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Fixing Eskom now

Ramaphosa has no choice but to draw a line in the sand over the next few weeks.
There's more bad news on the horizon for Eskom, writes the author. Picture: Shutterstock

For the national government to act like the current Eskom mess somehow happened suddenly overnight is a farce. The warning bells have been rung loudly for the last 10 years but it was ignored. And now the situation with Eskom is potentially catastrophic.

Let’s not beat around the bush. In short, Eskom’s 45 500MW power plants can only supply about 25 000MW of power. And Eskom is technically bankrupt with R420 billion in debt and an annual projected loss of R20 billion.

President Cyril Ramaphosa has no choice but to draw a line in the sand until the national budget is announced and that will be very unpopular. If he doesn’t do it then there won’t be enough generators in the world to save us. So what can be done?

Short term

1.     Bailout

Eskom has run out of money and from April 1 will be insolvent if the state does not give a bailout. So, in the short term, that will and must happen. The amount will be about R100 billion. The risk is that within 18 months, Eskom could be back in the same hole again. Therefore, this bailout must go with some strong action by the president. A bailout before March 31 is non-negotiable.

Read: Eskom in danger of collapse without bailout, South Africa says

2.     Take on the unions

Ramaphosa must be prepared to take decisive action against the unions threatening to disrupt Eskom. From 2007 to 2018, Eskom staff numbers went from 32 000 to 48 000 people. Staff costs went from R9.5 billion per year to R29.5 billion. And despite that, today we’re told Eskom is struggling to keep the lights on because of the poor quality of maintenance and poor workmanship. Forty percent of plant breakdowns are due to human error. Action must be taken at Eskom in terms of staff and the unions need to come on board.

Did you know that over the years, the Medupi power station build has been delayed by at least one whole year due to labour unrest? That excludes last year’s fun and games when, due to the financial challenges Eskom was facing, it offered workers a 0% wage increase. Workers went on a rampage, causing damage to power stations and dumping truckloads of coal at power station gates.

Read: Cost to fix Medupi, Kusile balloons to R8bn

This all led to load shedding over three days in June 2018. Eskom revised the offer and made one it could not afford, a 7.5% increase for 2018 and 7% for 2019 and 2020. Workers also got a R10 000 bonus 48 hours after the deal was struck. Now, once again, unions are threatening to strike. If the president doesn’t come down hard on the first sign of protest action that is illegal then we can kiss the economy goodbye.

3.     Rampant debt

The president must take action against the rampant debt at municipal level and in Soweto. Soweto owes Eskom R17 billion – as much as all the municipalities combined – and has never been cut off like rural councils. An example must be made and people who can afford to pay for electricity must do so. Will this be done before the election? There’s surely no choice in the matter?

4.     Middlemen – Diesel and coal

The continued running of the diesel turbines over the short term is critical for power stability.

Yet it appears that Eskom still has no direct contract with the wholesale suppliers of diesel like Chevron. Instead, the power utility has hundreds of middlemen and women who own these contracts in the name of empowerment. This is now a real risk to security of supply since Eskom has run out of diesel in the past week due to supply challenges. It is also more expensive and procurement issues are a major problem. I understand a roll of single ply toilet paper at Koeberg nuclear power station costs Eskom R40.

The same goes for coal. One major reason the new multi-billion rand power plants are struggling with providing power is the rubbish coal they are being sold. Eskom is still literally buying trucks of stones from smaller suppliers for Kusile power station and chucking them into the new turbines. Again, this is a procurement matter that needs an urgent look.

5.     Speed up the audit of the generators and skills

New Eskom CEO Phakamani Hadebe has decided it is now time to do an in-depth audit to establish the condition of Eskom’s power generation units (about 135 of them). What has he been doing since May 2018? Surely the very first thing one does when taking over a struggling utility with old plants and increased concerns about reliability is to establish the condition the plants are in? Now, Hadebe says that not only does Eskom apparently not know the state of all these units, it will take another three months before it does. This must simply happen faster and the money to fix the challenges that crop up must be made available.

