Moody’s warns electricity supply will remain highly constrained
Despite extra capacity from Medupi and Kusile, provision will be eased only moderately with decommissioning of older units
SA’s electricity supply will remain extremely constrained until the mid-2020s, Moody’s Investors Service said in a report on the electricity market on Tuesday.
The report comes as the country faces a third consecutive day of load shedding as Eskom lost the battle to keep up with electricity demand, forcing it to drop customers from the grid to avoid it tripping.
Eskom’s reserve margin has been eroded by unplanned breakdowns of its plants, leaving only 64% of its units available (known as the energy availability factor) to dispatch electricity.
The Moody’s report says that despite the addition of new capacity to the grid — about 6,700MW from new power stations Medupi and Kusile and from other sources — the decommissioning of some of Eskom’s older units will mean the supply is only moderately eased. It also warns that new renewable capacity will have lower load factors as solar and wind energy is variable and new capacity from other installations “could be subject to delays or poor performance, maintaining pressure on the reserve margin”.
Much of Eskom’s coal fleet is ageing with 11,000MW-14,000MW due to be retired by 2030. This amounts to about 25% of Eskom’s current capacity of 45,000MW. However, some of these may have to be retired earlier if Eskom does not get permission to postpone environmental standards compliance. Permission was granted to postpone compliance until 2020 and in some cases until 2025. If this is not granted about 18,000MW of units will have to be shut down in 2019 and 2020.
“Given the tightness in the system, that does not appear to be a viable solution for the government so a solution is likely to be sought,” the report says.
The economic growth scenarios modelled in the draft Integrated Resource Plan — SA’s long-term energy plan that has been tabled for discussion by the government — also points to serious system constraints in the future, notes Moody’s.
“Even under a low-demand growth scenario of 0.64% or a no-growth scenario of 0% the reserve margin looks tight, particularly if we take account of generally ageing and therefore less reliable assets,” it says.
Eskom’s “Medium-term System Adequacy Report”, a statutory document that is compiled for the National Energy Regulator of SA, indicates difficulties ahead. The report says that on a 1.9% demand growth trajectory, Eskom would need an energy availability factor of 73%. The report also says if the energy availability factor is only 71%, then even if demand does not grow, the system will have inadequate reserve margin. This is higher than what Eskom has been able to achieve in the past few months.
Moody’s says the proposal to split Eskom into three parts should lead to a greater number of energy producers and declining dependence on Eskom.