Eskom spent R7bn on diesel used to run its gas turbines in the 2021 financial year to end-March and that number is likely to rise in 2022 as oil prices spike due to the war in Ukraine.
The state-owned utility has debt of about R392bn and the rising cost of diesel will add to its woes. Further squeezing its finances is the decision by the National Energy Regulator of SA (Nersa) to approve only a 9.6% tariff increase for 2022/2023, after Eskom applied for a 20.5% hike.
“I agree we burn too much diesel. We don’t like spending money on diesel,” CEO André de Ruyter said at a media briefing on Thursday, but added that diesel-fed gas turbines were important in producing enough power to meet peak demand in the evenings.
The turbines are well maintained with the diesel stocks monitored hourly, he said.
Eskom has been holding daily briefings since the onset of stage 4 load-shedding and De Ruyter has repeatedly pointed out the need for new capacity from private producers, and for the government to streamline the process for private investors wanting to invest in generation.
“We do need additional generation capacity to be built. Eskom itself does not expect to play a dominant role in this,” he said, adding that Eskom cannot afford to build more plants.
The average age of Eskom’s plants, excluding the Medupi and Kusile power stations, is 42 years.
“The expected end of life of the majority of our coal-fired power stations is rapidly approaching. We cannot run these units in perpetuity. We need at some stage to replace them,” De Ruyter said.
UCT emeritus professor and senior scholar at the UCT Power Futures Lab, Anton Eberhard, writing in Business Day also called on the government to make it easier for Eskom to purchase power from private producers.
“The government needs to show more urgency. It could do so by making decisions more quickly. Existing independent power producers should be allowed to export more electricity to the grid. They can and they are willing.”
Eberhard writes that not only are the poor management decisions of former Eskom CEOs Matshela Koko and Brian Molefe coming home to roost, but that the government has not added a single watt of power to the grid since 2019 even as private producers have power to sell.
“It’s intolerable that SA’s energy minister, in office since 2019 and with extraordinary statutory powers, thinks he is doing his job by implementing an out-of-date Integrated Resource Plan, behind time and without him causing a single new publicly procured megawatt to come onto the grid, as yet.”
De Ruyter, however, explained that Eskom’s hands are tied when it comes to procuring power or changing regulations.
“We are not a policymaker. We are a policy implementer. Once we’ve communicated, it’s really in the hands of the various policy departments to implement changes.”
In August, the Eskom board tabled a decision to allow it to buy power from small private producers using contracts shorter than three years.
Eberhard says this offer “seems worth exploring. Why has government not signed off on this, six months after approval by Eskom’s board?”
Eskom said on Thursday that it also hopes to hire technicians from the original equipment manufacturers to help its technicians maintain and fix equipment that breaks down frequently.
The power utility requires an exemption from the Public Finance Management Act to procure these services.
De Ruyter said Transnet had recently received allowances to deviate from strict procurement policies.
“We have a very positive precedent [after] the minister of finance gazetted certain exemptions in favour of Transnet. We believe obtaining similar exemptions will be very useful to enable us to accelerate some of our procurement processes.”
De Ruyter said he did not expect load-shedding next week, though he added the risk is always present since the utility’s generation fleet is an “unreliable and unpredictable system”.
The department of mineral resources & energy had not responded at the time of going to print.
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