Did you know that not a single member of the current Eskom board and current Eskom executive committee has any experience at all with generation of electricity? Not one. And it is in generation where the problem currently lies. How many engineers and people with experience does Eskom have left? We need to know this.

Long term

Over the long term I’m afraid there’s more bad news. The simple fact is that Eskom is currently building ZERO new power stations beyond Medupi and Kusile. The country already has a dire lack of power. In addition, over the next 11 years to 2030 Eskom is expected to decommission 14500MW of its existing power plant. The country is also in desperate need of economic growth which needs electricity. But where will it come from? Eskom isn’t building.

So, what will President Cyril Ramaphosa do? We wait beside our candles with bated breath.

James-Brent Styan authored a book on the energy crisis called Blackout, The Eskom Crisis, published in 2015. He writes in his personal capacity.

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ESKOM cannot be fixed. Why? Its premised on a power production model that dates from Victorian times, being coal. The speed and scale of renewable has made ESKOM redundant already and it is not a dying giant, it is already dead. Further, the’product’ that it produces is mostly not paid for by the large municipalities, or stolen. It has debt that boggles the mind and its new mega-projects are abject failures and should be immediately shut down. WHEN ESKOM defaults, it will trigger bankruptcy cross-default via the ISDA regime and lead to a full SA sovereign debt default. This has only one ending, IMF intervention. This is a scientific and historical certainty. Nice words at SONA don’t fix these sorts of problems

Renewables are simply not viable as source of base-load power generation at the scale required. Solar needs the sun or very expensive batteries, wind turbines need wind and we don’t really have much hydro. They seldom work without expensive state subsidies like the UK’s “green power” levies. Whether we like it or not, we are stuck with a predominantly ageing carbon-fuels based thermal power generation fleet, burning coal or diesel or gas. This hand-wringing about the fuel source is a distraction from the fact that the ANC does not accept the need for technocratic management of anything – well-paid jobs cannot simply be rewards for party loyalty any longer; these people literally have the weight of the whole country on their shoulders and need to be appointed on the basis of directly relevant experience and merit. We cannot achieve transformation goals, or in fact goals of any sort, if we are all sitting in the dark, or in gridlocked traffic, because we don’t have any electricity.

Don’t agree SAR, pivoting from coal to renewables over a decade or two is inevitable. Maybe the Brulpadda field will give us clean burning natural gas? The coal model is dead, just ask the Maldives and Venice. In your eloquent post I do agree wholeheartedly with the fact that we are stuck with it!!

There is nothing called clean energy.

Ever wonder what happens to a battery after the change it.

study life cycle.

Also disagree, Like I said in another article, the cost of coal per kWh (just the cost of the mineral) works out to around 50cents per kWh, Solar clocks in around 17-20 cents per kWh, coals only advantage is that you can burn it at night.

Further… the Procurement models that the state at all levels of Govt use prevent efficiency and promote corruption.

Almost all these problems are at Transnet as well, they simply haven’t caused a serious meltdown yet.

The procurement problem is quite serious. Transnet also seems to refuse to use the central supplier database that is maintained by treasury. Instead, they run their own database and all but force employees to use middleman companies that are already registered on the in-house database instead of companies with domain expertise that is registered on the CSD.

This is how dentists and beauticians end up holding the keys to the entire economy.

the Rand definitely knows that ESKOM can’t be fix………look how it runs!

…yes, the only good news really….being positive for all the Rand-hedges today (…the past week in fact)

Does anybody know whether there are there grids where renewable power sources (other than hydro) currently provide reliable, steady base-load power without subsidies (either direct subsidies, or indirect ones such as taxes on carbon emissions)?

Denmark generates 44% of their consumption from wind, and is fast on its way to generate 50% from Wind.

Our peak energy demand is in the day (which is luckily when the sun is also shining the most) and on that level coal is x3 the price per kWh compared to solar, I worked it out the other day, if you used the money we spent on Kusile and Madupi alone we could have had 37GW worth of PV installed.

