Cape Town has concluded its first two power purchase agreements, buying 70MW of solar power at 19% to 21% below current Eskom rates. The 20-year deals cover 30MW from JEMPEC in Atlantis and 40MW from Make A Difference LLC in Philippi, both connecting directly to the City's grid.
Mayor Geordin Hill-Lewis says the two contracts represent about R8-billion of electricity over their term. It is the first South African metro to buy power on the open market.
Interesting insights on Cape Town power purchase agreements
The discount matters less than the escalation clause. Price increases on both agreements are tied to the Consumer Price Index rather than to Eskom's tariff decisions, and the contracts require the price to stay below Eskom rates across the full 20 years.
Eskom applied a 12.74% standard increase in its 2026 financial year, while inflation ran at 4.3% in July. Locking two decades of supply to CPI removes the single biggest unknown in a municipal budget.
Electricity is Cape Town's largest input cost, and roughly 70% of its tariff income goes to buying bulk power from Eskom. The 70MW is the start of a competitive tender for up to 200MW, with the City saying it wants up to 700MW of independent power over time, and a separate tender out for 500MW from licensed energy traders.
Alderman Xanthea Limberg says the agreements avoid close to two million tonnes of carbon emissions, generating tradeable carbon credits.
What others are saying about Cape Town power purchase agreements
TechFinancials reported the agreements, and the City's other energy measures, including R67-million paid to residents and businesses for 150 gigawatt hours of excess solar sold back to the grid since June 2024. BusinessTech noted Eskom's direct customers face a 9% tariff increase next year after 9% this year. EWN reported the inflation-linked pricing as the mechanism the City expects to limit cost increases for residents.
This is what Eskom's falling sales look like
Eskom reported yesterday that electricity sales fell 6.2% and that it now expects two to three gigawatts of surplus capacity. This is one of the reasons. A metro that spends 70% of its tariff income with Eskom has just signed 20 years of supply with someone else, and wants ten times this volume over time.
Keep the scale honest, because 70MW is small against Cape Town's total demand and neither plant is generating yet.
But the mechanism is the part worth copying. If you buy power at any scale, the question to ask is not only what the rate is, but what the escalation is tied to.
Whether other businesses get the same option depends on the revised electricity pricing policy and its rules for bilateral supply.
You might also like our piece on the GPU build in Centurion and the load it will need, why South Africa's business regulation is more restrictive than China's, and what the Big Mac Index rand figure says about input costs.
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