EP04 - ESKOM tariffs spike as renewable pipeline overwhelms infrastructure

South African Energy Market Update and Industry Insights
This episode provides an in-depth look into recent developments in South Africa's energy industry, from tariff adjustments and Eskom's debt recovery efforts to renewable energy projects and grid challenges. Perfect for anyone interested in the intersection of energy policy, industry innovation, and economic impact.
Main topics:
Eskom's 2026-27 Tariff Increases and Regulatory Framework
Eskom’s Debt Recovery and Municipal Debt Crisis
Growth of Renewable Energy Projects: Solar PV Initiatives and Off-Take Agreements
Grid Infrastructure Challenges and Regulatory Bottlenecks
Impact of Energy Costs on Local Industry & Resources
In this episode:
Eskom’s approval of retail tariffs with an 8.76% increase for direct customers and 9.01% for municipalities
How Eskom plans to recover revenue within fiscal year constraints and the implications for municipalities
Eskom’s public consultation on municipal debt and potential power supply interruptions
The introduction of large-scale solar projects like Anthem’s Nozi PV, including off-take arrangements with traders Discovery Green and NOA Group
Challenges faced by the metallurgical industry due to soaring electricity costs, exemplified by Merafe Resources’ profit plunge
The critical bottleneck posed by grid capacity and regulatory limits on renewable energy integration
The necessity of a smarter grid with energy storage solutions to support sustainable growth
Timestamps:
 00:00 - Welcome and episode overview of South Africa's energy sector updates
 00:32 - Eskom's 2026-27 retail tariffs approval and structural adjustment
 01:31 - Details on tariff increases for Eskom and municipalities 02:01 - Explanation of Eskom's revenue recovery within fiscal constraints 03:00 - Municipal tariff structures and changes for 2026-27 03:54 - Regulatory framework and compliance overview 
05:22 - Eskom’s public consultation on power interruptions over municipal debt 
06:10 - The municipal debt crisis and Eskom’s debt recovery strategy
 07:52 - Impact of municipal unpaid bills on electricity supply
 08:50 - Eskom’s operational stability and industry support statements 
09:46 - Industry implications: renewable sector growth and sector maturity concerns 
11:13 - Large-scale solar PV project announcements (Anthem's Nozi project) 
12:13 - Details on off-take agreements and project support funding 
13:11 - The role of traders and multi-off-taker wheeling models 
15:07 - Environmental and economic benefits of new solar projects 
16:25 - Private sector's role in decarbonization and energy sustainability 
17:35 - South Africa’s renewable capacity and grid capacity bottlenecks 
18:48 - Regulatory and infrastructural challenges ahead 20:45 - The need for expanded transmission linear infrastructure and smarter grids 
22:02 - Energy storage importance and demand management 
23:24 - Industry struggles: Merafe Resources’ profit plunge due to power costs 
26:05 - The impact of electricity tariffs and economic resilience
 27:44 - Final thoughts: community engagement, industry growth, and future outlook

Resources & Links:
South African Energy Regulator - NERSA
Eskom Official Website
Discovery Green

Transcript

SPEAKER_00 0:00

The approved standard tariff increase of 8.76 will be implemented from 1 April until 31 March 2027 for ESCOM Direct Customers and 9.01% increase will be implemented from 1 July 2026. Welcome to Relay Radio, where everyday life meets the wire. And this then, one of our latest episodes, behind me, things have definitely changed. You can see some decor changes and trying to do things on a shoestring budget, but yes, changes nonetheless. I've got these points open here, and we can take them one by one. The first of which I went and found over here on NERSA's website and the official media statement. Already got it open here, twice actually, and uh very clearly reads here 10 March 2026. Nurse approves the ESCOM retail tariffs and structural adjustment application for the 2026-27 financial year. So maybe just quickly something that I'm noting just off the bat. We we expected tariff adjustments. I'm wondering what they mean with structural adjustment for the new financial year. So it'll be interesting to know exactly what they mean by that and ultimately what the effect of that will be on us as Joe Soap in the street. So it reads the National Energy Regulator of South Africa, we all know NERSA, announced today that the Energy Regulator at its meeting held on 5 March 2026 considered and approved the ESCOM retail tariffs and structural adjustment application at an average tariff increase of 8.76% for ESCOM Direct customers and 9.01% for municipalities. So no one is exempt of these increases. The approved standard tariff increase of 8.76 will be implemented from 1 April until 31 March 2027 for ESCOM Direct customers, and 9.01% increase will be implemented from 1 July 2026. Now in our previous episode, you would have heard those are increases from what was originally approved. ESCOM went back and said, sorry, we made a slight miscalculation and we have to ask for more money ultimately from you and I. According to the ERTSA methodology, ESCOM must recover the full allowed revenue within its financial year, which is from April