ESKOM: A Tide Turning Step Change at Eskom?

Embattled Eskom remains one of the most powerfully charged topics across customers, municipalities, businesses and government. The power utility that has, for years, been unable to maintain a sustainable grid regularly causes sparks in debate thanks to the ongoing saga that is load shedding. Bad for business and bad for lives, and potentially a shock for investors looking into South Africa, something has to change within this melting organisation.

 After years of malpractice and high-voltage corruption, topped off by a state capture investigation, Eskom moved for a change at the very top to, hopefully, change the direction of the current. André de Ruyter – senior management extraordinaire – was welcomed as Group Chief Executive in January 2020 and his ambition is the flip the switch on Eskom, moving it from a stain on the country’s landscape to a reliable partner of society that helps drive economic development.

 But the former Nampak CEO and Sasol executive committee member has accepted perhaps one of the most challenging roles in Africa. He must significantly improve supply, address a major debt crisis, root out corruption, begin a long transition towards cleaner fuels and renewable energy, end destruction of property and theft of power, cast load shedding to memory, and do it all while a global pandemic and a local economic crisis still rage.

 All sizeable jobs must first be broken into smaller tasks. For Eskom, this means projects across all of South Africa that address the organisation’s dire need for improvement.

 RENEWABLE FUTURE

 A positive story for Eskom came in October when the Perdekraal East Wind Farm was launched in the Western Cape. Located in the Witzenberg local municipality in the Cape Winelands, the 110 MW wind farm is home to 48 turbines atop 115m towers. It can produce 368.8 GW hours per year – enough to power more than 111,000 South African homes. This addition to the Eskom grid, that also created 70 permanent jobs in the area, was hailed by local government as an important milestone.

 Cape Winelands mayor Helena von Schlicht said: “Besides job creation, it has contributed to Eskom’s capacity to respond to the energy needs of households.”

 Vice-president of Agri Western Cape and famer in the area, Heinie du Toit added: “We farm with fruit and vegetables in this region. There is scope to expand our farming operations, but to do so we need a reliable, sustainable energy source. The wind farm highlights what is possible.”

 Agri Western Cape Chief Executive, Jannie Strydom said: “Renewable energy is essential. The agricultural sector is dependent on a reliable, sustainable source of energy. We have approximately 240,000 hectares of agricultural land under irrigation in the Western Cape. The province exports 45% of all agricultural products. A reliable, sustainable source of energy is of great importance to the sector and critical to ensure rural safety in the province.”

 The project is part of the ANC’s renewable energy Independent Power Producer Procurement programme.

 In November, the Kangnas Wind Farm in the Northern Cape came online, adding a further 140 MW to the grid. A project from Lekela – the renewable power generation company that delivers utility-scale projects across Africa – Kangnas consists of 61 Siemens turbines erected close to the town of Springbok in the Nama Khoi Local Municipality.

 During the busiest period of construction, 550 jobs were created and long-term opportunities have also been created in the rural area. The clean power from the turbines helps to reduce carbon emissions from generation by 450,000 tonnes each year and provides Eskom with yet another source of clean energy to aid a stretched network.

 “Just five years after Lekela was created, this is a significant milestone for us all,” said Chris Antonopoulos, Chief Executive Officer at Lekela. “Kangnas completes what only existed as ideas on a piece of paper just a few years ago. We now have over 600MW of wind power in operation, which will supply clean electricity to hundreds of thousands of South Africans, at an affordable price for the next two decades.

 “Kangnas’ success supporting local manufacturing and jobs is an indicator of how low-carbon technologies can drive renewed economic growth in the wake of Covid. No other source of energy has the pace of development, nor the backing of governments, communities and companies that wind and solar do. We have to capitalise on this appetite to ensure the number of Africans without access to electricity continues to fall, not rise, in the next decade.”

 In the Eastern Cape, Enel Green Power has commissioned the 140MW Nxuba wind farm which will deliver 460 GW hours per year to the grid.

 At the third investment summit hosted by South Africa in November, Mineral Resources Minister Gwede Mantashe reiterated the desire of government for the country to rely less on Eskom as a sole provider of power. He also reminded the 175 delegates in attendance that South Africa has procured 2000 MW of additional energy supply.

