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Analysis: Eskom capacity at lowest in years

Nov 21 2018 06:45
Marelise van der Merwe, Fin24
Power utility Eskom's coal power plant Lethabo in

Power utility Eskom's coal power plant Lethabo in Sasolburg. (MUJAHID SAFODIEN/AFP/Getty Images)

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Even if coal supplies are supplemented short-term, Eskom faces structural problems that have left its ability to supply power deteriorating, with 2018 at the lowest it has been in years.

Speaking to Fin24 on Monday, energy expert Chris Yelland said since 2016, Eskom's Energy Availability Factor (EAF) has, overall, been on the decline – with 2018 "quite significantly lower at all times" than the previous two years. 

According to available Eskom data, the average EAF for this year is lower than it has been since 2004.

This means South Africans likely haven't seen the back of power outages for a while yet.

While it is normal for the EAF to fluctuate seasonally due to scheduled maintenance, changes in coal supply and other factors, a steady decrease in plant performance was cause for concern, Yelland told Fin24.

And unless management and maintenance issues are addressed long-term as well, the 14 new coal contracts announced by the beleaguered power utility – with the goal of providing more secure power supply by March 2019 – could be the proverbial Band-Aid on a broken leg.

YELLAND

Eskom; Graph: EE Publishers

Why is it getting worse?

There are two types of power outages: planned and unplanned. Planned outages are usually for maintenance, while unplanned outages are essentially power failures. If maintenance goes as it should, unplanned outages are minimised. 

But Eskom's infrastructure is "getting older and older", Yelland said, comparing it to an old car. "Even if you do some maintenance properly, it's going to get worse."

Moreover, he added, budget constraints mean maintenance hasn't been progressing as it should.

But fixing the problem can't happen overnight either, he explained.

System 'basically inadequate'

Eskom spokesperson Dikatso Mothae told Fin24 the power utility was "facing quite a big challenge" due to deteriorating plant performance "basically making our system inadequate".

A year ago, EAF was at 78, dropping to 74.2% in 2018. "The difference is quite significant," Mothae said.

Poor quality coal had also damaged infrastructure, she added, although good quality coal from the new contracts was expected to help. 

A System Status Briefing document released by Group Chief Executive Phakamani Hadebe last week cites "operational challenges" and deteriorating electricity generation. Load shedding cannot be ruled out for the rest of 2018, it adds.

The document does outline a nine-point recovery plan, which includes "fixing new plant".

Addressing three of the nine items on the plan, namely partial load losses, fixing the new plant and preparing for increased open cycle gas turbine usage, amounts to R8.2bn, R1.5bn, and R1bn respectively.

The power utility suffered a net loss of R2.3bn in 2018.

On Tuesday, ratings agency Moody's said proposals to hike tariffs by 15% could give Eskom a boost, but added that recent regulatory decisions meant approval could be a challenge. The decision on tariff hikes by the National Energy Regulator of SA will be announced in March 2019.

Mothae said Eskom's financial situation to date had resulted in having to "defer some of the maintenance".

"That is why we are seeing this decline," she said.

It would also be "quite a difficult balance" to schedule maintenance and meet demand, she added.

When will it get better?

Eskom believes coal stocks will recover to 28.2 days by March.

But "deep level" maintenance is needed, and this will not happen "from one week to the next", Yelland put it.

It can only improve gradually from one year to the next, he said. "You have to wait for the right time of year and do things one at a time. You have to meet demand at all times."

In his view, gradually fixing ageing infrastructure and the underlying financial crisis is "really a management and logistics problem compounded by financial difficulties, making them [Eskom] try to scrimp and save instead of invest."

With good management going forward, "they should be able to come right."

But it won't be quick – and in Yelland's opinion, waiting for the end of the rainy season is a bad sign. "When management has to leave the solution in the hands of God or the weather, it means they haven't done a very good job," he said. "That is an admission of failure."

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eskom  |  load shedding  |  power supply
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