State-owned electricity producer Eskom and government are assessing ways to secure the financial resources necessary to enable the utility to resume power-saving schemes, as well as to contract with those municipalities and independent power producers (IPPs) able to supply electricity into South Africa’s power-stressed grid in the short term.
Eskom controversially ended short-term purchases with a number of IPPs in December, having failed to secure funding for ongoing purchases in the third multiyear price determination, or MYPD3, which was sanctioned by the National Energy Regulator of South Africa in February 2013.
Last year, Eskom contracted a total capacity of 1 135 MW from IPPs and municipalities on short- and medium-term contracts and purchased over 3 500 GWh at a total cost of R2.9-billion, which equated to 83.6c/kWh.
Speaking at a state-of-the-system update in Johannesburg on Tuesday, Public Enterprises Minister Malusi Gigaba said discussions were under way between the Department of Public Enterprises, the Department of Energy, the National Treasury and Eskom, but he indicated that announcements would only be made once solutions had been found and did not provide specific timeframes.
“In light of the reduced revenue compared to what Eskom had applied for, the company has not been able, timeously, to renew some of the short-term supply-side options and continue with its demand-side options,” Gigaba said.
Eskom had been granted yearly increases of 8% between April 1, 2013, and March 31, 2018, as opposed to the 16% sought, which translated into allowable revenue for the period of R862-billion, rather than the nearly R1.1-trillion requested – a R225-billion financial gap.
Besides some of the immediate cutbacks, the utility was also undertaking a far-reaching review of the organisaiton in light of the MYPD3 decision, the outcome of which was yet to be communicated.
It had already placed on hold aspects of its integrated demand management (IDM) programme, which had yielded cumulative savings of 35 TWh over five years. The decision had been taken pending a review of the implications on the initiatives of the MYDP3, which extended IDM funding of R5.18-billion compared with the R13.09-billion sought.
The IDM programmes affected at short notice last year included its residential mass roll-out of efficient lighting solutions, the standard offer programme, the standard product and performance contracting programmes, as well as the Esco model.
Gigaba stressed that government was aware of the disruptive economic consequences of South Africa’s power constraints, which led Eskom to issue two power emergencies in late February.
The emergencies arose owing to a combination of high levels of planned outages, unplanned trips of five units and a loss of about half of Eskom’s usual imports of 1 500 MW from Cohora Bassa, in Mozambique, as a result of transmission network problems.
The emergencies, which were announced on February 20 and 21 and were soon lifted, were the first of 2014, with Eskom having announced a similar emergency late last year, which endured from November 19 to November 21.
“Government continues to work with Eskom to ensure that the identified initiatives to mitigate the tight power system in the short- to medium-term are fully utilised,” Gigaba said, including the possible extension of existing supply contracts with some municipalities and IPPs and “aggressively” pursuing IDM.
However, the initiatives would require funding that had not yet been secured. “Hence officials from the Department of Public Enterprises, the National Treasury and the Department of Energy are continuing discussions in search of a resolution on the funding of these levers and further communication in this regard will be done, when there are concrete decisions taken,” Gigaba said.
Outgoing Eskom CEO Brian Dames said the utility had contracted with IPPs on a non-discriminatory basis, where it had funding in place. But the decision not to extend the IPP and municipal contracts was taken, because “we just don’t have the funds for that.”
Dames stressed that it was working with government to find a solution to reintroduce the immediately available capacity, as well as to ensure the introduction of the 47 contracted renewable-energy IPPs. It was also interrogating ways to convert its expensive diesel-fuelled open-cycle gas turbines (OCGTs) to natural gas in an effort to reduce costs and bolster efficiencies.
For the immediate future, however, Eskom said it would continue to lean heavily on the OCGTs in the Western Cape, despite the fact that these were between 16 and 18 times more expensive than its coal plants to operate. In addition, the utility had faced diesel-supply constraints on a number of occasions.
In January, Eskom produced 453 GWh from the OCGT plants, up from 307 GWh in January 2012 and around 200 GWh in 2011. The high level of use continued into February, in a effort to provide the utility with space to proceed with its summer maintenance programme.
Planned outages were expected to vary between 5 000 MW and 6 000 MW up to April 2014, before falling to between 4 000 MW and 5 000 MW by June. The utility would continue with a winter maintenance schedule of between 1 500 MW and 2 000 MW.
Dames stressed the need to persist with the maintenance programme to position the utility to operate at availability of 80% in future, with 10% set aside for planned maintenance and 10% for unplanned events. However, in January, unplanned disruptions were as high as 6 500 MW a day, which Eskom planned to reduce to 4 500 MW in the run-up to winter.
“It will take some time to get to the 80% availability,” Dames stressed, adding that major components were being replaced, while there was also a strong focus on fixing boiler-tube leaks.
“A boiler is about its tubes that are filled with water that is turned into steam . . . and the tubes for each boiler stretch from about here [Johannesburg] to Durban and are about 5 mm thick. If you have a leak, you have to go in and find it and then fix it,” Dames outlined, noting that the utility had some 58 boilers in its fleet. “It is a massive undertaking to assess the condition of each boiler and it takes a lot of time.”