Utilities Electricity South Africa Market Intelligence

Industry Outlook & Drivers

Regional Market Outlook on Electricity  

• Among the overall installed capacity, the country relies majorly on thermal power with capacity 45.56 GW (thermal)
• According to Statistics South Africa, over 90% of the South African population have access to electricity, with the majority of new customers now being electrified in remote and deep rural areas
• Electricity sector in South Africa has witnessed dynamic changes over the past few years where increase in electricity tariff rates have been a prominent feature in the supply of electricity
• In this quarter, South African electricity sector witnessed huge amount of load-shedding due to Eskom's generating units being out on maintenance

Major Trends and Market Growth Patterns

• Approximately over 90 percent of the power consumed in South Africa is produced by Eskom and the rest is produced by IPP's and imported different countries
• Majorly, the electricity is generated through coal fired power plants which are anticipated to decrease in the upcoming few years due to the government's effort to increase renewable energy generation in the overall energy mix.
• Signing of 27 renewable energy IPP agreements in April 2018 is considered as one of the major government's initiative to increase the penetration of renewable electricity in the country

Generation Profile 

• Coal contributes to around 70% to primary consumption of electricity, and 90% to total generation of electricity in South Africa
• Amongst renewable energy sources, wind energy and solar PV are some of the prominent sources for which the country is developing proper infrastructure
• The average total loss from 2013 to 2016 has been around 8.79 percent. Due to the constant efforts in improving the infrastructure and grid connections, the losses are reduced to 7-9 percent

Consumption Profile 

• Electricity consumption in 2017 increased by 0.99 percent Y-o-Y, primarily due to the increase in Independent Power Producers (IPP) that are continuously making efforts to increase their market share with renewable energy projects
• Renewable Energy Independent Power Producer Procurement Programme (REIPPP) has been launched by the government which set the target of procuring 3,200 MW by 2020, and 6,300 MW by 2025 through renewables
• Renewable electricity generation has grown rapidly in the recent years which has resulted into greater competition for electricity supply and changing consumption patters from grid-based services

Price Trend & Forecast

Medium Term Forecast (3-6 Months) 

• The average electricity price in South Africa increased by 2.2% in Apr-17.This is because of the yearly hike of 8%, as approved by the NESRA, as a part of Multi Year Price Determination (MYPD) 3
• The current electricity access rate in South Africa is around 90 percent with most of the attention given to remote and deep rural areas. The government is targeting to increase the access rate by almost 200 percent by 2020

Long Term Forecast (6- 12 Months)

• National Energy Regulator of South Africa (Nersa) has allowed State- owned Eskom to raise its tariffs by 5.2% for the year 2018-19. The government has approved 5.2% increase despite Eskom's request for a 19.9% tariff hike.
• Revision in the tariff rates is expected to take place during April 2019

Utilities Electricity South Africa Price Drivers 

• In South Africa, electricity prices are determined by multi year price determination method (MYPD), where Eskom determines the prices by taking into consideration the future capacity additions, GDP growth, CPI, PPI; and the prices are reviewed by NERSA
• The average industrial prices of electricity have increased to almost 5.2 percent during the period April 2018 to March 2019 mainly due to improving the revenue of Eskom