That would have eliminated our daytime shortage and our nightime consumption could have been met with current coal stations.

http://www.crses.sun.ac.za/files/news/CSIR_BischofNiemz_pp.pdf

Eskom is imploding as a provider of base-load. The newly discovered gas field is a game changer for energy generation in SA. Gas fills the gaps in wind and gas generation. By the way – wind is a stable source of energy according to the CSIR report. Wind Energy supplies a stable supply when the geographical distribution of facilities is taken into consideration. The wind always blows somewhere.

The bottom line is that Eskom employees are more unpredictable and unreliable than the wind.

@PJJ A few years ago in the Danish parliament one of the ministers admitted that there were more than 50 days during the previous year when the wind generators were NEGATIVE power contributors(they draw some power even when they are idle). Luckily for Denmark they are connected to the European power net, so they can draw power from other countries, mainly from France. Germany also has to buy power regularly from France thanks to their large investment in renewables.

@The Hun
I am not advocating 100% renewables tomorrow, I think the law of diminishing returns would apply here as it does everywhere, but in a country that on average has 5+ sun hours a day (compared with countries in Europe that have 2-4) we require way less installed capacity than our northern neighbors to have meaningful generation.

Like I said earlier, you don’t have to be a green treehugger to see that renewables can be cheaper than fossil fuels in certain scenarios, and SA is exactly such a scenario.

I like these odds, where can I send my R1 to and where do I sign the paper.
I have always loved a long shot with money to be made (on average)

Personally, I’d continue to unbundle Eskom. Then make them responsible for the grid only. Keep that price (for using the grid) under TIGHT rein and let IPPs supply the power with competitive market prices. They’ll sort each other out.

Reduce the massive pay roll.

Once the start reducing the labour force.

E.g. Tesla had issue with product fired a lot of people. Suddenly production target are possible.

Pay roll: chop chop…

Everytime someone suggest that a resolution to a problem is reducing staff numbers, I just think…here comes Mr I-Figured-It-Out-All. That is a lazy uninformed suggestion.

It looks very bleak indeed. All good suggestions, but it’s not going to happen.

Yep. Not “radical” or “revolutionary” enough.

Bring on the ANC’s R1 trillion nuclear build.

During the 2018 illegal strike, many workers sabotaged power stations, and in terms of South African law, they should have been charged with treason.

” In South Africa treason remains a common-law offence . The crime of high treason is defined as:
“any conduct unlawfully committed by a person owing allegiance to a state with the intention of:
• overthrowing the government of the Republic;
• coercing the government by violence into any action or inaction;
• violating, threatening or endangering the existence, independence or security of the Republic;
• changing the constitutional structure of the Republic.”

But, Pravin Gordhan granted the saboteurs indemnity from prosecution and a R10 000 bonus. The ANC has already shown that it will do anything the unions demand (including indemnity for acts of sabotage and treason) – so how will it be different this time. Especially in an election year.

100% JBB. The corrupt ANC has corrupted Eskom beyond repair. Problem is that if Eskom sinks the whole economy tanks and we will be Zim II. Solar etc is not a viable option.

I am pretty sure there there is A LOT of private generation on standby be it : Solar/ Wind/ Hydro that if allowed (or even heaven forbid receive a incentive)to feed in, you would see a couple of hundred MW of generation capacity suddenly pop up.

When England was held at ransom by the unions, Baroness Margaret Thatcher had the resolve to break their backs. Who do we have to confront the unions and save the country? Cyril the “fighting for unity” Squirrel. Margaret Thatcher carried the flag of free market capitalism, private property and rule of law. She had a mandate from the majority of voters, that gave her the power to confront the unions.

A socialist workers party who is in alliance with the unions, forms the government in South Africa. Cyril the unity crusader, has no power to confront the unions. On the contrary, the unions dictate his agenda. He will eventually print the money to pay the union members. He will steal the purchasing power of the currency in order to bribe the unions.

