Danger of total failure of Eskom – insurance companies calculate the costs

The state of Eskom’s production fleet worries insurers of a possible total breakdown. However, there are several short-term solutions that the government can implement quickly to bring the public service back from the brink.

That’s according to EE Business Intelligence energy expert Chris Yelland, who says Eskom could get significant additional generation capacity on its grid within two years with solutions that don’t require much effort.

Yelland recently declared that the prospect of shedding Eskom made him anxious. Last week, half of Eskom’s generation fleet was down and half of its remaining capacity was “at risk”.

“If 50% of the coal fleet is unavailable for service and another 25% is considered ‘at risk’, then perhaps a national blackout is no longer just a theoretical possibility. distant, but a more distinct storyline that needs to be considered?” Yelland said.

Eskom’s latest 52-week load shedding outlook showed a likely risk scenario of a supply shortfall of 2,001 MW or more for 48 out of 52 weeks, signaling severe load shedding in the coming months.

Yelland echoed the sentiments of Eskom CEO André de Ruyter, who recently admitted the fleet would never relive its “glory days”.

There is simply no way to bring the existing coal fleet back to a satisfactory level of performance, which forces the search for the new generation elsewhere.

“At the moment, Eskom cannot deliver because it does not have enough production capacity available,” Yelland said.

“You could relieve Eskom of this burden, so that it is not always on the verge of shedding or over the edge.”

Yelland believes the first stop should be to avoid the corruption and endless legal hurdles that typically arise from procurement processes.

One of the clearest examples of this is the Risk Mitigation IPP Procurement Program (RMIPPPP), which has suffered significant delays and is expected to see less than half of its planned generation capacity of 2,000 MW online on time.

The main reason for the delay is the involvement of Turkish electric ship company Karpowership, which was chosen as the preferred bidder to supply 1,200 MW of capacity by the end of 2022.

But various legal challenges from rival companies, environmental approval issues and concerns over the cost of gas powering ships meant no formal deal was struck.

Based on the 2019 Integrated Resource Plan (IRP), 2,600 MW of renewable power generation and 513 MW of battery storage are also expected to come online this year, along with an additional 2,600 MW of renewable power and 750 M of coal energy in 2023.

But the agreements on these purchases have not been signed either.

Instead of acquiring more generation capacity through these painstaking approaches, Yelland says the government should enact the necessary legislation to make it easier for independent power producers (IPPs) to feed power into the grid.

This will mean less work and expense on the government’s part. It should also cost consumers less.

Yelland told the Afrikaans newspaper Rapport that if South Africa prioritized the role of the private sector in saving the grid from total collapse, 10,000 MW of wind and solar power and 5,000 MW of battery storage could be available within two years .

This would mean the end of load shedding.

André-De-Ruyter
André de Ruyter, CEO of Eskom

Yelland also highlighted six simple things that De Ruyter recommended to the government to help the utility tackle load shedding quickly.

1. Buy more electricity from existing IPPs

An additional 200 MW could be added to the grid from the current IPPs if the Energy Department changes delivery contracts.

2. Network upgrade to solve the IPP bottleneck

Upgrading national grid connections to allow for greater IPP capacity could add another 200-300 MW to existing generators.

3. Let Eskom buy electricity from small generators

Eskom’s board has approved a ‘standard offer’ to allow small generators to supply Eskom on three-year contracts. The proposal awaits the support of Nersa.

4. Reorganize the registration of private projects with Nersa

Although private power producers can now produce up to 100 MW without a license, they still have to register with Nersa, a lengthy process that could take years.

5. Exempt Eskom from specific requirements of the Public Financial Management Act (PFMA)

Eskom is at the mercy of middlemen who facilitate tenders for spare parts and maintenance equipment. Exempting the utility from the specific provisions of the PFMA would make this process easier and less costly.

6. The Treasury must compensate Eskom for the loss of municipal revenue

Municipalities owe billions to Eskom, which has resulted in a lack of cash for maintenance. Financial relief could allow Eskom to carry out more critical maintenance on power plants.


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