Continual load-shedding is wearing on everyone. But shouting about it won’t help. Instead, we need to deal with the causes of instability in the electricity supply. The problem is largely due to mounting stress from the years of delay in opening the huge new coal plants at Medupi and Kusile. By extension, the only real solution is to fast-track new sources of electricity — but that requires fundamental transformation of SA’s inherited electricity system.
Medupi and Kusile should have come into full operation between 2015 and 2017 with 6GW of capacity — over a quarter of Eskom’s total. Once they came on line Eskom could decommission older plants that are reaching 50 years old, the end of their planned lifespan. In practice, however, Medupi was only fully commissioned four years late. Since then it has been plagued by breakdowns due to poor design and construction. Kusile has faced similar delays and technical shortcomings.
The delays at Medupi and Kusile affect Eskom’s older plants in two ways. First, they have had to run harder to make up the gap in supply, with less time for planned maintenance. Second, Eskom has had to delay their decommissioning. Five of Eskom’s older plants, accounting for 15% of Eskom’s total capacity, are already older than 50 years. Another three, supplying over 25% of Eskom’s capacity, are well over 40 years old. Even improved maintenance can only go so far in these circumstances.
The delays have also raised Eskom’s operating costs, while its financing costs multiplied through years of unfinished construction. In 2020 Eskom paid its creditors R34bn, a 600% increase over 2010 in constant rand. Financing costs climbed from 4% of Eskom’s total revenues in 2010 to 17% in 2020.
Meanwhile, as Eskom’s coal plants break down it faces a soaring maintenance burden plus higher spending on diesel and electricity from independent power producers. In effect, load-shedding lets Eskom externalise these expenses to its customers — but that only escalates the total costs for the economy.
It’s a bit like falling in love with a 20-year-old car. At some point you spend more time pushing it than driving, even though the maintenance costs are breaking your bank account. Yes, it’s still not totally dysfunctional — but the days of cruising carefree down the highway are long gone.
So how to move on? For the electricity system, the obvious solution is to fast-track new suppliers. Indeed, that has been the national policy for over two years now, and Eskom itself is now lobbying for it. Yet implementation remains painfully slow, leading inevitably to increased load-shedding.
These disastrous delays have two main origins. First, it’s hard to unwind Eskom’s near-monopoly over the national grid. For generations layers of regulations and institutions have entrenched its position, through national laws, regulations and imperatives long built into the electricity regulator, national departments, municipal utilities and revenue structures. Changing the monopoly requires complex shifts in regulations and, much harder, in power relations.
Second, there are costs to the new system, including investment in new capacity, transmission lines and grid management. Less obviously, the shift depends on bringing in more sustainable energy sources, which are now cheaper to operate and faster to build. But coal mines would lose their captive market in Eskom and its consumers. In addition, the larger municipalities fund their services partly through electricity sales, which could fall if consumers move to other suppliers.
The costs of initiating a new electricity system are real. Still, as we look forward to another cold, dark week on level 6 they look small compared with the disastrous effects of continued procrastination.
SA desperately needs to replace bureaucratic delays and infighting with a laser focus on finding practical ways to accelerate access for new suppliers; to pay for the resulting transformation in electricity systems; and to manage the risks that will inevitably attend it.
• Makgetla is a senior researcher with Trade & Industrial Policy Strategies.
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