State-owned electricity utility Eskom will issue a tender soon for the procurement of an additional 500 MW of capacity from private generators, as part of a larger intervention to ensure supply security ahead of the introduction of new capacity from the Medupi, Kusile and Ingula projects.

Interim CEO Collin Matjila reported on Thursday that 598 MW had already been contracted with outside suppliers, including the Kelvin power station (150 MW), the Aggreko temporary power plant in Mozambique, as well as a number of short-term purchases from independent power producers (IPPs) and municipalities.

All the contracts would remain in force until the end of April 2015, by which time the much-delayed Medupi Unit 6 should have been ramped up to full capacity.

Progress in dealing with defective boiler welds, together with the recent factory-acceptance-test approvals for the boiler protection system software, had given Eskom confidence that the first 800 MW unit would be synchronised to the grid in December 2014. The unit, which was the first of six, would then be ramped up to full production during the course of the first quarter of 2015.

However, Matjila cautioned that the electricity system would remain under pressure until a number of Medupi and Kusile units had been commissioned, with Kusile Unit 1 still scheduled for grid synchronisation during the course of the 2015/16 financial year. Therefore, Eskom would be pursuing other supply- and demand-side interventions in a bid to bolster its reserve margin.

Group executive for sustainability Dr Steve Lennon said Eskom would seek to tap additional supply from the private sector, including from companies that had immediate cogeneration capacity, as well as those able to aggregate stand-by-generator capacity that had been introduced by a number of companies since the rotational load-shedding crisis of 2008.

He said an enquiry would be released soon and that it hoped to conclude contracts with suppliers before the end of the year. The tender will seek short-term capacity to the end of April 2015, but would also include the flexibility for two- or three-year contract periods.

PRUDENT EXPENSE?

That said, the utility remained under major financial stress and would, thus, also need to consider the best way of funding the new capacity, while also ensuring the purchases were affordable. For this reason, volume and price caps could be included in the contracts.

However, when compared with the cost of operating the open-cycle gas turbines (OCGT), Lennon was convinced that the National Energy Regulator of South Africa would view the additional IPP costs as having been “prudently incurred” – Eskom would then be entitled to use the Regulatory Clearing Account mechanism to recoup the expenses.

There was also a big focus currently on reducing partial losses, which Eskom believed could add 1 000 MW of additional supply-side capacity as the country enters the high-demand winter period when demand was expected to peak at 36 000 MW sometime in July.

The utility had also set a 1 500 MW demand-side target, comprising 230 MW of demand market participation from large industrial consumers, 700 MW from integrated demand management programmes and a further 200 MW from other initiatives.

It had also sustained its 2 000 MW interruptible contract with BHP Billiton’s Hillside and Mozal aluminium smelter, but had been able to improve flexibility in the manner in which these could be deployed.

Developments in the strike-afflicted platinum belt were also being closely monitored, with Eskom currently supplying about half of the 800 MW traditionally drawn by the mines in the North West province.

Group executive for transmission Mongezi Ntsokolo said it would be critical to maintain close communication with the platinum miners to ensure that capacity is available if and when the platinum mines began reopening. In the meantime, it would use the space created by the sector’s lower demand to continue with critical maintenance.

Matjila stressed that the attention given to maintenance over the past two years was beginning to bear some fruit, with Eskom planning to taper its winter maintenance programme from 2 000 MW in 2013 to around 1 600 MW between June and the end of August.

Higher availability was also expected to enable it to rely less on the expensive OCGT plants than had been the case in winter last year, with R1-billion having been spend on diesel in the first two months of the current financial year as compared with the R1.4-billion spend in April and May of 2013.

Nevertheless Matjila warned that, in the context of a tight system, any significant event could result in load shedding, which remained a “last resort” measure that would only be used should there be a risk of a total blackout.

South Africa had its most recent load-shedding event on March 6, 2014, which arose as a result of a breakdown in the supply of coal to the Kendal power station, in Mpumalanga.