A gloomy winter ahead?

Electricity supply in South Africa is again under increasing stress and the outlook with winter approaching looks gloomy. With the prospects for this year already negative, recent events have knocked a large chunk of supply out of the system just before the annual peak demand of winter sets in, with very little spare capacity to deal with it.

This threatens everything from mining and manufacturing output to social stability in delivery-stressed townships, economic growth and, most importantly, the country’s ability to try and meet the government’s latest target of creating five million new jobs over the next nine years.

This past Friday at the Presidential Job Creation Summit business leaders told government that reversing job losses and creating new jobs, particularly in the mining sector, would require stable and reliable electricity supply among other things. During the rolling blackouts of 2008 the mining sector bore the brunt of Eskom’s energy-saving measures, losing millions of rands in lost production. It was also the mining sector that shed the most jobs in the global economic crisis that set in shortly afterwards.

In October last year already the Department of Energy warned that South Africa would plunge back into a situation of rolling blackouts as from this year until 2016 unless urgent steps are taken to accelerate the realisation of the non-Eskom generation and energy efficiency projects.

"The latest forecasts indicate a worsening situation starting in 2011 and proceeding through to 2016. This situation poses a real risk of rolling blackouts, similar to those experienced in 2008, and a serious threat to government's objectives for growth and job creation,” the department warned at the time.

Worsening situation

However, since February the outlook worsened dramatically. Some 4,000MW –10% of Eskom’s total capacity – at one point went off the national grid, due to planned maintenance and problems with over-worked, ageing power stations. Eskom said these older power stations required substantial upkeep. However, with reserve margins under pressure, and the problems that had developed across the national grid, Eskom was struggling to keep up with required maintenance without further compromising supply security.

On February 9 the maintenance cut supply by a further 600MW when a turbine at Eskom’s Duvha power station – one of its biggest – exploded during a test. Replacement and repairs will cost up to R3-billion at a time when the utility is battling to raise its shortfall of R80-billion in funding for its immediate expansion programme aimed at hauling the country out of its current power problems.

Worse even than the cost involved will be the fact that 600MW could be lost to the national grid for a period of up to 18 months before a new unit may arrive from France. If during that time any other mishaps occur – as did at the Koeberg nuclear plant in 2008 – or if problems with old equipment and plants escalates, electricity supply in South Africa will run into very serious problems.

Then, as of March 14 Koeberg nuclear power station’s unit two was shut down for maintenance, taking a further 900MW off the national power grid. It will take approximately 55 days to complete the refueling, maintenance and statutory inspections, with an anticipated return to service by the second week of May.

While Eskom spokesman Tony Stott down-played the impact  as representing  only 2.2% of Eskom’s total capacity, when this is combined with the 1.5% loss of capacity due to the Duvha accident it adds up to 3.7%, which leaves Eskom’s preciously small  spare capacity margin of 10% over-exposed. Eskom should at this stage be operating with an absolute minimum margin of 15%.

Vicious cycle

The vicious cycle is that these developments compromise Eskom’s planned maintenance programme, which means more big breakdowns may be looming – wiich could  translate into rolling blackouts. The problem becomes even more acute with rising consumer demand as well as seasonal peak demands only weeks away.

These developments prompted Eskom to devise a plan whereby it could save at least 1,000MW over the next three years by managing demand from its 500 biggest customers, and another 1,000MW through efficiencies at its existing plants to counter the expected shortfall this year.

To manage demand from its 500 biggest power users, Eskom may set mandatory reduced usage targets for them, which could compromise economic growth and thus job creation among other things.

As for saving from increased efficiencies at existing plants, recent developments outlined above may already have diminished that option somewhat. This past weekend, however, Eskom did announce a five-year large-scale energy-saving awareness campaign called “49M” launched jointly with government, business and labour partners. It aims at mobilising South Africans to cut down on their power consumption and at reducing South Africa's carbon footprint.

Without saving energy, Eskom says South Africa will face a supply shortfall of between 6 TWh and 9 TWh this year and next: 9 TWh is the equivalent of Cape Town's total annual consumption or the capacity of a 1 000-MW-plus power plant.

Eskom says it expects pressure on the system to also start easing in the last quarter of next year when the first unit of the 4,800MW Medupi power station under construction in Limpopo comes on line. But that project, together with the Kusile project – both coal-fired power stations – has run into a barrage of criticism and opposition over power generation-type choices, delays, escalating costs, funding issues, environmental concerns and more.

Consultants to Eskom estimate that if Medupi, Kusile and several other projects go ahead, 35 new coal mines will be required. This in itself already places a question mark behind the sustainability of Eskom’s plans.

Officially Kusile’s initial price tag of R80-billion to R100-billion had already escalated to R124.42-billion by May last year, with Eskom denying industry speculation that it has shot up to R175-billion. Industry sources also say Treasury officials were calling for the scrapping of the project as paying penalties of R30-billion would be the cheapest option now. It has been estimated that so far Eskom has managed to secure only 11% of the required funding for Kusile .

Eskom itself says one of its biggest challenges is funding uncertainty. Its overall budget for emergency increases in capacity for requirements over the next  two years is R385-billion. That figure is expected to shoot up to one trillion rands by 2026, by which time Eskom hopes to have doubled its capacity to 80,000MW.

(Also read article on the uncertain environment into which a new Integrated Resource Plan was launched last week)