South Africa’s electricity system is currently under extreme pressure and the reserve margin is likely to remain tight until at least the mid-2020s, Moody’s Investors Service said in research.
Moody’s expects SA will remain dependent on Eskom – which it rates as B2 negative – for the foreseeable future, although its importance could gradually diminish.
“Further growth in renewable, embedded generation and new capacity in gas from the mid-2020s, could ease system pressure,” Moody’s said in a statement.
Longer-term improvements will depend on the evolution of energy demand as well as the pace of further growth in renewable, embedded generation and new gas capacity, according to Helen Francis, a Moody’s vice president – senior credit officer and co-author of the report.
Eskom’s generation assets – 88% of installed capacity – will be essential to meeting SA’s power needs in the medium-term, even in the event of a sector restructuring, she added.
In the view of Francis, this provides a strong incentive for the SA government to help improve Eskom’s very weak financial position.