Eskom: It’s load-shedding or die

2015-01-18 15:00

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Eskom has finally abandoned its “lights on at all costs” policy – and not a moment too soon for its beleaguered, aging power plants.

For the foreseeable future, the state-owned power utility will have to shrink the country’s power supply before it can be restored to anything like its theoretical capacity.

Heavy power users, organised as the Energy Intensive User Group (EIUG), are pleased with Eskom’s new approach.

“The most positive thing is that they are now telling the truth,” EIUG spokesperson Shaun Nel told City Press.

The EIUG has long called for load shedding to be imposed in a more business-friendly way.

That means having residential users take more of the load shedding burden instead of going directly to power-hungry smelters for ad hoc demand reductions.

Now that really doesn’t matter any more, said Nel.

“The magnitude [of the proposed load shedding] is such that no one will be spared. It is going to affect everyone.

“What you had before was secret load shedding. Since 2013, Eskom has been making significant calls for voluntary cutbacks. They said they were keeping the lights on, but that just wasn’t true,” he added.

In the past seven years, essential maintenance work on power stations has been pushed back or rushed, creating an inevitable downward spiral.

From now on Eskom will instead carry out maintenance “at all costs”. That was the crux of new Eskom CEO Tshediso Matona’s first “state of the system” briefing on Thursday.

The long-overdue decision follows a rapid escalation in plant breakdowns from last year (see graphic).

On a good day Eskom can now only deliver about 71% of its 43?300 megawatt installed capacity. On a bad day that falls down to 65%.

Good days are becoming increasingly rare. “Unplanned outages” have escalated to take down as much as a fifth of the system on any given day.

Eskom has to find the wriggle room for repairs and has only two options: get more power, or enforce more load shedding.

The wriggle room needed is 5?000MW – enough power for 1?million middle-income households and about a sixth of Eskom’s entire current generation.

It is incidentally almost exactly what the long-delayed Medupi station will generate when it is eventually completed.

In his presentation this week, Matona implicitly tried to defend the Medupi delay, which is now reaching three years.

He said delays were practically the rule for big power stations, even in so-called advanced economies.

For industrial power users, the new situation is actually worse than the initial power crisis of 2008, when Eskom tried to impose a system of power rationing.

Then, Eskom proposed that users should phase down their power demands to 10% below 2007 levels.

Seven years on, it’s no longer possible to be that precise. Supply is wildly fluctuating because of the unplanned outages, which makes it hard to plan for anything, except the worst-case scenario.

EIUG’s Nel said the next step would be the fast-tracking of cogeneration agreements to allow various factories to sell power that they generated using waste gasses into the grid.

An increase in private power generation was very likely, Nel said.

With the blame now being laid on the “lights on at all cost” policy, Matona remained cautious about pointing fingers.

He is not “judging” his predecessors.

At the briefing, Eskom chairperson Zola Tsotsi said that the policy was already dropped in principle by the utility in 2013, an act of defiance against the government.

Eskom’s finances are in a similarly dire state and the finer details of the government bailout announced last year are yet to be finalised.

As things stand, government is due to reveal all manner of interventions.

In September last year, Treasury announced a financial support package, including new equity that will be raised by “leveraging non-strategic assets”.

An analyst at Barclays this week caused a stir by suggesting the government can collect R86 billion in cash to shore up Eskom by selling all the listed shares in private companies it still owns.

These were the “non-strategic assets” to sell, the bank suggested in a research note.

The problem with this idea is that these shares are mostly held by the Industrial Development Corporation (IDC) and are crucial to its self-sustainability.

The Barclays proposal in essence means sinking the IDC to buttress Eskom. The IDC, unsurprisingly, rubbished the idea this week.

A second tranche of state interventions is planned, under the banner of Cabinet’s five-point plan announced last month.

This includes a new plan to source 2?500MW from privately generated coal power as well as cogeneration from other industries that create gas that can be used for power generation.

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