Eskom group chief executive André de Ruyter has admitted that the state-run power utility was ‘not where we want to be in terms of performance’ and that power supply shortfalls can be expected for another five years. Translation: Buy candles and kiss meaningful economic growth for the next few years goodbye.
De Ruyter made the remarks during a virtual briefing on Monday delivered by himself and other top Eskom brass. As the briefing took place, load shedding was taking place in the area around Megawatt Park.
“While there is an improvement on some aspects of the generation plant due to concerted efforts by Eskom employees, we are not where we want to be in terms of performance. The ultimate aim is to improve performance to reduce the risk of load shedding. The enormity of this task cannot be overstated,” De Ruyter said.
“Eskom has to reiterate, there will be a shortfall in supply of electricity of approximately 4,000 megawatts over the next five years as announced by President Cyril Ramaphosa,” De Ruyter said.
That is half a decade that South Africa simply cannot afford, if meaningful economic growth and development are to be achieved. It’s certainly no way to sell your economy as an investment destination.
Eskom finds itself caught in many binds. The utility has to take generation units offline for maintenance, which combined with unforeseen outages often triggers the need for load shedding. But if maintenance is not done – and done properly – things will get worse down the road. The company also has to continually beg its customers not to use too much power, in effect telling them not to buy too much of its product. That is clearly a bad business model.
“Maintenance in itself will not be the panacea to solve load shedding. What we need is additional generation capacity,” De Ruyter said.
That makes sense and it is not in Eskom’s hands – the government needs to lead that charge. There has been a lot of talk on that front from the Department of Mineral Resources and Energy, but little new generating capacity has been plugged in, to date. If bottlenecks can be reduced, the mining sector alone says it can bring two gigawatts in new renewable energy projects online. There is also a stated push announced in 2020 by the government to procure two gigawatts of additional emergency power, but with so many regulations and strings attached, one is left with the impression that there is no sense of urgency.
So for now, while it may not be a panacea, maintenance is the best option South Africa has to keep the lights on.
“The unreliability of the ageing fleet, with an uncertainty of about 6,000 megawatts of capacity at any given time, will remain until the reliability maintenance programme is able to address the historical maintenance backlog. The power system remains vulnerable and volatile with the risk of load shedding significantly reduced after the completion of the reliability maintenance by September 2021,” Eskom chief operating officer Jan Oberholzer said.
It was also revealing to note that the presentation showed that since 1 April 2020 – the start of the financial year – load shedding has been triggered on at least 43 days compared with 46 days for the financial year which ended on 31 March 2020. This is in part because of the surge in maintenance, but the backdrop was also a 51% decline in gross domestic product (GDP) in the second quarter of 2020. Things would have been worse without the effective collapse of the economy. To return to no load shedding soon would require another economic meltdown.
Then there is the small question of the climate crisis and Eskom’s contribution to it via its dependence on coal. Eskom cannot afford the mitigation measures needed to reduce the carbon footprint of its ageing fleet.
“We think there is a confluence of opportunities here for South Africa to accelerate the decarbonisation of its generation fleet by accessing green financing… as part of a just energy transition,” De Ruyter said. “Our average cost to mitigate one ton of carbon is $7. In Europe, that cost is in excess of $400. So it pays the Europeans, because carbon knows no borders, to rather approach a country like South Africa and assist us to decarbonise our economy.”
For the moment, Eskom needs coal and there is enough of that at least.
“Coal stock levels continue to improve, with average coal stock at 52 days by the end of February, excluding Medupi and Kusile. There is no power station below the Grid Code minimum requirement of 20 days,” Eskom said. BM