 “If you look at what we are implementing, we have opted for a mixture of technologies and a mixture of sources of energy. We are making provisions for that,” he said. “Other sources of energy are still needed to contribute so that there is stability, and so that we don’t have problems that are a function of one sort of energy,” he added. 

 INCREASING CAPACITY

Unfortunately, there is no quick fix for the increasing capacity within Eskom. Much of the generating plant is old and has been poorly maintained, and the Medupi and Kusile are not expected to bring their full clout – finally – until Q2 2021. The renewable contribution remains low and, still, the company is forced to turn to expensive diesel-fuelled open-cycle gas turbines (OCGTs).

 But de Ruyter and the executive team have signalled their intent. In October, Segomoco Scheppers, Group Executive for Transmission, said that major improvements and expansion was needed to ensure reliable supply.

 “There is a clear and compelling case for significant transmission network expansion critical for the connection of utility-scale renewable generation projects, mainly wind and solar,” he said.

 From 2021 to 2030, the new Eskom Transmission Development Plan (TDP) states the need for 30 GW to be added to the grid.

 “In order to provide an adequate and reliable transmission system, the total transmission capital plan in this period amounts to approximately R118 billion,” Scheppers said.

 Strengthening existing generation capacity will happen slowly and this means there will be no end to load shedding anytime soon. As the State of the System briefing at the end of October, de Ruyter said that even the 11.8 GW of promised capacity addition from sources outside of Eskom would not be enough to stabilise supply.

 “We shouldn’t stop at the 11.8 GW. We believe that more is required, because the economy, hopefully, will grow and, as the economy grows and demand increases, we will need to position ourselves to keep on supplying electricity to South Africa,” he said.

 He added that much of the country’s generating plant would require maintenance soon and some plants will need to be decommissioned, leaving further gaps in supply. The result – an Energy Availability Factor (the amount of the time the fleet is able to produce power) of 68% for the 2020/21 financial year, increasing to just 70% and 72% in the next two years.

 Eskom’s total 44,000 MW capacity will be bolstered in April 2021 when – what de Ruyter calls a step change – the maintenance programme and progress at Medupi and Kusile are completed.

 At the end of October, Unit 2 at Kusile attained commercial operation status, bringing a potential 800MW to the grid.

 “The commercial operation of Unit 2 is a major milestone that signifies the progress being made by Eskom towards the completion of the Kusile Build Project, on which lie the nation’s best hopes to bring stability and ensure security of electricity supply to power the South African economy,” said Bheki Nxumalo, Eskom’s Group Executive for Capital Projects. 

 Progress is also planned at the Koeberg Nuclear Power Plant in Cape Town where a R20 billion life extension project is under way, with the first new steam generators on site and ready for installation during a planned 2021 shutdown.

 At the beginning of November, a new 282km 400kV transmission line running from Gromis substation in the Northern Cape near Kleinsee to Juno substation in the Western Cape close to Vredendal was discussed as the company went to communities alongside contractors to complete feasibility research.

 The line will bolster the network as part of the Namaqualand Strengthening Phase 2 scheme which is a multi-million Rand project to improve supply in the area. The meeting with communities, municipalities and partners resulted in support from all groups a pledge to act effectively as the project is completed.

 “We believe that the success of any project depends on this kind of partnership hence this is an important day for all of us,” said Eskom’s General Manager for Project Stability, Matome Makwela. “The key objective for us is to construct and finish this 282km 400kV line within schedule, budget and with minimal instability incidents and we believe that through these engagements we will be able to execute this project successfully.”

 Matzikama Local Municipality Mayor, Councillor Mathilda Bains said the municipalities look forward to working with Eskom and its contractors.

 During this tough time for Eskom, progress is certainly underway. Whether it is fast enough and clean enough for everyone is yet to be seen. Perhaps now, the challenge equal to that of stabilising supply is to restore public trust that has been eaten away over the past two decades.

 For de Ruyter and team, a very difficult but interesting time lays ahead. The next few years have the potential to start a bright new chapter for one of the country’s most recognisable brands, but it is going to take a significant amount of involvement and hard work.

 Does the company have the power to succeed? It has no choice, failure is no longer an option.