Eskom resides hand-to-mouth in its efforts to acquire the diesel wanted to proceed operating its open-cycle fuel generators (OCGTs), which, within the face of extended power era outages, is the one approach the utility can stave off extreme and ongoing curtailment of South Africa’s electrical energy provide.
In the previous two years, Eskom has been pressured to rely more and more on the OCGTs – which have been supposed just for dire emergencies or use throughout peak demand durations – due to a steadily rising variety of breakdowns inside its ageing coal-fired power fleet.
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In the previous few months, the OCGTs have turn out to be important within the face of the lack of 4 500MW of era capability resulting from issues at Medupi and Kusile, Eskom’s two latest coal-fired power crops, and a life-extension refurbishment at Koeberg, its nuclear power station.
Eskom chief working officer Jan Oberholzer says this mixed outage equates to about 5 phases of load shedding.
Kusile Units 1, 2, 3 and 5 – which account for practically 3 000MW of the quantity – might be unavailable till the tip of this yr, he advised EE Business Intelligence.
The advanced life extension of Units 1 and a couple of at Koeberg will solely be full by March 2024, if all goes effectively. Medupi Unit 4 is just scheduled for return-to-service by September 2024 following a hydrogen explosion in August 2021.
When you add this huge, mixed outage to the nation’s current power era hole of 4 000 to six 000MW declared by Eskom greater than three years in the past – which has nonetheless not been addressed – it’s clear that South Africa is teetering on the sting of an electrical energy emergency.
The diesel emergency
Eskom’s administration group drew the ire of presidency in November 2022 when it declared that the utility had run out of diesel and couldn’t afford to purchase extra, having spent roughly double the R6 billion diesel funds for the monetary yr ending 31 March 2023.
When no additional funds from National Treasury materialised, Eskom chief monetary officer Calib Cassim managed to scrape collectively R1.5 billion supposed for different functions from his funds for the rest of the yr, to instantly purchase 50 million litres of diesel from PetroSA.
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That supplied sufficient diesel to maintain the OCGTs operating as wanted by December 2022. As the gasoline ran out, Cassim got here up with yet one more R1.5 billion from Eskom’s coffers for an extra 50.4 million litres of diesel.
According to Oberholzer, this could final till the tip of January 2023.
“From an operational point of view, I can tell you we need diesel,” he advised EE Business Intelligence.
“We need at least – and this is based on certain assumptions – an additional 200 million litres of diesel to take us towards the end of March 2023. It may be less and it may be even more, it all depends on what’s going to happen in respect of unplanned breakdowns. This is the best assumption we have, based on the outlook ahead.”
Eskom CFO Calib Cassim. Image: Moneyweb
Cassim says this could value Eskom one other R6 billion.
When added to the eleventh hour R3 billion he has simply coughed up, and the earlier diesel spend of about R12 billion, the utility’s diesel spend for the complete monetary yr 2022/23 will quantity to about R21 billion.
This is far more than double that of the 2021/2022 monetary yr, when Eskom spent R8 billion on diesel.
It is simple to see that authorities may be very upset by the monetary and political penalties, as Finance Minister Enoch Godongwana declared in Davos on 16 January that: “I don’t think Eskom has a diesel problem, I think it has a management problem.”
The value influence of load shedding
Despite the prohibitive value of diesel, there may be widespread consensus that the burden of extreme load shedding on the economic system is way increased.
Estimates range extensively. However, primarily based on 11 797 GWh (gigawatt hours) of unserved electrical energy within the 2022 calendar yr calculated from load shedding knowledge from the app EskomSePush, and a really low assumption of R10/kWh for unserved power advised by Eskom, the whole value to the economic system in the course of the yr would have been R115 billion.
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This very conservative estimate doesn’t account for the longer-term impacts of misplaced alternatives brought on by prolonged load shedding on enterprise, trade, agriculture and funding typically – and the cash spent by households, enterprise and trade on backup power programs.
