Eskom’s plan to address SA’s energy crisis

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Eskom’s PLAN to ADDRESS SA’S ENERGY CRISIS

André de Ruyter at the Joburg Indaba André de Ruyter, group chief executive of Eskom, attended the Joburg Indaba to give a keynote address that focused on the power utility’s turnaround strategies, progress and challenges.

By Dineo Phoshoko

De Ruyter started by explaining a series of events that led to the current energy crisis facing South Africa. The country’s power challenges started in 1998 when an energy paper recommended the construction of new energy plants. Government at the time disagreed and deferred the recommendations. This resulted in the creation of virtual capacity, which, according to the Eskom chief, is when there is a cutback on maintenance and plants are run harder to create more capacity than the plants can allow. “We deviated from our prescribed maintenance policies in an endeavour to keep the lights on. That was the mantra – keep the lights on no matter what.”

Around 2007, new plants (Kusile and Medupi) started to be built; however, critical setbacks including corruption and awarding of irregular contracts led to in-built design errors, resulting in the incompletion of the power plants till today. During a virtual plenary of the National Council of Provinces in May 2022, Deputy President David Mabuza explained that the design errors at both these power stations could take up to five years to fully rectify.

Then, in 2008, South Africa started to experience loadshedding. “There are children today who have never known a day in their lives in South Africa without loadshedding, which is a very scary thought. It’s a very poor reflection on how we do energy planning and energy capacity creation in South Africa,” De Ruyter said.

Ironically, when South Africa hosted the 2010 FIFA World Cup, the country was only getting deeper

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into trouble in terms of energy demand and supply. De Ruyter mentioned that load-shedding possibly could have been avoided had Eskom agreed to sign power purchase agreements with independent power producers (IPPs) in the private sector in 2014. At the time, the agreements were deemed to be too expensive, which is why the power utility did not sign the contracts. “If we look today, where our alternative is to burn diesel versus even the admittedly higher cost of Bid Window 1 and 2, we would have been significantly less susceptible to load-shedding if we had signed those contracts at the time,” explained De Ruyter.

According to the Eskom head, a report by Meridian Economics demonstrated that South Africa could have eliminated load-shedding if additional capacity were available. The report, titled Resolving the power crisis Part A: Insights from 2021 – SA’s worst load shedding year so far, states, “In summary, we found that an additional 5 GW of renewable capacity on the system in 2021 would have reduced load-shedding by 96.5%.”

Buying coal

To open the Eskom coal market for all coal miners to be able to participate equally, the power utility started to purchase more coal delivered by truck and less on conveyor belts. “This was to break the alleged monopoly of a small number of mining companies and open up the Eskom coal market, which was well intentioned – possibly – at the time. But it did open up the space for substantial corruption and fraud in the coal value supply chain,” explained De Ruyter. As a result, Eskom coal power stations were being supplied with discard coal that had a calorific value of between seven and eight, which is of poor quality.

De Ruyter cited geopolitics as indirectly having an impact on the power utility’s coal supply because the coal that was meant to be supplied to Eskom was being exported to Europe. He further added that the latest figures showed a staggering increase in coal exports to Europe. During a webcast of Thungela Resources’ interim results presentation for the period ended 30 June 2022, CFO Deon Smith said, “It’s worth noting that coal exports from RBCT into Europe have increased by about 720% – from half a million tonnes in H1 2021 to 4.1 million tonnes in H1 2022.”

Finding long-term solutions in the short term

In De Ruyter’s first system update presentation in January 2020, he explained that at least 4 GW to 6 GW of new capacity was urgently needed. He explained that

L-R: Sabelo Baroyi, Reuben Maroga, Andre de Ruyter, Gesie Theron and Nicolas Lecomte. All attended the lease signing between Eskom and Mainstream Renewable Power

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the new capacity would enable the power utility to take units offline to do the necessary maintenance. To date, the IPP office managed to sign contracts that will supply approximately 500 MW of additional capacity; however, De Ruyter stressed that this was insufficient. “That is not enough; we really need more capacity more quickly if we want to head off further restrictions because the downward trend of the energy availability factor is almost inexplicable unless we get the time to take units off and do the necessary maintenance.”

During his presentation, De Ruyter identified three priority levers to close the capacity gap over the next 12 months. The first was improving Eskom’s plant performance. He detailed that by improving six power stations – Tutuka, Kendal, Duvha, Majuba, Matla and Kusile – approximately 2 200 MW of capacity may be identified within 12 months, depending on system constraints and how quickly funds are released. Second, procuring additional capacity could add approximately 2 295 MW; third, demand-side management could result in an additional 1 450 MW – of which 750 MW can be expected within 18 months.

