Cape Town is accelerating its plan to reduce its dependence on Eskom, by utilizing independent power producers, its own solar generation, battery storage, and other technologies to ensure cheaper and more reliable electricity.
The City has recently signed its first two long-term power purchase agreements with independent solar producers. These 20-year agreements will supply 70MW of electricity: 30MW from a JEMPEC solar plant connected to the City's grid in Atlantis, and 40MW from Make A Difference LLC in Philippi.
The City stated that the electricity will initially be between 19% and 21% cheaper than current Eskom rates. These agreements are part of a procurement process for up to 200MW, with Cape Town's long-term goal of purchasing up to 700MW of independent electricity.
Mayor Geordin Hill-Lewis explained that the objective is to mitigate the impact of Eskom's electricity price increases on Cape Town consumers. "We are working to end reliance on expensive Eskom power to make electricity more affordable for Capetonians," Hill-Lewis said. "We are pleased to have sealed the first two power purchase agreements with solar plants here in Cape Town, a first for any South African city, with plans to buy up to 700MW of independent power over time."
The City anticipates procuring approximately R8 billion worth of electricity through these two agreements over the next two decades. Future price increases under these contracts will be tied to the Consumer Price Index, rather than directly following Eskom's tariff adjustments.
Cheaper bulk power may not immediately lower bills
Power and energy expert Prof Vally Padayachee commented that while the savings are significant, the greater long-term value might be in price stability. "A 19% to 21% discount relative to Eskom’s current rates is a significant initial benchmark," Padayachee noted. "The most vital aspect of this saving is not just the immediate reduction, but the price certainty provided by linking future increases to the Consumer Price Index rather than the unpredictable, often double-digit hikes associated with Eskom’s tariff applications."
However, Padayachee cautioned that consumers should not expect their municipal electricity bills to decrease immediately by the same margin. He explained that the impact on individual households would depend on how the cheaper electricity is integrated into the City's overall electricity tariff.
City expands wider energy-security programme
Mayoral Committee Member for Energy Xanthea Limberg stated that the agreements are intended to establish the foundation for a broader independent generation program. "With these initial power purchases, we are laying the foundations for a more sustainable and scalable generation programme," Limberg said. "This is all made possible by the diligent creation of an entirely new procurement framework for independent power to ensure robust, bankable, successful execution and long-term power delivery to the City."
In February, Limberg outlined a phased strategy that included City-owned solar plants, private renewable energy procurement, electricity trading, and significant electricity grid investments. The City is reportedly close to completing its municipal-owned utility-scale solar project in Atlantis and is also pursuing plans for a larger solar PV development at Paardevlei.
Furthermore, the City has allocated over R4 billion towards grid infrastructure upgrades to support an electricity system with increased renewable energy integration. In April, Cape Town initiated another step in reducing its reliance on Eskom by soliciting bids from waste-to-energy producers. The City aims to procure at least 5MW through agreements lasting up to 20 years, with successful projects required to supply electricity below Eskom's equivalent tariff.
Limberg highlighted that approximately 70% of the City's electricity tariff income is used to purchase bulk electricity from Eskom. "As it is our single largest input cost, it is vital that we identify ways to reduce how much Eskom affects electricity prices," she stated.
The City's plans for 2026/27 also include R659 million for renewable energy procurement over three years and R586 million for life-extension upgrades at the Steenbras pumped-storage power station, totaling an investment of R1.245 billion.
Battery storage needed to support solar growth
In August, the City announced it was exploring its first Virtual Power Plant. This initiative would enable the management of various energy sources, including rooftop solar, larger renewable plants, and battery storage, as a single power station.
Padayachee emphasized the critical role of this supporting infrastructure due to the limitations of solar power. "The primary challenge of solar power is its intermittency – it is a non-dispatchable resource that does not provide power during peak evening demand or periods of low solar irradiance," he explained. He added that Cape Town would consequently need substantial battery storage capacity, smart grid infrastructure, and demand management systems.