to March. However, the municipal financial year is from July to June. The approved average tariff increases for the respective customer categories are outlined in the table below. And then here we can have a look at those. So municipal flex, municipal rate, and then the public lighting, gen wheeling, gen offset, and gen purchase, all 9.01. And we can see there 8.76 on all of the SCOM direct customer rate structures. Then it reads there further to the bottom, pursuant to the court order issued on 21 December 2025. This I completed the redetermination process on 7 February 2026, enabling ESCOM to submit submit its ERTSA application on the 10th of February 2026. ESCOM submitted its application for the 2026-27 financial year, along with a proposed standard tariff schedule for review and approval. And we now know then that they got that approval. And it then just notes some regulatory framework that it's all in supposed compliance with. Now might be compliant, but still don't like it. I just thought I'd share this top news story with you. And in the electrical and energy industry, in other news, we can have a look at some more stories. Okay, so let's have a look at the next one I've got here, and I'm going to quickly read them to you. So the headline here reads ESCOM initiates a public consultation process on its intention to interrupt the electricity supply to address escalating municipal debt, protect affordability and strengthen the financial sustainability and advance sector reform. I can show you this screen here. This was on Thursday, the 5th of March last week, having exhausted all the reasonable avenues through the Intergovernmental Relations Framework Act. ESCOM is the in the process of issuing notices in terms of the promotion of Administrative Justice Act, providing affected parties an opportunity to make representations before further action is considered. The bottom line here is they are on the hunt. They are in looking to ensure that they will ultimately get their money. So formal action against 14 municipalities over unpaid electricity accounts, and there's an ESCOM official statement and some EWN coverage. Let me see if I can get the rest of that to you quickly. And reading further, then in their official statement, throughout the country, municipal debt has surpassed 110 billion rand, despite the National Treasury's intervention through municipal debt relief program aimed at restoring sound financial management. The persistent rise in arrears highlights the urgent need for ESCOM to proceed with debt recovery decisively. So you pay your bill, municipality doesn't pay their bill, and then your power gets cut off. Yeah, there's something seriously wrong with this picture, and all the more reason for us to seek alternate power solutions to gain energy freedom, to gain energy liberty, and to gain ultimately a sense of independence from the grid. Alright, let's have a look. So we see here Agnes Mlambu, group executive distribution for ESCOM, said the following We have to address rising area debt to protect the operational stability we have restored and the financial discipline we have rebuilt in the first three years of our turnaround to deliver on our development mandate. Through the turnaround, we are enabling business to protect and create jobs and supporting strategic industries to remain competitive. That in turn enable communities to thrive. And again, that was Agnes Nlambu. So, what are my thoughts here? I'm thinking by myself, what are we to do as you and I, as the average Joe in the street, and what is the impact that this has on the electrical industry? Well, on the one end, you might think it's great for the electrical industry because the SSEG processes and renewable energy sector will ultimately grow. Yes, this is true, but the issue still remains that sector is not mature. That sector of our electrical industry is not yet at a mature place where it can actually handle multiple municipalities simply being switched off. Besides the actual reason why they're being switched off, besides the repercussions to you and I, I'm thinking in terms of those that can't afford renewable solutions, those that that would ultimately have to function off-grid completely. But yes, all in all, I'm optimistic that this will be short-lived and hopefully they can come to a resolve. But yes, this does not look very positive looking into the future, as these are all signs of infrastructure decay, of local governance decay, and yeah, this is not a podcast or a channel to necessarily concentrate on those types of politically polarizing facts of South African life, but they are real and they are the news for right now in the energy industry, and I thought I'd share them with you and give my insights. I'd love to hear what you think, and maybe you can leave us comments down below. Give us your thoughts. Let's hop on to the next highlight for the last two odd weeks that passed in the news. This is more on the positive side of things. We're actually bringing solutions to the problems at hand, and it is along the lines of solar PV, solar photovoltaics. And have a look at this. Isn't that a sight for sore eyes? Open land, ready for solar to be installed. Anthem moves ahead with the giant free state PV project following off-take deals with two traders. Quite interesting, not