Eskom to lose more power

2015-03-30 08:00

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Utility has not renewed purchase agreements for more capacity and is also facing a losing battle to maintain its run-down network

Eskom is losing the battle against power station breakdowns and is already caught in a downward spiral of forced maintenance.

This is the fundamental reason for the creation of the so-called war room that is now rapidly taking control of the utility.

Despite suspended CEO Tshediso Matona’s recent declaration that Eskom would stick to maintenance plans no matter what, it is clear Eskom cannot do it.

The scale of unplanned outages is so extreme that doing the planned maintenance would necessitate load shedding on a scale that would endanger the whole network, says an engineer involved in Eskom’s maintenance.

“Even the construction of Medupi and Kusile is less important,” he said.

The only solution was more resources for maintenance. That meant calling on help from the original equipment manufacturers, such as Alstom, Siemens, General Electric and ABB, said the source.

Amid the increasingly ugly board battles at Eskom, the company might lose the much-needed 800 megawatts it receives from independent power producers (IPPs) this week.

The alarm was raised by Brian Day, former general secretary of the SA Independent Power Producers’ Association (Saippa), at a conference last week.

The power purchase agreements for that capacity expire on Wednesday, and there was still no indication they would be renewed.

With a few days to go, Eskom said it was still hoping to have them all signed by Tuesday.

“We are in the process of renewing the contracts,” Saippa told City Press in an emailed response to questions.

According to Saippa chairperson Sisa Njikelana, the organisation was not alarmed about the situation.

“As far as we know, Eskom has said it would renew those,” he said.

By Wednesday, “we will get a sense from our members” about what is happening, he told City Press.

The amount of power Eskom is getting from the IPPs is smaller than it used to be, but 800MW could be the difference between load shedding and no load shedding on any given day.

Eskom’s escalating plant breakdowns show little sign of abating. So far this year, 28% of the system, on average, has been offline, compared with 24% in the first quarter of last year. The troubling thing about this is that large-scale outages are taking place even though there are fewer incidents of planned maintenance.

Eskom said last week it was receiving about 809MW from the IPPs in question. But more than half of that was from municipal stations in Pretoria and Johannesburg.

But according to Saippa, this total was far below the 1?389MW contracted for until recently.

The drop was due to the expiry of medium-term contracts since the end of 2013 and the lower-than-expected supply from municipal power plants.

Saippa is lobbying the war room set up under Deputy President Cyril Ramaphosa to open the way for more IPPs.

They represent current and potential private producers of electricity from industrial processes, including smelters and paper mills.

Government has been promising that new rules for IPPs are imminent and the industry keeps grumbling about the deafening silence that usually follows such promises. But there is a slow but sure increase in the momentum of government’s commitment to the IPPs, says Njikelana.

In December, Saippa sent the war room a laundry list of suggestions about what was needed before a significant amount of private power could be provided to the grid.

These mostly revolved around the need for subsidies and incentives, longer-term contracts and higher tariffs. “You can’t just put a car on the road. The road itself has to be in a good condition,” said Njikelana.

The 800MW Eskom is getting from outside sources cost it up to 88c per kilowatt hour. The cost of Eskom’s own power is about 62c/kWh, and this is rising.

The IPPs argue that the tariffs they receive are too low to justify new spending on power generation.

The cost of private power should be weighed against what Eskom is paying for the diesel-fuelled peaking generators that now run more or less continuously – about R3/kWh.

The cost of power from the first renewable projects under the massive Renewable Energy Independent Power Producer Procurement Programme comes in at about R1.40/kWh. The Medupi Power Station is estimated to deliver power at about R1/kWh.

Strikes loom for Medupi

The demobilisation of the massive workforce at the Medupi and Kusile power stations is likely to spark more conflicts like the one last week.

A short strike at the Medupi Power Station site centred on a demand for an across-the-board exit bonus.

The question of how the thousands of people working on the site will be treated when the work is complete is becoming increasingly pertinent.

The demand that has emerged is for a R10?000 exit bonus, irrespective of job level.

Steve Nhlapo, metalworkers’ union Numsa’s head of collective bargaining, said workers tended to “pitch demands high”.

The strike last week has led to the apparent dismissal of about 1?000 workers by contractors on site and a lockout of further workers.

But the situation seems fluid and Nhlapo says the true situation is clouded by the upcoming Easter holidays, which would see many workers leave the site for a week.

Eskom denies the stoppage has affected the all-important work inside unit six of Medupi, which is being synchronised to the power grid, according to Reuters.

However, the payment demand is not the only one that is being raised.

Eskom, the Medupi contractors and the unions were meant to meet and plot out how the inevitable demobilisation of the more than 20?000-strong workforce was going to work. According to Nhlapo, that never happened.

There are meant to be plans for reskilling and redeploying the thousands of workers at Medupi and, later, at Kusile.

Numsa wants the demobilisation treated as a retrenchment, with the attendant severance pay.

Even if the power station took on as many of the people involved in building it as possible once it was operational, it would still be a fraction of the total workforce.

However, there are also no clear commitments from contractors about using the workers for their next construction projects.

The demobilisation will proceed over the next few years, with large numbers of people being let go as parts of the stations get completed. This process will drag on over five years.

While there should have been a site-wide deal struck with Eskom covering all contractors, what has happened instead is that each contractor is “doing its own thing”, says Nhlapo.

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