Eskom’s diesel woes
Blames strikes for use of expensive open-cycle gas turbines. Moneyweb
Cash-strapped utility Eskom has exceeded its budgeted use of diesel-fired open-cycle gas turbines (OCGTs) by more than eigth times in June and this month (up to August 20) in an effort to keep the lights on.
This came as the unplanned outages of its own fleet rose to a staggering 16% this month, even higher than the 14.2% in June and 14.7% last month.
It blames the situation since June on unprotected industrial action, but was in a similar position early this year, according to an article by the Mail&Guardian.
The OCGTs are designed to support Eskom’s generation capacity over peak- demand periods and are typically run for two hours per day. Eskom has confirmed that it has been running them during the morning peak as well and on occasion even during the day.
Other than in previous years, Eskom has been using the OCGT peaker plants procured by the department of energy from independent power producers (IPPs) more intensively that its own.
Excessive OCGT use has in the past cost Eskom billions of rands that it was unable to recover from electricity tariffs through the regulatory process. In fact, early in 2016 Eskom spend over R1 billion per month on OCGT usage as unplanned maintenance peaked.
Energy regulator Nersa has allowed Eskom a mere R28 million per month on average for the current financial year at a load factor of 0.5% to cover the cost of its own OCGTs and on average R191 million per month at a load factor of 1% for the OCGT IPPs. The IPP costs also includes an availability fee.
If the highly geared Eskom cannot recover the excessive costs through Nersa, and it is doubtful it will, it would have to fund it from shareholder capital or loans.
The high level of unplanned outages has led to a decreased space to do planned maintenance that could once again place the power utility’s operations on a downward spiral.
Eskom targets an 80% plant availability, with 10% out on planned maintenance and 10% on unplanned maintenance.
In May, Eskom chief executive Phakamani Hadebe told members of the media that the utility was performing well from an operational point of view.
OCGT usage was contained until November last year, but then seemingly started deteriorating with it reaching a load factor of 3.82% in March.
To illustrate the devastating cost burden of increased OCGT usage, Hadebe’s numbers show that the cost increased to R158 million in March, compared to R9 million in September last year, at a load factor of 1%.
If Eskom’s assertion that the poor performance since June is the result of union members during unprotected industrial action, it means the cost of the wage negotiations are much higher than meets the eye.