ELECTRICITY GENERATION
GAVIN KEETON: Eskom cannot return to health via damaging cost increases
Recent warnings that SA may face load-shedding during the festive season are a reminder of the negative impact for consumers and the economy of Eskom’s continued management and financial woes. Historically, SA's electricity was very cheap and plentiful because Eskom built large coal-powered stations that operated with significant economies of scale. The stations were built on top of enormous low-grade deposits supplying coal at minimal cost. Many of these coal mines were owned by Eskom but operated by private contractors with proven mining expertise. Eskom paid the operator on a cost-plus basis for a small margin. The result was exceptionally cheap coal and very cheap electricity. When local sources of coal were depleted power stations were closed and new ones opened elsewhere operating on the same model. Failure to build new power stations to meet local demand growth led to the 2008 load-shedding and severely disrupted Eskom’s traditional production model. Old mothballed power stat...
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