Eskom’s sweet problems

Eskom does not expect any load shedding this coming summer and starts the season in a much better position than it did a year ago.

In fact, it now has the sweet problem of excess energy and having to put units in cold reserve when they are not needed for power generation.

At its State of the System briefing on 5 September, Eskom CEO Dan Marokane said the utility had reduced load shedding from 84 days in the first eight months of 2024 to just 17 days over the same period this year. It almost halved its diesel usage, and 7 800 MW of generation capacity was recovered after it completed long-term outages and new units came online.

This has increased the utility’s ability to withstand unplanned breakages to such an extent that the risk of load shedding will only rear its head if more than 15 000 MW is lost – which is unlikely, Marokane said. The threshold during the past winter was 13 000 MW.

The performance of the generation fleet has improved substantially, reaching 66% in the first 25 days of August. The coveted 70% energy availability factor (EAF) is within reach.

Marokane told Moneyweb that the system operator now has a problem of too much capacity and has to put up to 7 000 MW of generation capacity per day into cold reserve.

“We now have to start creatively looking for uptake of that capacity by users who can have flexibility in terms of their load profiles.”

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Monde Bala, interim CEO of the National Transmission Company of South Africa (NTCSA), said with about 9 300 MW of solar PV from government-procured independent power producers (IPPs) and a further 7 000 MW of rooftop solar, about 5 000 MW of Eskom-generated supply is replaced on sunny days over noon and up to 8 000 MW in the afternoon.

The system operator must be able to manage this variance and have reserves available to substitute the solar energy on cloudy days, which can be challenging.

With a conservative estimate of 50% increase in solar PV by 2030, this could increase to up to 10 000 MW, “which creates significant flexibility requirements and planning uncertainty,” Bala said.

He cautioned that more coordinated planning is a key priority to ensure system stability and that associated variability risks, despite the increase in available capacity, are managed over the summer period.

“Understanding the geographical distribution of existing and new solar PV is a key aspect of improved system operations.”

Source: Eskom

With load shedding now virtually a thing of the past, Eskom will focus on ending load reduction and ensuring that electricity is affordable, Marokane said.

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Electricity tariffs

He gave the assurance that Eskom is listening to what the public is saying in this regard.

“The (Eskom) board has given us a clear message that increases must henceforth be in single digits,” said Marokane.

Nevertheless, Eskom must remain sustainable to ensure the security of electricity supply in the country, he added, and this was the aim of its string of court applications against the energy regulator Nersa over various tariff determinations.

The latest of these, a R54 billion settlement that will drive up electricity prices in the next few years, has resulted in an outcry across the board.

According to Marokane, these cases were about the interpretation of the prescribed methodology, and Eskom won them all. He believes any doubt about the interpretation has now been cleared up.

Although Eskom eventually receives the money it is entitled to thanks to these court victories, it comes only years later, and in the meantime the utility must borrow expensive funds to plug the gaps. This generally weakens its financial position – almost like a salaried worker who is employed now but only receives their salary a few years later.

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Marokane said the basic formula enshrined in law – that a regulated entity such as Eskom may recover its efficient costs plus a reasonable return on assets through tariffs – is sound. He stressed that only about half of Eskom’s costs are within the organisation’s control.

The big question concerns the subsidies built into the tariffs – who should be subsidised, under what conditions, for how long, and what they should give back to the community during that period.

He said these are policy matters on which the government must provide guidance, and the current review of pricing policy will bring certainty to the market.

One of the key aspects of making electricity more affordable, Marokane said, is to expand free basic electricity for the poor.

Agnes Mlambo, Eskom’s acting head of distribution, said the utility estimates that about 2.1 million electricity users qualify for this, but it currently reaches only about 500,000 of them.

The reason is that many buy their electricity from Eskom but must register for the benefits through a cumbersome process at municipalities.

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She said in areas where Eskom is currently applying load reduction to protect local infrastructure from overload, illegal connections and electricity theft are rife. Many of those residents qualify for free basic electricity but do not access the benefits.

Eskom is rolling out a large-scale campaign to install smart prepaid meters in these areas and hopes this will eliminate illegal practices and remove the need for load reduction, which also leaves paying customers in those areas in the dark.

However, along with installing these meters, Eskom will work with municipalities to ensure that residents who qualify, receive the free basic electricity that the government makes available to them.

This article was republished from Moneyweb. Read the original here.