one off taker, not one off take entity, but two. I'll touch on the details of how the off-taking process works in another uh episode. But there we can see the leading South African independent power producer Anthem has announced that its giant 475 megawatt AC and then that 620 megawatt DC Nauzi solar PV project in the free state has advanced to financial close after concluding private off-take agreements with electricity traders Discovery Green and NOA Group. That's wonderful news. That's great news. 9 billion Rand transaction has been supported by a consortium of lenders, including Standard Bank, NetBank, EPSA, and Vantage Green X Note. Anthem is the lead developer, generator, majority equity participant, and long-term operator of the facility. So they'll ultimately be responsible for keeping it going. And the Rheatile group is Anthem's equity partner in the project. Notsi follows a multi-off tacker wheeling model. Very interesting. So wheeling basically supplying power from a different location than where you're using it. So imagine I'm buying power, but it's being generated in another province. That's exactly what's going to happen here. So multi-off taker wheeling model, making use of agreements with ESCOM to wheel power over the national grid through 20 years plus off-take agreements with traders like Discovery Green will not like. There are the two traders that were approved: Discovery Green and NOA Group. I'm hoping to touch base with someone from Discovery Green fairly soon. I have a contact and just need to reach out to them. And who knows, we might get them on as a guest in the near future. So it then further highlights the increasing role of traders in supporting new generation projects, a trend that was underlined in recent South African Energy Traders Association report showing that the most of the more than one gigawatt of new projects that reach financial close in 2025 were backed by trader off-tech commitments. And it simply then just tells us a bit more about this installation and what it will entail. Spanning more than a thousand hectares, so imagine this a thousand rugby fields. Anthem says Nazi ranks as the largest solar PV project in South Africa. It will comprise of over 860,000 solar panels and have a yearly energy output of about 1.5 million megawatt hours. That is a phenomenal amount. So joint venture has been appointed as the engineering, procurement, and construction contractor, the EPC, while Anthem will assume the operations and maintenance responsibility post-year two of operations. Very interesting. They're in essence allowing for the main contractor, the EPC, to uphold the OM section then for the first two years, and whereafter, then Anthem will take over the last, well, the back end of the 20-year contract to then do 18 years of operations and maintenance. And construction is expected to be completed within 26 months. So we're in that financial mature section now of this contract, and it's then aiming to go live or construction to be completed within 26 months. So yeah, very, very interesting. At the moment, Discovery Green CEO Andre Nepchen says the Nazi project will introduce significant new renewable capacity onto the grid at a time when businesses are prioritizing long-term price certainty and a clear pathway to decarbonization. And isn't that so polar opposite to what we've just heard of what SCOM wants to do? Create for private industry and hopefully moving towards a point of ensuring that the industry becomes more sustainable, both from us as installers and electrical contractors, but also from a supply chain point of view to ensure that pricing stays semi-consistent. So, yeah, I am excited for what's coming, excited for what there is to see. And let's have a look at one more. This is closer to home. Yesterday, the 9th of March, Sapvia made a statement modern grid needed as more renewable energy becomes online, comes online. South Africa's installed solar PV capacity of 10.2 gigawatts, 72 gigawatts of renewable energy projects at an advanced stage of development, and a pipeline of a further 220 gigawatts of renewable energy project projects. And we just heard of uh the free state colossal PV project in the pipeline. We see there the top statement the industry has reached a critical bottleneck, says the industry organization, Sub Via, South African Photovoltaic Industry Association, technical technical and policy manager Sim Kuluse. And he states that the challenge is no longer a lack of investment, appetite, or technology, but the physical and regulatory capacity of the national grid. And I want to almost say it's more on the regulatory side than anything else. He then further goes on to say the energy transition has moved beyond the race to generate electrons and is now a race to build the infrastructure that carries them. So, what is ESCOM doing to ensure that this industry will move forward? And how is Nursa hampering those attempts? How is national government improving regulatory framework, policy framework on a local governmental level to ultimately not restrict the uptake of cost-effective, renewable, and sustainable energy? Now remember, this is not about me having electricity to boil my kettle for a cup of coffee. This is the backbone of our economy. Take electricity out of our country for six or eight hours, like