solar projects currently under construction. Of these, 375 MW are expected to come online in 2024, and an additional 120 MW in early 2026. Furthermore, 880 MW of projects are in advanced development stages, with construction anticipated to commence in 2025. SAPVIA forecasts a quarterly growth rate of 8 to 15% over the next two years in the commercial and industrial (C&I) solar market (installations between 30 kW and 1 MW) and the utility-scale segment. This projection is based on current private-sector registration trends and indicates a fairly robust trajectory for the solar PV industry. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is playing a crucial role. The upcoming seventh bid window aims to connect 1.8 GW of new solar projects to the grid by the end of 2028, further bolstering South Africa's renewable energy capacity. 

7. After years of procrastination Eskom to dispose of home loan portfolio to African Bank.

After years of deliberation, and a R2bn penalty by National Treasury for the delays, Eskom has finalised the sale of its staff home loan portfolio to African Bank, in a move to streamline operations and bolster financial stability. The transaction, valued at R5.7bn, involves the transfer of Eskom Finance Company SOC Limited's (EFC) home loan book to African Bank. Eskom's journey to divest this asset began in 2018 with a pre-qualification process for potential bidders. However, the sale faced delays, notably in 2020 when the economic impact of the COVID-19 pandemic affected stakeholder expectations, prompting Eskom to restart the sale process in September 2022. African Bank's acquisition is a move to diversify its product offerings and strengthen its position in the secured home loan market. Eskom Finance Company, established over 30 years ago, provided home loans at preferential interest rates to Eskom employees, with repayments typically deducted directly from salaries. At the time of the initial sale consideration in 2018, the loan book was valued at R8.7bn, serving approximately 16,000 customers. This divestment aligns with Eskom's broader strategy to focus on its core operations and address its substantial debt burden. By offloading non-core assets like the home loan portfolio, Eskom aims to streamline its operations and improve financial health. African Bank's successful bid underscores its commitment to expanding its footprint in the home loan market. The integration of EFC's home loan book is expected to provide African Bank with a platform for growth in the secured lending sector. The transaction represents a pivotal step for both Eskom and African Bank, reflecting a strategic realignment towards their respective operational and financial objectives.

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