A pre-feasibility study to assess the options for Eskom to accelerate the uptake of distributed energy resources – Part II

Background and context

In January 2023, Eskom Distribution (Eskom Dx) commissioned Nova Economics to undertake a two-part study examining the role Eskom Dx could play in accelerating the adoption of distributed energy resources (DERs), in support of the National Energy Crisis Committee’s (NECOM’s) fourth objective: to unleash businesses and households to invest in rooftop solar.

Part I of the study focused on how Eskom Dx could facilitate the uptake of rooftop solar photovoltaic (PV) systems and battery energy storage systems (BESS) among customers supplied directly by Eskom Dx, as well as those served by municipal distributors. Part II extended the analysis to explore how Eskom Dx could support electric vehicle (EV) adoption, with a particular focus on the rollout of public charging infrastructure and the implementation of smart charging solutions.

Specific motivation for Part II of the study

South Africa’s automotive manufacturing sector is under increasing pressure due to impending internal combustion engine (ICE) bans in key export markets, particularly the European Union, which currently receives 77% of South Africa’s vehicle exports. With vehicle manufacturing accounting for 12% of national exports, transitioning to new energy vehicles (NEVs) is essential to safeguard the industry’s future competitiveness.

In this context, Eskom Dx, traditionally responsible for operating a unidirectional distribution network, must adapt to a future characterised by decentralised energy and bidirectional energy flows. As electric vehicle supply equipment (EVSE) is typically connected at the distribution level, distribution network operators (DNOs) like Eskom Dx have a critical role to play in enabling transport electrification.

South Africa, although in the early stages of EV adoption, must urgently develop appropriate standards, regulatory frameworks, and infrastructure plans. Eskom, in turn, must incorporate EV uptake into its energy demand forecasting and tariff design processes to ensure system adequacy and efficient investment.

Approach

We began by analysing global and South African EV market trends, including demand forecasts for EVs and charging infrastructure. This included desktop research and interviews with industry stakeholders to understand key barriers to adoption and the evolving roles of utilities in the EV ecosystem.

Consistent with Part I, we developed a set of “must do” and “could do” recommendations for Eskom Dx:

• The “must do” actions outlined enabling measures to support EV and EVSE uptake, such as grid readiness and standards development.
• The “could do” actions suggested more proactive roles, including Eskom-led investments or incentive programmes.

Eskom Dx selected one of the “could do” options for further analysis – a pilot programme aimed at supporting the electrification of public transport, particularly minibus taxis and buses. We developed a financial model and impact analysis, using data from the Stellenbosch taxi rank, where detailed charging needs had already been established.

Key findings

The selected pilot scenario involved providing incentives or investment support for public transport electrification. Four scenarios were analysed, each compared to a “do nothing” baseline. These scenarios tested two types of funding mechanisms – rebates and on-bill financing – and two incentive levels:

• Make-ready: Covered infrastructure from the utility meter to the EV charging station.
• Make-ready+: Encompassed make-ready and included the charging station hardware itself.

Our analysis found that, despite initial capital requirements, Eskom would achieve positive net present value cash flows over the project lifespan, mainly due to increased electricity sales. If Eskom recovers the pilot’s investment through general tariffs, the maximum estimated tariff increase would be R0.04/kWh, assuming 12 high-investment pilot projects of similar size.

For charging station operators, we assumed a required return on equity of 20%, as indicated by stakeholders. To meet this target, operators would need to maintain a 150% margin on the active energy charge (i.e., 2.5x the base energy rate), assuming all cost recovery is through energy sales, and no fixed monthly fees are levied.