Mining houses want to go it alone on power generation
Minister stalls crucial renewables projects ‘to protect unions’
● In a heavy blow this week, Eskom pushed the button on stage 6 load-shedding, halting operations at South African mines, which spurred the sector to push for reforms enabling it to bypass Eskom.
Johan Theron, group executive for corporate affairs at Impala Platinum, which applied a day’s stoppage to its operations at its Rustenburg and Marula mines, said R100m in revenue could be lost for every production shift lost at its Rustenburg mine.
Harmony Gold lost two shifts this week, said senior investor relations co-ordinator Max Manoeli, which would have an impact on at least 85kg-87kg of gold that the company extracts every day.
James Wellsted, senior vice-president for investor relations at Sibanye, said it was difficult to reduce power demand without affecting production.
Anglo American SA operations were also impacted, but it did not provide details.
Henk Langenhoven, chief economist at the Minerals Council SA, said the industry needed more control over electricity availability and tariffs. The blackouts are a threat to a sector that contributes R350bn to the economy every year, he said.
“Production is not doing well, and it is using the same amount of electricity [as in] 2008. We have become much more efficient — that’s one of Eskom’s problems, we’re using less electricity per unit of production, but there are many of these almost circumstantial issues around us that determine whether we can flourish or not,” he said.
On Friday the department of mineral resources & energy published a request for information for ways to quickly close a power supply gap, saying it wanted to assess options for procuring 2,000MW-3,000MW of new capacity, the department said.
Minerals Council CEO Roger Baxter said stage 4 and 6 load-shedding was affecting the viability of many mines.
“Eskom is essentially making an industrial policy decision to downscale the mining sector when it makes these stage 4 and stage 6 calls,” he said.
He said the situation was desperate and demanded urgent action by mineral resources & energy minister Gwede Mantashe and other government leaders to “drastically streamline” processes to allow for the rapid establishment of self-generation facilities.
Although there have been moves by the government to potentially enable municipalities and large power consumers to buy power directly from independent power producers without going through Eskom, there are still many hurdles, he said.
“What is required is a streamlined process through [a] one-stop shop made up of the relevant directors-general to enable the urgently required additional power supply to come online in the shortest possible time.”
The Minerals Council says about 870MW of solar power and 800MW of conventional power could be added to the national grid by mining companies over the next three to four years.
Last year Harmony applied to the National Energy Regulator of SA for a 30MW solar energy plant but it is still awaiting feedback from the regulator and Eskom, Manoeli said.
Wellsted said Sibanye had a 350MW module it planned to build near its Driefontein operations. “But the problem is the various issues with the Integrated Resource Plan and approvals,” he said. “In theory, the mines can build and source power independently at equivalent cost to Eskom. However, legislation prevents this, which is understandable [as] taking the big-paying customers away from Eskom will have a catastrophic impact on its revenue stream and ability to repay debt.”
Langenhoven said if the industry is able to replace Eskom’s “old and ageing and failing units” with other, cheaper power sources, it will significantly reduce costs for the industry and position it for further investment.
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● Thomas Garner, chair of the South African Independent Power Producers (IPP) Association, says mineral resources & energy minister Gwede Mantashe should be fired for “doing nothing” to alleviate the country’s electricity crisis in spite of the options available.
Mantashe still has not authorised a new round of desperately needed renewable energy procurement, and has ignored pleas to let businesses generate more of their own power, which would be the “easiest and quickest way” to bring new electricity to the grid.
“The damage he’s done and is doing to the economy is so massive I think he should be fired,” says Garner.
He believes Mantashe is trying to protect the unions and coal interests.
“He’s holding the whole economy hostage, the whole country.”
Mantashe issued “a very lame-duck” statement after SA was plunged into unprecedented stage 6 load-shedding, saying he would take steps to develop more electricity capacity.
Given his refusal to do anything until now, says Garner, he believes the minister was told to make the statement by President Cyril Ramaphosa, and his heart is not in it.
