Eskom crisis continues – Moneyweb

FIFI PETERS: Just picking up on Eskom, I was looking at my Twitter feed and I could see that Stage 10, Eskom and André de Ruyter, as well as President Cyril Ramaphosa, were among some of the dominating hashtags today in South Africa. South Africans tried to make light of a dark situation because of the power cuts. Today, for the second time in a row since 2019, Eskom implemented Stage 6 loadshedding, warning that things could still get pretty dark.

We have independent energy analyst Chris Yelland on the Market Update for more. Chris, thanks for your time, as always. I think that it is significant that we haven’t had Stage 6 load shedding in around two years, so I’m wondering if you saw it coming when it was implemented at the weekend?

CHRIS YELLAND: Well, this is the third time we’ve had Stage 6 load shedding. We had it in December 2019, and we’ve had it now twice this year.

I guess if you look at the statistics of the energy availability factor, which I track every week, you’ll see that the energy availability factor year on year [has been] declining every single year for the last five or six years. And in fact this year load shedding has reached a stage where the number of hours lost to load shedding is more than in the entire year last year – and we are now going on for the middle of September.

So things are getting worse. We had Stage 6 load shedding before, so I think we can expect it to happen now with greater frequency unless we do something about it.

FIFI PETERS: Just reflecting on what you said, I have an infographic here that says we have had 68 days of load shedding so far this year – and the year’s not even over. In the whole of 2021 it was 48 days of load shedding; in 2020  35 days. I think that picture’s pretty clear. It’s been getting worse over the years. Who should we be blaming for this?

CHRIS YELLAND: Well, I think we’ve got to  get past this blame game. Of course people do need to be held accountable. But right now we should focus on solutions and actions rather than complaining. It doesn’t help to get angry …. it helps to start looking for solutions. So I am just tempted to say let’s put that on hold for a while, while we deal with the problems and get down to solutions.

FIFI PETERS: But we were told previously by the current Eskom management, by the minister of public enterprises, by the president himself, that solutions were being worked on. We’ve been told about solutions for donkey’s years now. But let’s just reference it back to maybe 2020 – and those solutions have not been forthcoming. I suppose that that is why people are asking themselves ‘What now?’ in terms of accountability, and who should be blamed for solutions having not materialised?

CHRIS YELLAND: Okay. Well, if you insist on looking at the blame game, let’s look at that. First of all, we’ve got to hold people accountable for things for which they were responsible. Starting off with a report by Meridian Economics recently – they showed that, based on empirical evidence, that had we had an extra 5 000 megawatts on the grid last year, we would’ve reduced load shedding by 95%. I’m talking about 5 000 megawatts of solar, PV and wind.

Now about five years ago [former Eskom CEOs] Mr [Brian] Molefe and Mr [Matshela] Koko stopped the renewable energy IPP programme. Had they not, we would’ve had that 5 000 megawatts on the grid right now, and we would’ve had 95% less load shedding. Point number one.

Point number two, Medupi and Kusile are intended to generate approximately 9 600 megawatts of power. They should have been on the grid by 2014 and 2015. To this day they are not fully on the grid.

Medupi is suffering significant technical issues, unable to deliver at full capacity. One of the units has blown up. Kusile is only half finished, and that which is finished is performing exceptionally poorly. If those had been finished when they were intended to, we would have had 10 000 megawatts – 9 600 MW to be exact – on the grid. We wouldn’t have load shedding right now.

So those issues – the design, the execution – took place in the years from 2008 to 2015, 2016, 2017, and those people who did the design and did the planning and made the decisions need to be held accountable, for sure. So what I’m saying is we need to hold those who are accountable for the current situation accountable.

FIFI PETERS: All right. Point taken. Getting to your point now in terms of solutions, Eskom is talking about speaking with independent power producers to help them supplement their current energy deficit. What do you make of what they’re trying to do to fix the problem, and what do you think they should do to fix it?

CHRIS YELLAND: Look, again one has to look at what is possible and what is within Eskom’s limits of authority. So let’s start off by talking about what is not within their limits of authority. Eskom is not allowed to procure, so build, own and operate new generation capacity. Those decisions are taken by the minister of mineral resources and energy through the public-procurement processes, and those processes are under way, but they are running very, very late indeed. Of the emergency risk-mitigation IPP programme announced by the president in December 2019 [for] 2 000 megawatts of emergency procurement, only 150 megawatts has been procured to date under that IPP procurement programme by the DMRE’s [department of mineral resources and energy] IPP office.

Bid Window 5 is busy collapsing, is failing to reach financial closure. That’s another procurement by the DMRE’s IPP office.

What is within Eskom’s power?  What is within South Africa’s power to deliver new generation capacity quickly? Well, firstly, there’s a lot of existing generation capacity out there. Eskom announced yesterday that they’re going to market to find out what was out there, and whether it could be brought to the grid, and how much it’s going to cost so that they can contract for about a thousand megawatts. That’s not insignificant.

Read: Eskom to procure emergency additional energy to ease load shedding

The other options are of course the private sector – that is, customers of electricity – from domestic, commercial, mining, industrial, agricultural customers doing own generation, so-called self-generation, embedded generation, distributed generation on a big scale. This can deliver huge quantities of new generation capacity at no cost to the public purse and can be delivered quickly. These are the things that can and should be done.

The customer is the solution. The customer is the only solution in the next two years.

FIFI PETERS: Why is Bid Window 5 struggling to reach financial close?

CHRIS YELLAND: Well, it went out in the public procurement process, the bidding process, perhaps at the most unfortunate time. It was at a time when prices were declining and the bidders expected prices of equipment, plant to decline still further. They came in with very aggressive low-cost bids and maybe 20 or so received letters from the DMRE saying that they were the preferred bidders, and it’s now time to reach financial close.

In the meantime, the long delay between the issuing of the bidding documents and the time when bids were announced, the successful bidders, the whole world had changed. Covid had hit South Africa and the world, the Russian/Ukrainian war started, and the price of things like copper, steel, aluminium, solar PV panels, transformers, cables, switchgear, transport, have all skyrocketed.

And so by the time people were now told to go to financial close, the world’s costing had changed and these projects, many of them, are unsustainable at the bid prices that were bid at a time when they expected the prices to go down and not up.

So they’re not achieving financial closure. And many of them are unlikely to, to the extent where the minister has announced that they are kind of going to abandon Bid Window 5 and go out to market again. That’s going to cause a two-year delay.

FIFI PETERS: Scary stuff. Chris, we’ll leave it there for now. Thanks so much for the insights catching up again, I’m sure, in the near future, Chris Yelland is an independent energy analyst.

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