BUSI MAVUSO: Capability outside Eskom for power generation is the light at the end of the tunnel
The public outcry for President Cyril Ramaphosa to cut short his working visit to Egypt to come home and show leadership in addressing the Eskom crisis last week was a reflection of the raw emotion stirred by unplanned load-shedding that has returned to haunt the SA psyche and our prospects for higher levels of economic growth and job creation.
After almost a decade of maintenance neglect, Eskom’s coal-fired generating capacity is old and unreliable. Without major (and very expensive) refurbishment, operational performance is likely to continue to deteriorate.
Medupi and Kusile power stations were planned to step into this breach but have been mired in corruption and are poorly designed and built and as such are incomplete, extremely expensive and very unreliable.
South Africans are paying for years of poor decision-making and even poorer execution regarding power.
There is an estimated 2 gigawatts of power generation outside Eskom just waiting for signatures and approvals from the state
The economy contracted 3.2% in the first three months of the year, largely due to energy constraints. In the most recently released data on the third quarter, the economy contracted yet again, by an alarming 0.6%. There is valid concern that we may enter yet another technical recession due to the impact of load-shedding in this final quarter of the year. Growth prospects for 2020 will inevitably be downgraded by all forecasters.
With so much riding on next year’s February budget and the spectre of a ratings downgrade by Moody’s Investors Service, which has us hanging on by a thread to our last investment grading, talk of recession and reductions in economic growth prospects from what are already alarmingly low levels may just be the final straw for SA to lose its last investment-grade rating, at great cost to all South Africans.
Eskom has just reminded us that it is a monopoly that is our greatest sovereign risk. Without low-cost and reliable power, business cannot compete, grow and create jobs.
While there must be a focus on repairing Eskom plants and improving existing generation as soon as possible, very little can be done by Eskom about load-shedding in the short or medium term. We are simply not generating enough reliable supplies of electricity, and Eskom is in such turmoil that it seems incapable of adding new generation capacity.
To face up to the national crisis and provide some light at what at times looks like a very dark tunnel, we must tap into the generating capability that exists outside the giant monopoly of Eskom.
Lifting regulation on generation of electricity for own use is the quickest way to increase electricity supply and would require no investment from the government or Eskom. There are already businesses that generate electricity for their own consumption, with several having additional capacity that could be fed into the national grid. If the own-generation limit was increased to, say, 20MW, and existing regulatory restrictions were removed, many more businesses would be able to create generating plants very quickly if given the green light.
After years of delays, SA miners have urged the government to grant permission for them to set up their own independent power sources. There is an estimated 2 gigawatts of power generation outside Eskom just waiting for signatures and approvals from the state. Granting the approvals would make an immediate contribution to stabilising the grid.
Regarding Sasol’s gas engine power plant, half of the 140MW capacity is used by the petrochemical company, with the rest being intended to be fed into the grid but it has never been able to successfully connect.
These power projects could be rapidly started from so-called embedded generation ranging from small-scale rooftop solar generation to utility-scale gas and combustion generators.
The government should act urgently on these measures.
An expedited procurement round in which all existing projects are allowed to bid to expand capacity could create rapid expansion of supply at costs lower than new projects would incur
Other short-term solutions to electricity supply are available in the excess capacity in the 64 existing and operating renewable independent power producers (IPP).
Current power purchase agreements through which Eskom acquires energy from these producers do not allow for the excess capacity to be fed onto the grid. A change to these contracts would allow the additional capacity into the grid. Some estimates put this amount of excess capacity at 30MW, and 280MW if round four projects that will begin coming online from February are included.
The IPPs that are already in operation can expand capacity with little additional development, because all grid connections and other infrastructure are in place. An expedited procurement round in which all existing projects are allowed to bid to expand capacity could create rapid expansion of supply at costs lower than new projects would incur.
Regarding longer-term plans to boost generating capacity in time frames as long as 18 months, the renewables sector has historically shown it can procure new plant quickly and on budget. A solar plant can be constructed in 12-18 months, while wind plants can be operational in 18-24 months.
With the Integrated Resource Plan (IRP) published and indicating a clear allocation for additional renewable energy within that time frame, all that is required is for mineral resources & energy minister Gwede Mantashe to make a determination.
Round five of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme could be launched immediately, looking to close by the middle of 2020 and have plants under construction from that point that will come on to the grid through the end of 2021 into 2022.
Share a truth
There are options to deal with the generating challenges posed by years of mismanagement at Eskom. It is not a hopeless situation. But do we have the will and the urgency to act? We have no choice.
When Eskom’s new CEO, Andre de Ruyter, starts his first day in Megawatt Park in January, he’ll have to share a truth that load-shedding may very well be a calendar feature for 2020 as he grapples with some of these operational challenges. It’s a truth I hope he is allowed to share with an exasperated public who have grown tired of the poor communications from Eskom. Pretending anything else would be most damaging to his ability to lead the turnaround of Eskom.
While Eskom is hopefully left to focus on operational issues as well as acts of sabotage that also contributed to our most recent episode of load-shedding, the short-term measures should be acted on immediately. They will contribute additional capacity and boost sentiment.
None of these will solve the energy crisis entirely, but they could contribute to lessening the severity of it. They require a suspension of some dogmatic approaches to policy positions and an end to interdepartmental turf wars. None are insurmountable with the right political will and leadership.
• Mavuso is CEO at Business Leadership SA.