Units in Eskom’s coal fleet that do work are being used at a rate of more than 90% compared to an international benchmark of 70%, and that worries lenders, says Lungile Mashele, an energy expert at the Bank. Development Council for Southern Africa (DBSA).
“We are currently running our coal fleet to the ground,” he said in a webinar hosted by EE Business Intelligence on Tuesday (December 7). This was the first in a series of webinars on maintaining reliability from Eskom and addressed maintaining reliability for the boilers and associated power generation plant.
Join heated discussions with the Moneyweb community and get full access to our market indicators and data tools while supporting quality journalism.
R63/month or R630/year
You can cancel anytime.
Mashele noted that lenders have their own technical experts like her, who analyze the technical performance of utilities and look at indicators such as amounts spent on maintenance and plant utilization factors down to the power plant level.
She said Eskom for some time has not met the technical criteria to justify any additional funding.
His comments come as Eskom relies on loans to meet its operational requirements, even though it already has a debt load of around 400 billion rand.
Mashele said Eskom’s spending on maintenance was very low in 2020 and this worries lenders.
It could be the reason for the current high level of unplanned outages and an unprecedented amount of load loss this year, he added.
He said the utility currently averages 2.3 boiler tube failures per unit per year compared to a target of one and there is no guarantee this will not increase.
The maintenance that Eskom managed to do was mainly within the generation business, while little was done in transmission and distribution.
That, Mashele said, is the reason shooting increases after load shedding, as are transformer blasts and fires.
Eskom COO Jan Oberholzer said at the same event that the utility has only completed 18 of the 84 planned reliability maintenance outages.
According to Mashele, it could take “most of the next decade” to complete all these maintenance outages.
According to Oberholzer, it takes 18 to 24 months to adequately prepare for outages and requires money to be available and released, as well as a commitment to follow through with the outage, no matter what.
Mashele said the conversation about this should have been two years ago to gain buy-in from the National Treasury, the Department of Mineral Resources and Energy (DMRE), lenders and other stakeholders.
He said Eskom’s maintenance cost has skyrocketed in some cases due to lack of proper preparation before outages and also due to fraud and corruption. When emergencies occurred, funds earmarked for maintaining reliability had to be redirected.
It leads to a loss of confidence when lenders see that the utility company promises to do one thing and then ends up doing another.
She said Eskom cannot wait 70 to 90 days for National Treasury approval for acquisition decisions, as Oberholzer said.
Mashele further noted that Eskom’s coal fleet is not designed for ‘load tracking’, which means going up and down as demand fluctuates over a 24-hour period.
However, this is increasingly the case as the share of intermittent renewable generation increases.
State of concern
He said it is problematic that the acquisition of new generation capacity is not in the hands of Eskom.
This is being done by DMRE, which makes purchasing decisions with Eskom as the energy buyer.
He said government structures tend to make decisions for political expediency, rather than focusing on what the network needs.
Mashele said the addition of flexible gas generation as envisaged in the Integrated Resource Plan (PIR) is necessary to complement intermittent renewable generation.
He warned that Eskom’s technical performance is deteriorating and said it will affect its creditworthiness in the future.
“Eskom’s failure will lead to South Africa’s failure,” he said.
Oberholzer said the Eskom team is doing everything it can to recover operations, but in extremely difficult conditions.
There are many committed staff members who do not deserve the abuse they receive, he said.
“All my colleagues and I receive are insults and criticism.”
It would have been great to get support, he said.
Oberholzer emphasized that the country needs 4000 – 6000 megawatts (MW) of additional generation capacity to be able to do the necessary reliability maintenance.
Capacity in perspective
Engineering management consultant Mike Rossouw sees things differently: He said Eskom has enough capacity, what it needs is to make that capacity available.
He said Eskom must shut down its oldest and worst performing power plants, namely Arnot, Camden, Grootvlei, Hendrina and Komati, and redirect those resources.
“Unless we close them, I tell them South Africa is going to close,” he said.
Facilitator Chris Yelland, MD of EE Business Intelligence agreed, provided a massive new construction program occurs at the same time.
“A lot of projects done by a lot of companies, not Eskom,” Yelland said.