It seems that the price of everything is going up and the cost of living is higher than ever – whether it’s the cost of food, fuel, medical aid or education. One basic essential that seems to be increasing dramatically in South Africa is the cost of electricity.

According to an article in MyBroadband, the average price of electricity from Eskom rose by over 1722% over the last 30 years, compared to inflation of 451.9% over the same period. Specifically, from April 1994 to March 1995, the average electricity tariff was 10.32 cents per kWh. In 2024, the price is 188.07 cents, which is nearly a 19 times increase. 

The graph below shows how Eskom’s average electricity tariffs have changed over the past 30 years compared to what they would have been if adjusted in line with inflation.

The most notable price hikes came from 2008 onwards, with double-digit price hikes including a 31.3% increase in April 2009. Over the last five years, electricity has increased by an average of 14%. 

Unfortunately, Business Tech reports that Eskom has requested more price hikes over the coming years from the National Energy Regulator of South Africa (NERSA). If they’re approved, the increases from 1 July 2025 will be substantial: a 36.15% hike for direct customers, and a 43.55% increase for customers supplied by local utilities. Then, in the years to come, Eskom is seeking further increases of 43.55% in 2026; 3.36% in 2027 and 11.07% in 2028.

So, what can the average consumer do about this? The obvious solution is to switch to using solar power rather than relying on Eskom. While this does take an initial investment to set up, the savings over time are undeniable – and would quickly outweigh what you spent to set it up.

A Practical Example

Given the escalating electricity tariffs imposed by Eskom, John has decided to invest in a home solar system which costs him R115 000. 

The calculation of savings on his electricity bill indicates that the solar system will pay for itself within four years, based on consistent energy usage and system performance. This scenario also takes into account the potential for even higher tariff increases sought by Eskom from the National Energy Regulator of South Africa (NERSA). These amounts have fluctuated over the last 5 years (last five years: 2024=12,74%; 2023=18,65%; 2022=9,61%; 2021=15,63%; 2020=13,87% ). This cumulative saving is illustrated in this table:

* description of system: 5,5kWp solar array, 5,1kWh L-ion Battery storage and 5kVa Hybrid Inverter

Please note:

• All figures inc VAT as this is a residential system
• Based on 4,8 sunpeak average hours in CT, only use 80% of total solar production
• Eskom annual price increase assumed at 14% (last five years: 2024=12,74%; 2023=18,65%; 2022=9,61%; 2021=15,63%; 2020=13,87% )
• Based on current unit price of approx R3,10 per unit in CT – assuming less than 700 units usage per month
• All figures are approximates and therefore not guaranteed but are a good indication of savings
• All savings and figures are based on optimum use of system capability. Based on South African requirements.

Comparing this investment to traditional banking savings, the difference is clear. The interest accrued from the bank at a rate of 7.6% would result in a sum that is significantly less than the savings from the solar system. This is calculated as follows:

Besides being a more economically sound investment, a solar installation also offers additional benefits such as a reliable power supply, which is particularly valuable given the frequent power outages experienced in many regions. The environmental impact of solar energy also cannot be overstated; it is a clean, renewable source that reduces reliance on fossil fuels and helps mitigate the effects of climate change.

The socio-economic advantages of solar also extend beyond individual households. As more people like John adopt solar power, there is a collective reduction in demand from the main grid, which can lead to a decrease in overall energy costs and a lesser environmental footprint. Additionally, the shift towards renewable energy sources can stimulate job creation in the green technology sector, contributing to economic growth. There’s also a concern that if we don’t all assist in our own way, South Africa will not be adhering to the The Paris Agreement, an international treaty on climate change, signed in Paris in 2015. 

In the face of rising electricity costs, a switch to solar power offers not only savings but also environmental and social advantages. As solar technology continues to advance and becomes more accessible, it is likely that an increasing number of households will follow John’s example, leading to a more sustainable and economically stable future.

Sources:

• https://mybroadband.co.za/news/energy/538099-south-africas-1722-electricity-price-pain.html
• https://www.businesslive.co.za/fm/opinion/editorial/2024-08-28-editorial-this-eskom-hike-will-fry-the-economy/
• https://codera.co.za/historical-eskom-electricity-tariffs-increases-in-sa/
• https://www.iol.co.za/capetimes/news/eskom-unbundling-will-cost-sa-dearly-cc50ad53-3aef-4a69-a2bc-5d8f7c838f1b