The demise of Eskom heralds the final freedom from colonization and the official end of Western Civilization in South Africa. This is exactly what the ANC supporters wanted. The demise of Eskom and the bankruptcy of most municipalities is the ultimate manifestation of socialism. This is how socialism presents, and expresses itself among its supporters. This destruction is the practical manifestation of The Freedom Charter.

Unfortunately that is not unfolding too well either. A number of services were privatised during this period with companies set up to run the “new” operations.

It appears that perhaps private capital was not as “efficient” as previously thought with Carillion now bankrupt and Interserve a few steps behind.

I do however agree that the unions in SA are too militant, with very little understanding of the repercussions if the status quo is maintained and with their attitude of maintaining jobs at all costs.

In the real world (read first world) a number of jobs don’t exist any more (a good example is perhaps the petrol attendant), due to these “jobs” increasing the costs, reducing the bottom line of a company and not adding any real value to the customer.

Hello Sensei. It’s unfair to compare these two state leaders:

Mrs Thatcher is made of IRON, while Mr Ramaphosa is made of soft plastic.

…when the heat is turned up, Mrs Thatcher turns into a glowing red-hot woman, while Mr CR simply bends, melts and lose shape…trying to please everyone 😉

Cyril the Chameleon is running out of colours to ingratiate in…

He reminds me a bit of hapless Dick in ´Fun With Dick and Jane´. Poor Cyril finally gets his chance to be head honcho; only for the BS republic to come crashing down. Off course, Dick had no inkling what was heading his way but Cyril… how can he possibly be surprised by any of this? Where has he been all these years? In a coma?

Agree; a bit like the DA trying to run Jhb and Pta when the ANC had looted the coffers then stolen the coffers themselves. As well as leaving a toxic legacy of contracts. A looter continua. As if billionaire Cyril cares.

I see that in the last AFS Eskom provided against the debtors book. Given that it is unlikely that much of this has been recovered they should write it all off. So the loss will then be close to a staggering R25 BILLION!!

Unfortunately Comrade (Zupta CFO) Gordhan will have to do what the Eskom CEO said-take on the unions and fire 35% to 40% of the staff.

Also has one person been arrested yet for the wholesale corruption here-NO-Great work ANC boss Cyril…great work!!

Eskom is the logical conclusion of sacrificing hierarchies of competence on the altar of radical left wing social engineering. A microcosm of SA.. https://m.news24.com/SouthAfrica/News/Eskom-must-shed-1-081-white-engineers-20150308

…in fact, this is the root cause of the current ‘challenges’, being the Govt’s “AA/BEE social experiment”. Nowhere on the planet this system worked.

VIVA for Transformation!

A very good article James-Brent Styan with meaningful and purposeful required action plans.
It is just a huge pity that none of these suggestions will ever come to fruition so long as the ANC and Ramafakia remain in power.
It is as though they are hell bent on destroying our economy and country to benefit their own pockets only.
It is about time that all South Africans stand together against this thug regime (as it is after all your, the average South African’s tax being plundered) and demonstrate / revolt just like they did in France recently due to their fuel price hikes. Who the hell are they (the ANC and Eskom) to hold us and our country to ransom? Why do we continue to sit back and take this crap from this useless corrupt government? It astounds me…

Just surprised how well the ZAR and govies are holding up

Until the budget speech next week when the extent of the income shortfall from all the bailouts are revealed.

Very good article James. You’ve basically done what Pravin Gordhan is going to pay a few Italian ‘experts’ to do for a substantial cost. The problem is that no one is going to take these tough decisions with 3 months to go before a national election. It’s a pity that the mass voter base doesn’t understand what is at risk here for the country. The longer Eskom continues like this, the less there is to salvage. The only two options here are to either privatise or give licenses to IPPs to build their own stations or renewables and sell back to Eskom. Currently Eskom doesn’t have the skill, captial or efficiency to produce the power required.

