Spare electricity capacity is now burning a hole in Eskom’s pocket
It has embarked on a strategy to address a decline in domestic power sales by, among others, looking at cross-border sales and local demand stimulation
The margin between peak electricity demand and available generation capacity was 27.1% on January 4. Eskom’s available generation capacity was 33,326MW, while dispatchable power from Independent Power Producers (IPPs) was 1,014 MW, but peak demand was only 27,018MW. That gives a spare capacity of 7,322MW or 27.1% above the peak demand.
SA first encountered national load shedding in January 2008 when low coal stocks, heavy rainfall and normal summer maintenance produced a perfect storm.
Starting in October 2007, the northern parts of SA, Mozambique, Zambia and Zimbabwe experienced exceptional (in many cases record) rainfall. The consequence of this was that by January 2008 the ground was saturated and severe flooding took place. This in turn disrupted coal mining operations, as many mines are open cast, while turning normally good driving roads into quagmires. The bad driving conditions resulted in many small Black Economic Empowerment (BEE) transport companies, which had recently been given contracts to haul coal from mines to power stations, not being able to maintain their contracted delivery schedules.
Ordinarily, Eskom would have been able to keep its power stations going even if the mines could not mine or transport companies could not deliver coal, as it normally carries 20 days of stock, but as noted above, the exceptional rains had started in October 2007. It was a record month for an October in Pretoria, exceeding the previous October record set way back in 1966. That meant that by the time January 2008 came, the disruption to coal mining and transport had been going on for about 90 days. It did not result in a crisis in December and early January as many people were still on leave and demand was low, but once factories started producing again from mid-January, demand increased and load shedding prompted the closure of several mines due to safety concerns.
The recession in 2009 meant that power demand dropped steeply, and until the November 2014 coal silo collapse at Majuba power station, Eskom was mostly able to keep the lights on by delaying maintenance and using peaking power stations such as Ankerlig during non-peak times. After November 2014 these emergency measures were no longer possible, and load shedding became more frequent during 2015.
The power from the Renewable IPP programme and better maintenance practices using the so-called "Tetris" programme meant that from September 2015 Eskom was able to avoid load shedding as it brought more generation units on stream.
The power supplied to the national grid from non-Eskom sources has increased to 8.2% of the total power generated in November 2016 from only 6.3% in January 2016. In addition, Eskom has connected two 794MW units from the Medupi power station, one 800MW unit from the Kusile power station and all four 332MW units from the Ingula pumped storage scheme to the grid by the end of 2016.
This spare capacity is now burning a hole in Eskom’s pocket, so it has embarked on a strategy to address the decline in domestic power sales with the aim of stimulating sales growth as domestic power consumption fell by 1.2% in the first 11 months of 2016. The strategy addresses cross-border sales, local demand stimulation, public-private partnerships, corporate development and unregulated revenues.
One of the obvious targets are the energy intensive steel and ferro-alloy producers who had to cut back production over the winter months to compensate for increased residential heating demand which pushes peak demand to the 33,000MW level. That may mean additional steel and ferro-alloy production in 2017. Already South African steel production rose by 3.1% year on year (y/y) in November to an estimated 498,000 tonnes after jumping by 13.8% y/y in October to 534,000 tonnes.
In addition, Eskom is aiming to achieve 200,204 residential connections by the end of March 2017, compared with the target of 169,722 set by the Department of Energy.
The government’s economic cluster said in early September 2016 that steps have been taken to accelerate implementation of the Nine-Point Plan. The cluster was at an advanced stage in preparing for the implementation of 40 high-impact investment projects.