“Now, because of stage 6, he’s really under pressure. Probably the president ordered him to start doing something, and now he’s doing something. But it’s too little and too late.”
Garner says if the government had continued with the renewable energy programme started in 2011 the current “nightmare” situation could have been avoided, but state capture put an end to it.
Now decisions made in 2015 by then Eskom CEO Brian Molefe to cancel renewable power purchase agreements “have caught up with us”.
“Mantashe can’t be blamed for that, but since his appointment in May he’s done nothing to procure power. He should have done a determination within one week of the new Integrated Resource Plan (IRP) in October. Instead, all we’ve had are statements that he’s not going to be pushed around by the IPPs.”
Previous energy minister Jeff Radebe gave a clear signal that the government was serious about renewable energy but Mantashe’s belligerent attitude has sent precisely the opposite signal.
“Radebe rolled up his sleeves and got things signed. Then Mantashe took over and the process died completely.”
Garner says there are more than 20,000MW of renewable projects in the pipeline for the next five or six years, which, as well as filling SA’s power gap, would bring in billions of rands of investment and create thousands of jobs.
“The minister could ensure these megawatts are brought onto the grid within six years.”
However, at the rate he’s moving this won’t happen.
“He can commit to procuring the next round of 2,500MW within six months. It would take a further 24 months for it to be on the grid. But he’s not doing this.”
The easiest and quickest way to bring new electricity to the grid is to let business take the lead and procure its own power.
“The minister can make a deviation from the IRP to allow bilateral agreements between IPPs and energy users.”
If Sasol, for example, wants to procure 100MW of wind power from an IPP, it must be allowed to do so immediately, says Garner. As things stand, it can’t.
“The minister could make it happen now. The first plant could be built in six months’ time.”
He says Mantashe is not the only culprit. A deviation signed by Radebe is still being held up by the national energy regulator, Nersa.
“They have to finalise the rules, it’s as simple as that.”
Radebe asked Nersa to do this more than 18 months ago, and nothing has happened.
“The obstacles are everywhere, and everybody who wants to be an obstacle becomes an obstacle,” says Garner.
He doesn’t expect much to happen following Mantashe’s statement. “I don’t believe there’s going to be a lot of action, due to the time of year, due to the fact they don’t even have IPP consultants at the moment. They need to appoint consultants. That’s a whole process that needs to be followed.”
The recent axing of Karen Breytenbach, the super-efficient head of the IPP office, was “quite devastating” for the renewable energy procurement programme, he says.
No reasons were given by the department of energy.
“It’s another one of those moves where you really just don’t understand what’s happening. It’s obviously a political play, it’s not about what is right for the country.”
He says she was probably one of the only people in SA with the experience and skills to navigate the complexities involved in renewable energy procurement.
She spearheaded the team that built the IPP office into a world-renowned unit drawing investment of R215bn in renewable energy projects since 2011.
That momentum has now been “totally lost”, says Garner.
“What she brought to the table clearly didn’t suit the minister’s agenda. Wanting to move too quickly, having a programme that is completely above board.”
He says Mantashe’s inaction makes a mockery of Ramaphosa’s statement this week that the government’s “immediate priority is to get as much generating capacity back on line within the shortest possible time”.
“That’s a great statement to make. But then he must pull in his minister and say to him, you must deliver or I’ll withdraw you.
“Because the minister is clearly ignoring what the president is saying.”
Ramaphosa also assured the country that Eskom’s “emergency response command centre” was working around the clock to fix the breakdowns.
“Maybe”, says Garner, a mechanical engineer who spent 20 years on the mines before going into the renewable energy sector 10 years ago.
“But the problem is the plant has not been maintained for so many years, and the design of the new plant is wrong.”
Fixing those things is going to take years, even if they do work round the clock, he says.
“The only thing that will assist in fixing the problem is getting new generation capacity up and running as quickly as possible.”
And appointing a new minister.
Ramaphosa must say to him, you must deliver or I’ll withdraw you — the minister is clearly ignoring what the president is saying