De Ruyter stressed that while it was important to get new capacity as soon as possible, it was equally important to be mindful that South Africa’s competitiveness in global export markets was at risk mainly due to the carbon content of the country’s exports. “Work done by the National Business Initiative has shown that there is some 46% of South Africa’s exports at risk of carbon border taxes. This includes not only manufactured goods but also agricultural products, as well as mineral exports.” As such, De Ruyter noted that it was important that the country was well prepared in this aspect to be globally competitive. “If we don’t, then we really are at a substantial risk of losing access to our key trade partners in terms of exports.”

He also highlighted some key reinforcing challenges contributing to the national utility’s power supply constraints. Among them was old generation capacity. “We’ve got a system that is designed for a completely different electricity market than what we’ve got today.” Financial challenges, grid access, as well as crime and corruption were other critical challenges mentioned by De Ruyter. “Crime and corruption in the coal supply chain really is a massive problem and we are regrettably not getting the necessary support from law enforcement that we would have liked,” he said.

Launching innovative initiatives

Not all hope is lost, as Eskom is launching various innovative solutions that will not only add much-needed capacity to the grid but also contribute to environmental sustainability. One of those is leasing land close to power stations with grid access to connect significant renewable energy to the national grid. De Ruyter was excited to announce that the first lease agreement was to be signed on 14 October 2022.

The agreement between Mainstream Renewable Power and Eskom would see a 1 650 hectare site where Mainstream plans to build and operate renewable energy plants. The lease agreement will run for 25 to 30 years. This agreement is one of four similar agreements signed by Eskom that will contribute hundreds of megawatts of renewable energy to the national grid. The land is located next to the Majuba and Tutuka coal-fired power stations in Mpumalanga.

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Commenting on the signing of the agreement, Hein Reyneke, GM: Africa at Mainstream, said, “Mainstream is proud to support Eskom in its initiative to expedite the connection of large quantities of much-needed clean, affordable power to the grid as part of the just transition to renewable energy.”

Eskom has allocated 31 000 hectares of land for such projects. “We are targeting these strategic investments to enable greater generation capacity to be added as quickly as possible so that we can unlock more megawatts on to the grid,” said De Ruyter.

When power stations reach the end of their lifespan, Eskom plans to repower decommissioned coal plants with renewable and repurposing facilities. This is another innovative initiative referred to as coal station repurposing and repowering.

The Komati Power Station is a case in point. “We believe that we have a duty to communities [and] people that have supported us for many, many years – and in some cases generations,” said De Ruyter. He further explained that Eskom was currently in advanced discussions with the World Bank to obtain support for the repurposing and repowering of Komati Power Station. He also addressed concerns about shutting down the power station at a time when the country was at the peak of an energy crisis. “The fact of the matter is, we cannot operate Komati legally beyond the end of October. We will be non-compliant with government safety regulations.”

An aspect of re-empowerment is also included in the repurposing and repowering of coal stations, whereby people can obtain training that will make them eligible for employment in the renewable energy sector. “We have obtained grant funding from the Global Energy Alliance for People and Planet (GEAPP). They’ve made available money to us to start a training centre at Komati to train PV and wind technicians so that they can go and work in the industry,” explained De Ruyter. He added that various renewable energy associations had highlighted the existence of 16 000 vacancies that cannot be filled because of a lack of trained people in these professions.

In addition to GEAPP, Eskom would also be working with the South African Renewable Energy Technology Centre based at Cape Peninsula University of Technology, to develop the Komati Training Facility.

New capacity on the way

South Africa is currently facing a situation where new capacity is needed at the lowest cost but environmental considerations must be taken into account. The wheels are in motion to get urgently needed new capacity on to the grid, with a pipeline of 6 000 MW of registered embedded generation projects. Realistically, 50 GW to 60 GW of renewable capacity needs to be added to the grid by 2030, which will require an investment of R1.2 trillion in infrastructure.

“There is no way that Eskom can do this. We just don’t have the balance sheet. There is no way that the fiscus can do it. The way to do it is for electricity customers and electricity producers to come together and [use] the unbundled Eskom as the market platform, to create this new industry, which I think is a very exciting development going forward.”

De Ruyter proudly mentioned that President Cyril Ramaphosa had intervened and established the National Electricity Crisis Committee where regular meetings take place between the government and Eskom employees to resolve the national energy crisis. “We are trying to work with our colleagues in government to ensure that we can solve this as quickly as possible. Remove the roadblocks, cut through the red tape, and make sure that we can restore energy security,” De Ruyter concluded.