Oct 11, 2011
Power supply security to hinge on growth outlook as Eskom warns of Medupi delayBack
Observers agreed that any delay to the Medupi programme could raise the spectre of supply disruptions, owing to South Africa's tight supply/demand balance. But those canvassed by Engineering News Online also stressed that much would depend on the outlook for economic growth, which would, in turn, dictate the pace of power sales growth in 2012.
Slower-than-anticipated growth in 2010 and 2011 had helped sustain Eskom’s reserve margin and had been material to ensuring that Eskom did not need to resort to rotational load shedding, which had caused severe economic harm in 2008 and had led to the closure of many of the country's mines on safety concerns.
Eskom CEO Brian Dames told lawmakers that the schedule was being negatively affected by the underperformance of the boiler contracts. These contracts were awarded to a consortium comprising Hitachi Power Africa and Hitachi Power Europe, but controversially also included Chancellor House, which is directly associated with the governing African National Congress.
Together, the boiler contracts for the Medupi and Kusile power stations were valued at R38.5-billion and represented the largest single contract ever awarded by Eskom.
Dames told Parliament’s Portfolio Committee on Public Enterprises that Eskom was working closely with Hitachi to put in place remedial measures to mitigate delays. Eskom had also received confirmation from the Japanese parent company that it should meet its commitments under the contract.
“With a year to go, we are concerned that the performance of some contractors could put the schedule at risk,” Dames said.
The utility had initiated a detailed assessment of the timelines for the first unit, or 'Unit Six', to determine whether the project could indeed be synchronised to the grid in late 2012, as outlined in the current schedule. An expert review team had been assembled to assess the schedule and a detailed update on the Medupi timelines would be provided when Eskom released its interim financial results on November 23.
Hitherto, Eskom and Dames had insisted that the first 800 MW unit would be commissioned before the end of 2012, despite several contractors, including JSE-listed construction group Murray & Roberts, warning of delays, scope changes and contract variations.
But the recently promulgated Integrated Resource Plan 2010 (IRP2010), covering the period 2010 to 2030, took a more conservative view, indicating that the first Medupi unit would be commissioned only during 2013.
Should the commissioning of the first unit be delayed it would not be the first significant schedule change, with Eskom initially anticipating the first Medupi unit being synchronised in early 2012, before changing that date to June 2012 and then to September 2012. Most recently, it published a revised date in its annual report indicating the unit would be commissioned by the end of next year.
Frost & Sullivan energy sector consulting manager Marc Goldstein said that the delay had the potential to cause disruptions, but added that much would hinge on the outlook for economic growth.
He noted that year-on-year electricity growth levels had been lower than anticipated and well below the levels anticipated in the IRP2010, which had been premised on yearly economic growth of 4.5%.
During Eskom’s financial year to March 31, 2011, sales expanded at a lower-than-expected rate of 2.7% to 224 446 GWh – the State utility had been expecting growth of 4.2% and sales of around 227 000 GWh as South Africa’s economy recovered from its 2009 recession.
Manufacturing Circle chairperson Stewart Jennings, whose fellow members were directly affected by the 2008 shortages, but were currently more concerned about the margin impact of surging power prices, said any threat of new supply disruptions would be bad for manufacturers and future job-generating investment.
Jennings said reliability of power supply was essential, but that the immediate threat of disruptions had been lowered by the low economic growth rates.
“But we have to get this economy growing at rates better than 4%. If we do that, I think Eskom will be in trouble,” he added.
That said, the more pressing concern for manufacturers was the impact rising power prices, as well as other administered prices, were having on margins, particularly in a context where the strong currency was offering little relief.
The Manufacturing Circle was finalising a paper on the impact of power prices and hoped to petition the National Energy Regulator of South Africa before year-end on the need to put in place mechanisms to moderate the price path.
Edited by: Creamer Media Reporter
To subscribe email email@example.com or click here
To advertise email firstname.lastname@example.org or click here
Other Electricity News
Updated 10 minutes ago A R42.5-million claim brought against coal mining company Keaton Mining by opencast mining services company Megacube Mining has been dismissed with costs. The JSE-listed Keaton said in a Stock Exchange News Service announcement on Tuesday that Megacube would also be...
Updated 15 minutes ago South Africa's new vehicle sales fell by 9.2% year-on-year to 40 390 units in April, data from the trade and industry department showed on Tuesday. Exports rose 31.5% to 31 028 units compared with the same month last year, the department said.
Updated 2 hours 54 minutes ago The medium-term game plan of African cement producer PPC is to find new resources, which will probably require it to engage in some form of exploration close to where urban development is expected in Africa. Over time, the resources side of the business is expected...
Recent Research Reports
Automotive 2016: A review of South Africa's automotive sector (PDF Report)
Creamer Media’s Automotive 2016 Report provides an overview of South Africa’s automotive industry over the past 12 months. The report provides insight into local demand and production, vehicle imports and exports, investment and competitiveness in the sector, as well...
Energy Roundup – April 2016 (PDF Report)
The April 2016 roundup covers activities across South Africa for March 2016 and includes details of a North Gauteng High Court Judge’s dismissal of a court application to postpone the 9.4% electricity tariff increase, which the National Energy Regulator of South...
Electricity 2016: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2016 report provides an overview of South Africa’s electricity sector, focusing on State-owned power utility Eskom and independent power producers, electricity planning, transmission, distribution and the theft thereof, besides other issues.
Energy Roundup – March 2016 (PDF Report)
The March 2016 roundup covers activities across South Africa for February 2016 and includes details of the Department of Energy’s plans to announce the preferred bidders for the first tranche of the coal independent power producer procurement programme; the Council...
Steel 2016: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2016 Report examines South Africa’s steel industry over the past 12 months. The report provides insight into the global steel market and and particularly into South South Africa’s steel sector, including production and consumption, main...
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
This Week's Magazine
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
Daimler Trucks and Buses Southern Africa (DTBSA) saw a marked slip in new-vehicle sales in 2015 compared with 2014, with sales dropping from 5 897 units to 5 300 units. The decline came as the South African new truck and bus market declined from 31 558 units in 2014...
Group of 20 (G-20) economies threatened to penalise havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. The G-20 will consider “defensive measures” against financial centers and...