Electricity problems converge as Eskom CEO departs

April 11th, 2014, Published in Articles: Vector

 

by Chris Yelland, investigative editor, EE Publishers

With former Eskom CEO Brian Dames’ recent resignation, Eskom must now face enormous problems led by an acting CEO with no direct experience of running a major state-owned enterprise or a business the size of Eskom, or of managing projects with the size and technical complexity of Medupi and Kusile.

Chris-Yelland

Chris Yelland

Three emergency protocols have been invoked since November 2013 to stave off a national power blackout. This has forced regular mandatory load curtailments by Eskom’s largest industrial customers, as well as mandatory rotating load-shedding of industrial, commercial, agricultural and domestic customers countrywide for one day in February 2014.

To meet demand, the ageing Eskom generation fleet is running flat-out with unacceptably low generation reserves. Coupled with deferred maintenance at its coal-fired power plant due to the generation capacity shortages, this is resulting in high levels of unplanned outages, with plant availability dropping well below 80% – significantly lower than industry norms. This effectively further reduces availability of already low generation capacity.

It has also resulted in Eskom having to run its emergency reserves – 2426 MW of diesel powered open-cycle gas turbines (OCGTs) in the Western Cape – for extended periods. The R2-billion budgeted by Eskom for diesel fuel in the financial year ending 31 March 2014 has risen to R10-billion, resulting in a cash-flow crisis which the utility claims is affecting other necessary capital and operational expenditure.

Eskom recently announced that it was unable to meet the new Department of Environment air quality and particulate emission regulations at its Kriel and other coal-fired power plant, and threatened to reduce power output at Kriel by 2400 MW unless it was granted exemption from the regulations. Eskom has also delayed the installation of a flue gas desulphurisation (FSD) plant at its new Medupi coal-fired power station, to which it is committed in terms of a World Bank loan.

The disclaimer that it requires the involvement of independent power producers (IPPs) is in stark contrast with the canning of the Independent System and Market Operator (ISMO) Bill.

The utility has imposed massive electricity price increases since 2008, which have played a significant role in curtailing electricity demand and economic growth. Lower energy unit sales, however, drive the prices higher still to recover committed costs from declining sales volumes, and a vicious cycle ensues.

It must be appreciated too that the massive electricity price increases experienced to date are only to meet Eskom’s projected expenditure for the next five years. No new base-load or other generation capacity beyond Medupi and Kusile has been factored in. A decision and a funding arrangement for the planned new nuclear fleet of 6000 to 9600 MW, estimated variously to cost between R300-billion and R1200-billion, has still not been announced.

The problems in the distribution sector of the electricity supply industry are legendary, with plenty of talk and analysis of the issues, but little concrete progress toward the solutions, and a massive backlog in investment in network maintenance, upgrading and refurbishment, variously estimated to be somewhere between R30-billion and R60-billion.

To comment on this article please contact vector@ee.co.za.

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