SIMON BROWN: Take a load off: alternatives to Eskom

As I write this we’ve had more than 60 days of no load-shedding, something that didn’t seem even remotely possible at the beginning of the year. Now, as you’re reading this the elections are over, so maybe load-shedding is back? Eskom has promised us this will not be the case and that while there will be some winter load-shedding it will be infrequent and limited to stage 2.

We’ll see, but either way, individual households and corporates have been taking things into their own hands and installing renewable energy solutions, battery storage and diesel generators.

The diesel generators aren’t ideal, and they’re expensive. The Pick n Pay update for the year ended February stated a cost of R698m for diesel, while Shoprite* spends closer to R1bn a year on it. Sixty days of no load-shedding means they’ll save about R120m and R165m respectively. Now, when they’re not burning diesel they’re using expensive Eskom power, but there is still a saving when the generators don’t run, and that saving goes directly to the bottom profit line.

Inversely, less load-shedding may mean less take-out and sit-down dining, as consumers were heading out to eat (or ordering in) when load-shedding hit. For every winner, there is a loser, and quick-service restaurants could have fewer sales, especially as the consumer is really struggling right now.

But the bigger trend is in renewable energy, which has an upfront cost to install, but then provides power at a far cheaper rate than Eskom could ever hope to supply. Spear Reit now has about 25% of its power requirements coming from renewables, and this is considerably cheaper and the annual cost increases will be far below the cost increases one can expect from Eskom.

The problem with renewable energy is that, in the case of solar, you need sunshine — so, come clouds or night-time, you’re back on Eskom (or diesel backup). But Reunert results commented that “battery storage solutions in the commercial and industrial market continue to expand”, solving the lack-of-sunshine problem. Batteries are not only more effective these days, but prices have been falling as well — much as we’ve seen in solar panel tech.

A recent increase in tariffs on Chinese solar equipment will also help drive costs still lower outside the US, as Chinese manufacturers need to find new markets and lower prices will surely be a part of their strategy. This even as we’ve seen smaller home system prices fall markedly over the past year or so. What would have cost me more than R100,000 in December 2022 is now closer to R60,000.

There is another angle here as well, and that involves ESG concerns. A business with a high percentage of power requirements being met by renewables will get better ratings for ESG investors. This improves the investment case for these companies and potentially better returns for shareholders.

So, yes, Eskom may have “fixed” load-shedding, but the world is moving on from its supply.

* The writer holds shares in Shoprite