According to a statement from the City of Cape Town, the municipality is fast-tracking its plan to reduce reliance on Eskom by signing solar power contracts that are cheaper than the current tariffs. The city said the new agreements are part of a broader strategy to secure a more reliable and affordable electricity supply for residents and businesses.
In South Africa, Eskom’s electricity tariffs have risen sharply in recent years, and the utility’s chronic load-shedding has left many users facing frequent power cuts. For a city of 4.5 million people, the cost of imported power and the economic impact of outages are significant. By turning to solar, Cape Town hopes to lock in lower rates through power purchase agreements (PPAs), contracts where a buyer agrees to purchase electricity from a generator at a pre-agreed price for a set period.
The city’s move reflects a wider trend in the country’s energy market. Over the past decade, the cost of solar photovoltaic (PV) panels has fallen by more than 70 per cent, making large-scale solar projects increasingly competitive with coal-based generation. Several municipalities and large industrial users have already signed PPAs with independent power producers, citing both cost savings and the desire for a more stable supply.
While the Cape Town announcement confirms that negotiations are underway, the exact size of the solar portfolio, the price differentials and the timeline for implementation remain undisclosed. The city’s statement claims the deals will be “cheaper” than Eskom’s rates, but independent verification of the price gap has not yet been published.
For small and medium-size enterprises (SMEs) operating in the city, the potential impact could be twofold. First, if municipal electricity tariffs are reduced, businesses that source power from the city’s distribution network may see lower operating costs. Second, a more reliable supply could reduce downtime caused by load-shedding, improving productivity. However, the extent of any cost pass-through to end-users will depend on how the city structures the contracts and whether it chooses to subsidise the transition.
Analysts note that the success of Cape Town’s solar push will hinge on the availability of suitable land, the speed of regulatory approvals and the ability to integrate intermittent solar generation into the existing grid. The city has previously identified several sites for solar farms, but the details of those projects have not been confirmed in this announcement.
In summary, Cape Town is publicly committing to accelerate its Eskom exit by pursuing cheaper solar power deals. The move aligns with national trends toward renewable energy, but the precise financial and operational benefits for the municipality and its business community remain to be quantified.
The legal shift that made this possible
Municipalities buying power directly from independent producers, rather than exclusively from Eskom, is a relatively recent option in South African law. National electricity regulations were amended in 2021 to remove the licensing threshold that had previously capped how much power a private generator could produce for its own or a municipality’s use without a full generation licence, and Cape Town was among the most vocal municipalities pushing for that change, having pursued its own legal route toward direct power procurement even before the amendment took effect. That regulatory shift is what makes municipal-level power purchase agreements like the one described here possible at all: without it, a city wanting to buy solar power directly from a producer would have needed Eskom’s involvement as an intermediary, which is precisely the dependency this kind of deal is designed to reduce.
Businesses operating in Cape Town specifically should note that any tariff benefit from these deals is likely to phase in gradually rather than arrive as an immediate bill reduction, since a municipality typically blends newly contracted solar power with its existing Eskom-sourced supply over time rather than switching a city’s electricity source overnight. The near-term benefit for most local firms is therefore more likely to be improved supply reliability than an immediate drop in the municipal electricity line-item, with cost savings building as the renewable share of the city’s power mix grows.
