A year ago, then Eskom CEO Phakamani Hadebe announced a nine-point plan to restore SA’s electricity supply. None of the points was headed “Do proper maintenance”. Last week, Eskom’s new CEO, André de Ruyter, said his recovery plan for Eskom will focus on doing exactly that.
The bottom line, according to De Ruyter and Eskom COO Jan Oberholzer, is that Eskom has delayed doing proper maintenance on its ageing generation fleet for the past 10 years to keep SA’s lights on “at any cost”. But, like so much else in SA, the long-term costs of this short-term expediency have finally caught up with the country.
What Eskom really needs is to institute semi-permanent load-shedding so it can do extensive, long-term maintenance to restore the integrity of the grid. Oberholzer says Eskom needs to take between 4,000MW and 5,000MW offline. But plunging SA into permanent stage 4 to 5 load-shedding would cripple the economy.
Du Ruyter would prefer to minimise load-shedding and return to demand-side management (whereby big users voluntarily cut their demand according to a schedule). The effect would be much the same as low-level load-shedding, just more predictable.
But to give the grid the breathing space it needs, the government must also bring new sources of supply rapidly on stream by allowing companies, households and independent power producers (IPP) to generate as much power as possible.
The mining sector says it can generate 600MW over the next 18 months, mostly from solar. In addition, 27 renewable energy projects from bid window four are on the verge of completion. They will add 2,300MW to the grid. The government has asked IPPs how quickly a further 3,000MW could be brought on stream. The photovoltaic industry believes up to 2,000MW of small-scale capacity could come online over the coming year if red tape is slashed.
As it turns out, this two-step solution — to prioritise extensive maintenance (facilitated by taking some big users off stream) and to fling wide the gates to IPPs and self-generation — formed the thrust of the recommendations of the Eskom sustainability task team. This expert panel, headed by University of Cape Town professor Anton Eberhard, made its recommendations to President Cyril Ramaphosa at the end of January 2019. So, it has taken a full year for SA to get back to square one.
The panel’s full recommendations have never been made public but apparently included the suggestion that South32’s Hillside aluminium smelter in Richards Bay be closed, because this would free up 1,205MW — about the amount shed by all of SA during stage 1. Aluminium smelters are notoriously heavy users of electricity but create few jobs. Hillside, SA’s only remaining aluminium smelter, employs 1,000 people, but a further 29,000 are reliant on the aluminium value chain.
Hillside says it has not been approached by the government with the suggestion that it close. The Minerals Council also knows nothing of it. More importantly, the council believes momentum is finally building across the government to allow private generation — a more lasting solution.
It was encouraged by its meeting with De Ruyter last week. (Hadebe was 10 months into the job before he met SA’s big energy users.)
But make no mistake, if Eskom forces an ongoing 20% demand curtailment on big energy users it will have a profoundly negative effect on the economy. The consensus is that SA will grow by just 0.9% in 2020 and 1.3% in 2021 — about half a percentage point lower than forecast a few months ago. SA’s growth prospects have collapsed because December’s stage 6 load-shedding revealed that neither Eskom nor the government has a proper handle on the electricity crisis.
De Ruyter is on the right track, but whether he can get SA’s politicians to bite the bullet remains to be seen. Factional political agendas and vested interests make his task that much harder. All of SA needs to get behind him to push a lasting solution to the Eskom crisis over the line.
• Bisseker is a Financial Mail assistant editor.
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