we've seen in the recent past, and you will see the absolute havoc it wreaks on every moving part of our however small economy in comparison with the rest of the world. But yeah, the the effect is just is just so we see there, uh it states in the engineeringnews.co.za news platform the 2025 South African Renewable Energy Grid Survey showed that while developers are ready to build, grid connection remains the single largest hurdle to delivery. In high resource areas like the Northern Cape and the Eastern Cape, projects are increasingly competing for limited connection points, leading to a so-called gridlock situation that can stifle private sector-led growth. In 2026, grid connectivity, not capital, will be the final arbiter of South Africa's energy success, he comments. At the moment, ESCOM, for the national transmission company of South Africa to succeed, it must function as an investment grade standalone entity capable of raising 440 billion rand in capital required to deliver 14,500 kilometers of new transmission lines needed in this decade. 10 years to raise 440 billion Rand, and that 440 billion Rand must be spent on transmission lines only. That's not like budget for the whole country for 10 years. That's transmission line expansion for the next within the next 10 years. Then we need to move towards a smarter grid. We need energy storage on the grid for any form of renewable to stay sustainable and actually functional. If we don't have anywhere for the energy to go, we simply can't use it. I always try and explain to some of the people that I facilitate class for. Energy can't be pushed, it can only be pulled. If there's no demand, there is no power draw. Power supply is merely the ability to do something. So yeah. Where does that leave you and I? I would almost want to say vote right. If only voting was the easy part, if only it was as easy as voting right, but nowadays, even that is hard. But yes, as I said, we won't go politically polarizing on this channel. I'm just sharing my personal personal views. It's as simple as that. You'll remember I touched on the smelting industry, metallurgy industry on the last episode, and how ultimately, in some cases, it's roaring back to life, but in this case, it's not. Mirafe Resources posts a profit plunge as soaring power costs shut their smelters. On March 9th, so this was yesterday at the time of recording, South Africa's Mirafe Resources reported a 72% slide. That's a massive plummet in full year profit on Monday after suspending operation at its ferrochrome smelters due to high electricity costs. Now you might say, well, why don't they just generate their own? They are, but they can only do that much. Mirafi's headline earnings per share fell to 12.2 South African cents in the year ended December 31st of 2025, all the way down from 42.9 cents in the previous year. The company which operates Ferrochrome joint venture with Glencore idled its plants in April of 2025, citing soaring power costs and increased competition from Chinese smelters. So if business isn't hard enough just by simple business and competition, also known as good old capitalism, they now have to compete against soaring energy costs because mainly of just mis and malmanagement. Again, I'm not gonna try and be too negative, but the reality is January 26, South Africa's energy regulator approved a 35% reduction in electricity tariffs for Mirafe and fellow producers Salmoncore, allowing Mirafe to restart its largest plant, the Lion Smelter, last month. That I picked up on our last episode. On February 27, state power utility ESCOM offered a further 29% tariff cut to the distressed smelters pending regulatory approval. So it seems like they are exempt of the ESCOM increases, but it almost feels like the damage has been done. I'm thinking in terms of how many businesses are only feeling the effects of COVID-19 and the various impacts that had on just daily business. And some of those effects are coming to light now, where they might have been able to take some of the knock financially until now, but ultimately that's not always sustainable. So, yes, interesting times indeed. I would like to hear from you. At Relay Radio, we make this a relay. So, from me to you, it's now your turn to continue this conversation. And I believe that as soon as the conversation stops is when our problem actually will just increase. As long as we can keep the conversation about things like this going, keeping information about things like this flowing, and these topics do not become taboo, they will stay at the order of the day. And ultimately, as citizens of this country, we should make our Voices heard, and I, for one, have a great love and passion for the electricity and energy industry in South Africa, and I want to see it grow. I want to see it flourish. I myself am a small business owner and soon to be a father. So I want the future for my children to be sunny and hopefully not lit by candles alone. It wouldn't be a very bad thing, but economy cannot move forward in this age without electricity. We will fall hundreds of years back if we lose the day-to-day support that the electricity grid supplies to local business. So yeah, that's it from my side. And remember, keep your contacts clean. And you've been tuned into Relay Radio, where everyday life meets the wire.