The Minerals Council South Africa has welcomed the Department of Mineral Resources and Energy’s (DMRE’s) statement that it is committed to the development of adequate generation capacity to meet electricity demand in the interests of economic growth.
However, the council said the industry believed further actions were urgently needed.
Following this week’s sudden shift from Stage 4 to Stage 6 energy curtailment, or load-shedding, which resulted in underground mines in South Africa suspending operations for a short period, as well as other sectors having to curtail activities, the DMRE issued a statement on efforts it would make to improve the electricity supply situation.
Essentially, Stage 6 load-shedding meant that mines were confined to essential demand only, which prevented the night and morning shifts from accessing operations. Stage 4 load-shedding only requires a 20% demand curtailment.
However, the Minerals Council on Friday said the real impact of this was that some companies would have lost a week’s production, as crews would have to first go back in and stabilise areas from a safety perspective before mining could resume.
Minerals Council CEO Roger Baxter said the impact of Stage 6 and Stage 4 load-shedding was “devastating” for the mining sector, as most mining companies would not only lose their week’s production, but were also facing threats to the viability of some mines.
He added that “Eskom is essentially making an industrial policy decision to downscale the mining sector when they make these Stage 4 and Stage 6 calls”.
The situation was desperate, the council lamented, and it demanded urgent action by Mineral Resources and Energy Minister Gwede Mantashe and leaders of other government departments to drastically streamline regulatory processes to enable the rapid establishment of self-generation facilities to supplement Eskom’s constrained capacity, and also urgently open the way for further generation by independent power producers (IPPs).
“While we are particularly encouraged by the Minister’s decision to promulgate Section 34 determinations, we urge urgent implementation,” Baxter stated.
While the Integrated Resource Plan (IRP) is used to roll out electricity infrastructure development in line with Ministerial Determinations that are issued under Section 34 of the Electricity Regulation Act, the Ministerial Determinations give effect to planned infrastructure by facilitating the procurement of the required electricity capacity.
In effect, this would mean that municipalities and large power consumers could procure power directly from IPPs without having to go through Eskom.
Beyond the four interventions mentioned by the DMRE, the council further called for the amendment of Schedule 2 of the Electricity Regulation Act, which would lift the licence requirement for self-generation regardless of plant size.
Unregulated generation is currently limited to 1 MW plants with indications that this will be increased to 10 MW. Power produced by mining companies for their own use often does not require Eskom handling or transmission and, therefore, should not be subject to licensing, irrespective of size, the council explained in its statement.
The current regulatory requirements to licence self-generation for own use are cumbersome and very time consuming and also involve environmental, land use and generation licences from National Energy Regulator of South Africa and Eskom permissions where wheeling is required on the national transmission grid when self-generation occurs at a distance from the mine or plant, along with IRP 2019 approvals.
According to the Minerals Council, what is required is a streamlined process through some kind of “one-stop shop” made up of the relevant directors-general that will enable the urgently required additional power supply to come on line in the shortest possible time frame.
The Minerals Council’s latest assessment is that about 869 MW of solar power and up to another 800 MW of conventional power could be added to the national grid by mining companies over the next three to four years, with more available from other energy-intensive sectors.
“Government should stop trying to place all their eggs in the one basket called Eskom. We can clearly see that over the past 12 years, despite hundreds of billions of rands funded through much higher electricity prices and substantial taxpayer-funded bailouts, that Eskom is in an even worse position and this is having a materially deleterious impact on the economy and mining in particular,” the council elaborated.
It urged government to take decisive steps not only to fix Eskom, but also to enable the private sector to bring on stream substantial self-generation capacity. These proposed self-generation plants would come at no cost to government, the taxpayer or Eskom and would help provide the room for Eskom to get its house in order, Baxter said.
While these shorter-term steps are essential, if the broader energy supply and cost issues are to be fully addressed the longer-term remedies, including the timeous implementation of the IRP and the long-awaited restructuring of Eskom, need to be allowed to resume, the latter under the direction of an executive leadership and board empowered to do that, the council commented.
“The mining industry, and South Africa as a whole, needs a reliable electricity supply characterised by a diversified supply base, globally competitive prices and reliability of supply in order to enable the mining sector to realise its true economic and transformational potential.”
The Minerals Council reiterated its openness to working with the DMRE, Eskom and other parts of government to find a workable outcome, but Baxter emphasised that the industry would “need concrete action plans and accountability for delivery and we are asking government to unleash the energy of the private sector to help resolve this national electricity crisis”.
According to financial company Intellidex, in a separate statement this week, Eskom has “exceptionally deep and structural cultural problems internally which have been compounded by disaffected union employees and bloated management, ineffectual middle management layers and experience bleeding out of the company”.
This has then been paralleled by the overworking of the system, an old system (37 years average plant age) and underinvestment in maintenance in recent years, the company pointed out, emphasising that “the system is vulnerable with no safety margin” and a desire not to run open-cycle gas turbines at full speed.
In spending the last year digging into the operations and the power utility’s inner workings, Intellidex concludes that Eskom is “unfixable over the long run”.
As a result, the company suggested that unbundling will have a negligible positive effect on the problem, adding that a debt deleveraging, while inevitable and if anything, skews the incentives in the wrong direction to do less rather than more.
The Energy Intensive Users Group of Southern Africa (EIUG) reiterated on Thursday this week that its members had several options available to alleviate the country’s electricity supply constraints, while warning that the risk of load-shedding would persist until new supply- and demand-side solutions were identified to create sustained reserve capacity.
The EIUG, which includes mining and industrial enterprises that collectively consume about 40% of South Africa’s electrical energy, said in a statement that the options included leveraging private balance sheets to build new generation capacity.
Greater collaboration between government, Eskom and business was urgently required to unlock these options, many of which fell under the direct authority of Mantashe, Engineering News Online reported.