Eskom runs out of money to buy diesel

• Risk of power cuts increases if the utility struggles to run its emergency generation fleet

Seven months into its current financial year, Eskom has already exceeded its R11bn diesel budget by about R1bn, which means that for the next few months it will struggle to afford to run its diesel-powered emergency generation fleet.

Presenting the state of the system outlook for the 2022/ 2023 summer period, Eskom COO Jan Oberholzer told journalists the power company was now in the “difficult position” where it is forced to implement load-shedding because it does not “have the money to burn diesel at the rate [it] has been doing up to now”.

Oberholzer said Eskom was facing “significant financial challenges”, which contributed to it not having the resources to increase spending on diesel.

Monde Bala, Eskom’s group executive for distribution, said debt owed to Eskom by errant municipalities had escalated from R2.6bn in 2014 to R20bn in 2019, before rocketing to about R53bn this year.

As the utility continues to battle financial troubles and breakdowns at its power stations, it has had to implement 145 days of load-shedding since the start of its financial year in April, and it may have to implement another 120 days before the end of March.

The total budget for diesel for the year to end-March is R11bn and by the second week of November it had already spent about R12bn on diesel.

Diesel is used to power the open-cycle gas turbines Ankerlig and Gourikwa, which have a combined generation capacity of 2,000MW (equal to two stages of load-shedding).

These emergency generation units are used to make up for a shortfall in generation capacity when there are outages at coalfired stations, enabling Eskom to avoid having to resort to higher stages of load-shedding.

Eskom has a debt burden of

R400bn and its financial position is weakened further by the billions of rand it is owed by municipalities.

Bala said the R53bn owed by municipalities “includes some compound interest, but current account [arrears] are also increasing at a rapid rate.”

Even large metros were “facing difficulties in keeping up with their current accounts” and some “structural intervention” from the government might be needed to deal with the problem, Bala said.

“This is not sustainable, [Eskom] cannot absorb further increases in the debt.”

Eskom predicts that up to 155 days of stage 3 load-shedding (when 3,000MW is dropped from the system) may have to be implemented over the six months from December to May. The outlook is based on assumptions of 13,000MW, 14,500MW and 16,000MW of unplanned generation outages.

Under the base-case scenario (13,000MW unavailability), almost no load-shedding will be required to manage power supply and demand.

However, when outages increase to 14,500MW, the utility will need to implement on average 16 days of stage 2 load-shedding a month over the next six months. The worst-case scenario, which caters for 16,000MW (about 35% of Eskom’s total installed capacity) of unplanned outages, will require on average 26 days of stage 3 load-shedding a month.

In September and October unplanned outages over the evening peaks were at 15,000MW on average, and Eskom operated above its maximum unplanned outage assumption 23% of the time.

For the 2022/2023 financial year to date (from April to October) the generation fleet has been operating at 58% efficiency. The newly appointed acting head of generation, Thomas Conradie, said the energy availability factor (EAF), which measures system output as a percentage of total installed generation capacity, was even lower (about 54%) when looking at the coal-fired fleet in isolation.

SHRUNKEN

The EAF target for the year is 65%, but it seems unlikely that this will be achieved.

“We are now sitting at 58% EAF and, normally, during the summer, we perform the bulk of our planned maintenance, which further erodes [energy availability]. We are hoping to move towards achieving 60% [EAF] by financial year-end, but [will probably] only get to 65% by the latter part of next year,” Conradie said.

Oberholzer described a “shrunken generation system bereft of any reserve margin”, which meant that every single breakdown pushed the whole system to the edge.

Some of the most severe recent load losses were due to a chimney collapse at Kusile power station at the end of October. This led to the immediate shutdown of Unit 1 at Kusile and subsequent shutdown of Units 2 and 3 which removed 2,200MW of capacity from the grid. Eskom cannot at this time confirm a date by when these units will be returned to service but said this was “at least a few months away”.

Meanwhile, Medupi Unit 4 (800MW) will remain out of service until September 2024 and Koeberg Unit 1 (920MW) will be taken offline for maintenance in December for six months.