Deferring units is senseless
It would be a very costly mistake says Eskom
ESKOM yesterday ruled out deferring units at Kusile power station in order to cut costs, saying such a move did not make sense and would expose the power utility to contractual penalties.
Consultancy Meridian Economics this week released a study in which it proposed, among others, that Eskom should curtail work at the Kusile project, decommission older coal-fired power stations to save costs without threatening security of supply.
In the study, Meridian said South Africa did not need a nuclear, coal or gas power procurement or construction programme. “Instead, the country should accelerate its transition to cleaner, cheaper, and more sustainable renewable energy when further capacity is required.”
Speaking on the sidelines of National Energy Regulator of SA (Nersa) hearings into Eskom’s tariff application yesterday, Eskom’s acting executive for group capital, Peter Sebola, said curtailing construction work at Medupi in Limpopo and Kusile did not make sense as Eskom was on the verge of completing the projects. He said Medupi was 85 percent complete, while Kusile’s construction work was 82percent complete.
“If you are left with only 18percent of the work to do, why would you stop at this point? If you stop you will pay penalties, because you have already concluded contracts, bought material and mobilised resources on site. Instead of us wasting money on penalties, it is better for us to spend money finishing Kusile. The additional cost that we will incur if we stop now and restart later will be between R20 billion and R30bn,” he said.
Sebola said deferring construction at Kusile’s Units 5 and 6, as proposed by Meridian, would save the utility between R3bn and R5bn immediately.
Also speaking at the hearings, Eskom’s acting executive for generation, Willy Majola, said that the utility was considering putting three power stations – Hendrina, Komati and Grootvlei – on cold reserve from the 2020 financial year. He said the utility had earmarked the three power stations because of their projected running costs in 2020.
Cold reserve refers to generating capacity available for service, but not in operation. Majola said the grid code required a unit on cold reserve to be available within 24 hours if demand surges.
He said four units from different power stations were currently on cold reserve.
“We do not have at the moment an entire power station on cold reserve. For this 2019 tariff application, we are not going to put an entire power station on cold reserve. It is not necessary, because the demand versus supply does not allow that.
Switch off “But going into the 2020 financial year we will find ourselves in a situation where more than 3 800MW will not be required. So a minimum of 3 800MW will have to be out, all the time. That capacity then means that we will have to put an entire power station on cold reserve. At the moment, we think it is three power stations that we need to switch off,” said Majola.
Meanwhile, Eskom’s interim chief executive, Sean Maritz, said yesterday that the utility’s executive committee had decided to take steps “to shift the organisation’s reputation towards positive change”.
As a result the group had adopted a five-path plan to improve governance. “This includes strengthening our general internal ethics and fraud framework where we have reviewed and approved our ethics and fraud management policy,” he said.
He said the organisation would improve its declaration of interest policy, systems and processes, focusing on consequence management.
“We are also implementing independent audits on leadership where members of the executive committee, divisional executives and senior general managers will undergo regular independent lifestyle and conflict of interest audits. They also commit to co-operate with all independent inquiries on corruption, when required to do so,” said Maritz.