• Eskom targets 32 GW renewable capacity by 2040, cutting coal to 18 GW

• Plans include new clean energy projects and a dedicated subsidiary

• $22B debt and rising off-grid solar raise funding and demand concerns

Eskom, South Africa’s state-owned electricity company, announced on Wednesday, July 16, its goal to generate most of its electricity from renewable sources by 2040.

This target, disclosed during a presentation to members of parliament, specifically aims to increase installed renewable energy capacity to 32 gigawatts, or GW, by that date. This is a significant jump from less than 1 GW currently. The rise in green energy is expected to align with a gradual reduction in installed coal capacity, from 39 GW to 18 GW, over the same period.

As part of this plan, the public utility intends to replace old generation equipment at aging coal-fired power stations with new installations powered by renewables, gas, or other advanced technologies.

The company also plans to deploy its renewable energy projects through a dedicated subsidiary. In April, Eskom launched a tender to recruit a firm to support the establishment of this independent entity. It reports having a portfolio of 2 GW in clean energy projects ready for execution by 2026.

Among analysts, Eskom’s latest announcement has raised several questions. The cost of this ambitious plan has not been disclosed. In 2021, the company’s former CEO André de Ruyter estimated the cost of a "just" energy transition, involving the closure of 22 GW of coal capacity and its replacement with low or zero-carbon sources, at $2.2 billion.

Currently, Eskom carries nearly 400 billion rand, about $22 billion, in debt. This raises questions about how it plans to mobilize new funding to execute these projects. Additionally, Eskom faces several structural challenges, including unpaid debts from municipalities and the rapid expansion of solar self-generation capacity since 2022.

With households and small to medium-sized enterprises investing in off-grid or hybrid systems to avoid load shedding, the business model of Eskom’s future renewable energy subsidiary could be undermined by a potential drop in demand on the central grid.

Espoir Olodo