I wonder if the Italian “experts” are or have to be working through Pravin’s local chums like J&J. Jay Naidoo was one of those responsible for where Eskom has ended up.

You can be guaranteed they are connected in some way. I mean, just ask yourself, how many coal fired power stations does Italy have?

Koeberg power station is old style planning and working. The offer from outside S.A to build bigger and better did hit a brick wall of to expensive. No one reported positives as not run by BEE nonsense. The mean reason of sinking without hitting anything but by valves full open.

Only way to fix this, is getting Bono to hold a big concert and write some strongly-worded songs. Maybe get a hashtag going? #HelpUsAgainBono ?

Can South Africans not begin to shift as many non-critical loads as we can to off-peak times? This is not a solution to the root causes of Eskom’s problems of course, but to avert loadshedding it could help in the short term. Looking at swimming pool pumps, washing machines and dishwashers, these can run overnight on a time delay or timer. I’m sure most people would co-operate if there was a campaign communication, the same way people reduced water consumption in Cape Town and Nelson Mandela Bay to avert “Day Zero.” It beats sitting in the dark.

Consumers will only do this when there is a direct incentive to do so. Many countries have this in the form of dual- or multi-rate tariffs. Expensive power during the day and drastically cheaper power at night to do things like charge batteries, run appliances that use resistive heating (dishwashers, washing machines, electric geysers). Some countries even use storage heaters in winter; these charge up with heat overnight and then release it at a steady pace during the day. We’ve had 10 years’ warning to install this simple, proven approach and done sweet nothing…

Some cities, including Chicago, go as far as using cheap electricity at night to freeze vast quantities of water, which is then used during the day to provide district cooling to major buildings. This takes huge amounts of energy-intensive air-conditioning compressor demand off the grid during peak day-time hours. This technology has been around since the 1960s.

Am with you on this one: SA power cost the same irrespective the time of day / load. Their is only a tiered or sliding scale tariff based on monthly usage (and type of user).

By allowing for a “multi-rate” tariff (based on time of day) by increasing the tariff during high-load times, and offer lower rates during night/low load times is one solution to ease peak load.

But I wonder if our meters has the inbuilt technology to accommodate different ratios of usage…i.e. by allowing faster or slower drop in kWh-unit count?

While I like the pragmatism you must realist that we had load shedding on a Sunday in summer in a down economy when energy demand is far from peak.

Shifting peak day loads will only buy you so much time. While industries can start or stop work shifts throughout the day.. winter is coming thus Eskom is not the only thing that will need to split, ie, time zones will need to introduced to buy us more time while whatever Eskom resolution happens.

Lastly Unions are literally the most important factor in this equation as they hold the country hostage. While unions gave the ANC its political might, its long overdue for a split from the ruling party. Not sure CR will do it as he is already due to make a lot of his own party lesser employed and wearing orange jumpsuits (again.. will he?).

Personally I think this, unions and handling of corrupt parties, is the main items that will signal to most historical astute folk if SA is going to continue on a declining path or CR is willing to fix things albeit, likely at his peril post elections. The Eskom drama can be fixed more easily given the above two as there is lesser monetary risk.

…well, at least it has been great for Rand-hedges the past few days.

ASSEBLIEF TOG.it is so easy to fix eskom ,the money is available in Dubai.
Ramaphosa is dancing around the issue because he and his cabal do not want the truth to come out re state capture.
All his proposals are going to cost the SA taxpayer even more , because the prezents will continue to be handed out to cabal members.
A reciprocal extradition treaty was signed between SA and Dubai in 2018,
can some legal boff please explain to me why cyril and a high level delegation can not go to Dubai and expedite the the extradition of those Gupta scum along with the loot?

Don’t fly out engineers that are already conflicted from Enel in Italy that will take six months to learn the operating enviroment, just bring back skilled engineers to Eskom that are familiar with the type of power plants that we have that are in SA sitting idle.

End of comments.

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