Eskom faces rising curtailment costs as solar growth strains South Africa grid
South Africa's power system is absorbing growing costs from surplus daytime generation as more households and businesses use their own solar electricity. Eskom is expected to pay about R4 billion in the current financial year to renewable producers for deemed energy when grid operators instruct them to reduce output.
Highlights
- Eskom's curtailment payments to solar and wind producers are rising due to increased embedded solar capacity leading to more frequent surplus on the grid.
- Eskom must maintain coal-fired stations during daytime solar peaks to meet post-sunset consumer demand, complicating grid management and curtailment logistics.
- The number of curtailment instructions to renewable plants has increased sharply since late 2023, with the trend expected to continue alongside further solar expansion.
Curtailment payments climb with daytime solar surplus
As reported by Moneyweb, the increase in embedded solar capacity is forcing Eskom's system operator to issue more instructions to solar and wind farms to curtail generation when there is excess power on the grid.Keith Bowen, senior manager: market operator at the National Transmission Company of South Africa, says this is creating a complex set of issues. Eskom does not shut down its coal-fired stations in these periods because they need to remain available to meet demand after sunset, when customers return to the grid for cooking and water heating. When renewable plants are told to reduce output, Eskom must still compensate eligible producers as if it had taken the electricity.
The utility's compensation obligation applies to independent power producers participating in the government's renewable energy procurement programme, while curtailment risk for private offtakers is handled contractually between the parties. The number of curtailment instructions has increased sharply since late last year as solar installations have expanded, and the trend is expected to continue.
In our earlier article on Equites Property Fund’s interim results, we covered how the REIT lifted its interim distribution after accelerating its exit from the UK and redirecting capital toward South Africa. We also noted that proceeds from the Aviva portfolio sale helped reduce leverage, support FY27 guidance, and fund domestic logistics growth with strong liquidity and improved funding terms.
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