Taking this into consideration, the price of unserved electrical energy is prone to be a lot increased. At R50/kWh and even R85/kWh (if a examine by the CSIR is something to go by), the associated fee to the economic system in 2022 could be extra like R590 billion or R1 000 billion respectively.
Rising OCGT utilization
The worst-case eventualities started to rear their head when Eskom was pressured to implement Stage 6 load shedding on 11 January after 11 era models unexpectedly broke down, taking the whole quantity of era capability offline to greater than half of its put in capability of about 46 000MW.
The load issue for Eskom’s OCGTs shot as much as 48% at the moment – which means they have been operating flat out for about 12 hours of the day – and that is what enabled South Africa to avert crippling Stage 8 load shedding for the primary time.
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There are rising strategies throughout the ANC that Eskom is intentionally implementing load shedding to scupper the ruling social gathering’s possibilities within the 2024 nationwide election.
This is bolstered by utterances from Mineral Resources and Energy Minister Gwede Mantashe, who has claimed that Eskom is permitting greater than 20 000MW of put in era capability to “stand idle”.
In actuality, Eskom’s system operator implements load shedding to stability provide and demand on the grid, with the intention to avert a nationwide blackout.
The threat of this disaster remains to be seen as slim – supplied that Eskom has sufficient diesel for the OCGTs, as effectively as different emergency levers on the disposal of the system operator.
Eskom’s personal OCGT power crops – Ankerlig and Gourikwa – can generate as much as 2 067MW of power, which mitigates two phases of load shedding. There are additionally two additional OCGT power crops – Dedisa and Avon – owned and operated by unbiased power producers (IPPs), which might generate 1 005MW to avert an extra one stage of load shedding. The IPP OCGTs usually are not a part of Eskom’s diesel headache as they purchase their very own gasoline.
A take a look at the load issue development for Eskom’s OCGT utilization over the previous yr tells the entire story. In monetary yr 2021/2022 it averaged 7%, and within the yr up to now it stands at 14%, based on Cassim. This compares with an OCGT utilization load issue of simply 6% factored into Eskom’s newest electrical energy tariff permitted by Nersa for the 2023/24 monetary yr beginning 1 April 2023.
Diesel outlook
Now, as soon as once more, Eskom is peering into an abyss. Its second batch of diesel is anticipated to expire on the finish of January, and the Eskom board is taking a look at methods of developing with the money to maintain the OCGTs operating till the beginning of the brand new monetary yr on 1 April.
“We now need to find cash somewhere, and as soon as possible,” stated Oberholzer.
“We have been given some actions that we are actively and urgently pursuing to see how we can obtain money to deal with this challenge of not being able to run the OCGTs.”
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But not one of the choices on the desk appear like fast fixes. One possibility could be to obtain among the arrear debt of greater than R50 billion that Eskom is at the moment owed by municipalities.
Tax rebate
Another could be the receipt of a hefty diesel tax rebate claimed from the South African Revenue Service (Sars), which Eskom’s financials present as simply over R3 billion for the yr ending 31 March 2022.
In phrases of an modification to Section 75 of the Customs and Excise Act, from 3 August 2022 Eskom is allowed Fuel and Road Accident Fund levy rebates totalling R4.04 per litre of diesel used for power era. From estimates of diesel gasoline burned in Eskom’s OCGTs, this R3 billion may due to this fact simply have risen very considerably.
However, the diesel gasoline rebates anticipated by Eskom have been disputed by Sars for greater than a yr, and the clock is ticking.
Oberholzer maintains that Eskom has no issues in sourcing diesel, though it’s largely all imported, and South Africa has no official strategic reserves.
The nation as a complete makes use of between 12 and 14 billion litres of diesel a yr, and at a load issue of 15%, the diesel utilized by the OCGTs operated by each Eskom and the IPPs would quantity to about 1.13 billion litres – lower than 10% of the whole.
© Copyright 2023 – EE Business Intelligence (Pty) Ltd. All rights reserved. This article is revealed with permission.
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