Power crisis 'may last years'

2008-04-02 16:34

Johannesburg - South Africa's power crisis may last many years unless there is a sustained drop in electricity demand in Africa's largest economy, state power utility Eskom said on Wednesday.

The warning came as Eskom, which produces about 95% of the nation's electricity, resumed a wave of planned power cuts and South Africans grew increasingly impatient with an energy crunch that has shaken industry and investor confidence.

In a press conference in Johannesburg, Eskom CEO Jacob Maroga downplayed hopes the utility could ramp up its electricity reserves quickly and said reducing consumption was the only quick fix.

"If we only rely on supply (increases), the numbers are not looking good for many years," Maroga said.

While expressing Eskom's satisfaction with industry's response to the crisis so far, Maroga said the utility would also "welcome" delays in construction of energy-intensive projects and developments, including smelters.

But he insisted moves to cut the country's thirst for electricity would not compromise economic growth. The South African economy has been growing at an average annual rate of about 5 percent in recent years.

Worries that its mining-heavy economy could stumble have picked up pace since nationwide power cuts in January forced large gold and platinum mines to shut down operations for five days, pushing precious metal prices higher.

The mines are now operating at 95% of their normal electricity supply.

Critics say the government ignored warnings and failed to adequately plan for future demand growth. And many people are concerned the power crisis may black out the World Cup, which South Africa hosts in 2010, despite official reassurances stadiums will have generators for the tournament.

Coal stocks drop

Eskom has blamed its woes on a combination of factors, including the failure of the government to invest in electricity generating plants, maintenance problems at its existing facilities and wet weather that affected its coal supplies.

The utility's coal stocks have fallen to an average of about 12 days' supply at plants, well below the 20-day supply it has targeted for its facilities when the South African winter arrives in a few months.

Brian Dames, Eskom's chief operating officer for its primary energy, generation and enterprise division, said at the briefing that the utility was negotiating with coal companies to raise the quality of its supplies.

Eskom plans to spend R343bn in the next five years and R1.3 trillion until 2025 to increase its generating capacity, a plan that includes constructing new nuclear power plants.

As part of its efforts to fund the infrastructure programme, it has requested a stiff 53% increase in electricity tariffs for 2008 and suggested consumers should have to shoulder the risk of coal price rises.

It is also in talks with mining companies on proposed electricity price increases, Maroga said. "We may have to raise our appetite for price," he said without giving details on the discussions.

- Reuters