Eskom launches first-ever renewables offtake programme

From the newsletter

South Africa’s national utility company, Eskom, has launched its first renewable energy offtake programme, inviting large power users to procure 291 MW of solar PV. This marks a pivotal shift in both its generation mix and business model, enabling large users to source clean power directly from it through long-term power purchase agreements (PPAs).

• The shift to renewables across Africa is accelerating. National utility companies that have long relied on fossil fuels are finding it hard to cope with renewables' competition. Some, like Eskom, are opting to join the race.

• Eskom’s latest move follows its April call for bids to establish a specialised business unit aimed at accelerating the rollout of renewable energy solutions in partnership with the private sector.

More details

• South Africa has liberalised its electricity sector, bringing an end to Eskom’s century-old monopoly. This transition has been particularly challenging for the coal-reliant utility, which now faces growing competition from independent power producers (IPPs). Most IPPs focus on renewables and are rapidly gaining ground by signing direct PPAs. with large customers. This threatens Eskom’s future revenue streams as its most valuable clients shift to cleaner and more reliable alternatives.

• Under Eskom’s new renewable energy programme, successful bidders will sign PPAs with a minimum contracting capacity of 10 MW lasting 5 to 25 years, with electricity supplied in phases from multiple Eskom-owned renewable projects. The first project is expected to become operational by December 2027. 

• The renewable energy supplied under this PPA will be delivered on a self-dispatch basis, meaning customers will receive energy as it is generated by the solar PV facilities. There will be no centralised dispatch control or real-time scheduling from Eskom. Buyers will be responsible for balancing their remaining demand requirements through other sources or Eskom supply channels.

• For consumers, this shift is highly beneficial. It guarantees priority access to power and allows businesses to negotiate more competitive deals. By sourcing renewable energy directly through PPAs, companies can also certify their use of clean energy and generate renewable energy certificates (RECs). These certificates not only provide an additional revenue stream but also help businesses maintain access to European export markets, which will fully implement the Carbon Border Adjustment Mechanism (CBAM) policy next year.

• Many commercial and industrial customers are already feeling the pressure of looming market changes, and governments are stepping in to support the shift. In Egypt, the government is incentivising the private sector to adopt renewables and has opened the market for private-to-private power generation, with the first batch allowing 400 MW of solar PV capacity. Similarly, Kenya, Zambia, and Nigeria have introduced policies that enable companies to generate their own power. The World Bank, through its Mission 300 initiative, is also pushing for more than a dozen countries to adopt similar frameworks.

• Against the backdrop of global fossil fuel supply vulnerabilities and their weaponisation, renewables are emerging as a stable and secure alternative. Eskom distribution acting group executive, Agnes Mlambo, noted: “By offering customised renewable energy offtake solutions, we are enabling our customers to transition to low-carbon operations while ensuring a secure and competitive supply through customer-centred solutions.”

• Eskom’s dedicated renewable energy business is expected to further accelerate deployment, with a target of 2 GW of construction-ready projects by 2026, and scaling up to 32 GW, including green hydrogen, by 2040.

Our take

• Eskom’s pivot is also a warning sign for other African utilities reliant on fossil fuels. As renewables become cheaper and more attractive for businesses, utilities that fail to diversify risk losing their most profitable customers, eroding their financial stability.

• For Eskom, the real challenge will be proving it can deliver projects quickly enough to compete with IPPs and rebuild its credibility. If successful, Eskom could position itself not only as a competitor to IPPs but also as a strategic partner for large customers seeking long-term clean power. 

• Directly selling clean power to C&I customers provides cost certainty and enhances their renewable energy credentials, which will be critical for maintaining access to export markets and improving ESG ratings, which are becoming major factors in attracting investment and consumer trust.