Eskom pivots to renewables with new business unit

From the newsletter

South Africa's national power utility, Eskom, is inviting bids to establish a specialised business unit to accelerate the deployment of renewable energy solutions. The chosen company will provide services for one year. The subsidiary will operate independently from Eskom for better market positioning and enhanced Public-Private Partnerships.

• The shift to renewables across Africa is happening at a faster rate. National utility companies that have long relied on fossil fuels are finding it hard to cope with renewables' competition. Some are opting to join the renewables race.

• Eskom's move follows others like Kenya's utility provider, Kenya Power, which plans to venture into residential solar, and KenGen, which plans to enter captive power generation for commercial and industrial (C&I) customers.

More details

• In the advert that is open until May 7, 2025, Eskom is looking for applicants who have a proven track record in establishing a renewable energy company, the number of Public-Private Partnerships (PPPs) and Special Purpose Vehicles (SPVs) created that have delivered projects, IPP Business Model & Financial Structuring Expertise, and technical capability and sector knowledge.

• At the same time, Eskom has also signed a Memorandum of Understanding (MOU) with Exxaro Resources to collaborate on research and projects aimed at reducing carbon emissions, aligning with the Just Energy Transition plan. It also prioritises transition initiatives such as skills development and job creation in the green sector.

• Speaking at the signing of the MOU, Eskom CEO, Dan Marokane (pictured right) said, “There is no reason why we should be questioned as to why we should be playing in the space and not giving it to others. We have a 42,000-person workforce that needs to be transitioned. We will do this with others on our lands, with our people who are skilled and will also leverage the balance sheet of others to de-risk ourselves going forward.”

• Eskom's decision to pivot to renewables comes at a time when the utility company is facing supply deficits and resorting to load shedding to protect the grid. This is still happening despite the increased switch to self-generation and the significant number of independent power producers wheeling power to large industrial consumers.

• The company has an initial pipeline of 2,000 MW of clean energy projects to be executed by 2026 and has developed a pipeline of more than 20,000 MW to diversify its energy mix. It currently relies heavily on coal and plans to introduce renewables for baseload power in the form of Battery Energy Storage Systems.

• Recent uptake of renewables for baseload power by Kamoa Copper has brought clarity on cost comparison with fossil fuels. It continues to draw attention and interest from mining companies.

• The space for renewable energy adoption is changing very fast with the declining cost of technologies. Utility companies that are still reliant on old thermal power plants for electricity generation are left with no alternative but to plan for an eventual transition to renewables. Their loss-making nature can be a hindrance, but following the path of Eskom by establishing a dedicated unit for renewables can be a game-changer.

Our take

• Renewables are here to stay, and the policy environment is only catalysing it further. Eskom's decisions couldn't come at a better time, especially after the government approved its renewable energy master plan targeting 5,000 MW of renewable installations annually.

• African national power utilities have an opportunity to revive their business models and align with renewables. Being the entities with the most customers, who are now moving to self-generation, they can utilise their expertise and establish dedicated platforms that will cater to renewables to ensure they don't lose their best customers.

• Nigeria, Ghana, Egypt, and Morocco are some of the countries that have invested heavily in renewables. Their utility companies have the best chance to capture this growing market and should be next in following Eskom's playbook.