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Finally, a credible plan to fix Eskom

There was always only one answer ….
Selling the proposed plan to South Africa will not be easy but, almost anything would be better than the current chaos. Image: Waldo Swiegers, Bloomberg

Eskom has admitted it has a solution to its highly unreliable ageing fleet of coal power stations. This time, however, the plan is not the clichéd definition of insanity (which seems to have been the plan over much of the last decade).

In an interview with Engineering News last week, Eskom chief operating officer Jan Oberholzer revealed that a new approach to maintaining the utility’s coal fleet would be considered by the board before the end of this month. The thinking is that Eskom would remove a number of units for service for an extended period of time, allowing it the space to do proper maintenance.

Said Oberholzer: “I believe Eskom needs to be bold and say truthfully to the public of South Africa that we have 25 000MW 24/7, 365 days a year and then take whatever buffer we have and maintain our units.

“If it’s time for a 12-year general overhaul, or a nine-year general overhaul, or a midlife refurbishment, or routine maintenance, we take the unit off and we maintain it properly. If it’s a 60-day, a 75-day or a 90-day outage that’s what we do and we replace whatever we need to.”

The 25 000MW supply figure is not yet finalised but has been repeated a few times in recent months.

This approach to maintenance is not without precedent at Eskom. The maintenance of nuclear plant Koeberg is extremely rigorous. “We need to show the same level of respect to the coal units,” said Oberholzer.

This has been the answer all along and there are a lot more people than just Oberholzer who know it (perhaps the president does too?). Very few however will say so publicly.

Currently, maintenance of the coal fleet is continually deferred – resulting in the poor performance and reliability of the plant. Even in January 2020, less than a month after the unprecedented level of Stage 6 load shedding was reached, maintenance is being shifted out as the utility battles sky-high levels of plant breakdowns.

Under successive prior CEOs, including those who crow about their ‘achievements’ on social media, maintenance was simply not done.

And when it was, it was done poorly. The problems facing Eskom now have been years in the making. Oberholzer describes this as “neglect, under-maintenance and abuse” of the coal fleet.

Committing to a scenario of guaranteeing just 25 000MW of supply – it is understood that a sliding scale of options will be deliberated by the board – will translate into Eskom having the headroom to do maintenance on around 18 000MW of plant. Effectively, the bulk of the 13 000MW to 14 000MW of plant experiencing breakdowns will shift into a planned maintenance mode. The maintenance backlog is so large that this strategy would need to be followed for about two years.

Possible scenarios

Committing to a significantly reduced level of supply (whether 25 000, 26 000, or 27 000MW) will leave the country with two options:

  1. Near-permanent load shedding. The shortfall will be made up by predictable power rationing, the level of which will be determined by the amount of power Eskom is able to commit to supplying.
  2. Bringing new emergency supply on stream as rapidly as possible (cutting red tape that prevents independent power producers from contracting directly with municipalities will also help). The Department of Mineral Resources and Energy has commenced a process to find a way to address this short-term supply gap, through demand-side management (with large power users) and new generation capacity. It published a request for information on the process to procure between 2 000MW and 3 000MW, with a deadline of January 31. There has been no movement on further rounds of renewable energy procurement, which has all but stalled.

It is likely that a combination of both of these will be used if this maintenance strategy is pursued.

However, given reliability issues across Eskom’s fleet, including brand new power stations like Medupi, it is difficult to foresee the utility being able to constantly supply even 25 000MW, as plant undergoing long-term maintenance cannot quickly be called upon to plug a supply gap.

The delay that has been caused by a process seemingly underway by the presidency to strengthen/replace/overhaul the Eskom board, could mean that this maintenance strategy might not even be discussed this month.

Committing to this strategy is not a decision Eskom can or will make in isolation. It will require heaps of political will from the presidency, the minister accountable for Eskom (currently Pravin Gordhan) and Cabinet, as well as the ruling party itself.

Selling this plan to South Africa is not going to be easy but, increasingly, a frustrated public appreciates that the status quo simply isn’t working. Almost anything would be better than the current chaos.

Treasury will have a say too, as it will not only need to try and sell this idea to the rating agencies, it will likely need to provide Eskom with even more fiscal support. Removing a significant level of supply for a period as long as two years will have a sizeable impact on Eskom’s revenue, and its income statement will deteriorate further.

There are no easy decisions here. But time is – finally – running out.

Read: Actions needed to put Eskom on the road to recovery

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Totally incorrect. Eskom has multiple problems. Unreliable and un-maintained power stations is the symptom of the problem. Incompetent management, over staffed, incompetent staff, trainloads of debt. A incompetent government. That are the problems.

Well, the fact that Eskom is a SOE is actually the problem.

No, no, no! Eskom’s own figures already suggest that it’s only distributing an average of 25GW at any given moment (loadshedding incl.) for the year endimg July 2019. The crisis has noticeably worsened since then..! By increasing ‘planned’ maintenance from 9.5GW up to around 18GW will just result in this amount increasing again 2 years later. The original 9.5GW still remains outstanding, now, as is! Eskom already brought decommissioned plants back online at the start of this whole fiasco! Truthfully, we should actually be fighting over Eskom’s carbon emissions but since they can’t even keep the lights on our attention is elsewhere… all that Eskom has to offer these days is it’s post-generation infrastructure but soon that too will be worthless for all the same reasons.

Take the non paying municipalities off line . Problem solved.

What about the people in those municipality’s who do pay? Free solar installation?

Not even 5% solved. The problem lies within Eskom itself.

non paying municipalities plus zimbabwe – nobody will convince me that whatever electricity they are getting from sa is paid in cash into an eskom bank account if i don’t see it myself

Warren Buffett says that if a company is kind of bankrupt, you can change the management team as many times you like, the company will still fail. After so many boards, new CEO’s etc., Escom goes deeper and deeper year after year, but we still think/believe it will change course?

yes, that’s where one swallow does not make summer kicks in

Let the Private Power producers get you 5000 MW online in the next 4/years . You won’t even have to fund it !
Use them for G……sake .

The price of a broken economy will always be infinitely higher !!

Yes, yes, yes – the answer for SA with its abundance of solar radiation and 3000 kms of windy coastline is renewable power. The dog-in-the-manger Gwede Mantashe must be given a swift hard kick up his backside, holding the whole of South Africa to ransom in order to favour a few thousand of his trade unionists. The trouble with the ANC is its unholy alliance with the selfish, greedy trade unions and proven-epic-fail Communist Party. Kick those two into touch, get rid of the endemic corruption at high levels in the party and – voila! – South Africa will begin to blossom again, hundreds of thousands of jobs will be created and we will be saved from a descent down the toilet.

It’s not even a question anymore. We do not have the balance sheet to build any more plants so we have to use IPPs, build more peakers and use renewables + storage to give you peaker like generation.

Maybe even build the coal plants that were awarded a while back.

Nuclear will take 10-15 years to deliver energy and a private nuclear plant may be a push too far.

Gas could be an option if you can get a feed, relatively quick to build.

The quickest route is embedded generation/distributed energy, now is the perfect time to open the taps and allow anyone to install their own generation or allow private to sell to private through IPPs.

None of these solutions are new, been discussed for better part of a decade and yet the ANC wait until the wall is about to fall over. Incapable, corrupt and incompetent so not too surprised.

In the USSR the communist regime kept on mining coal at a huge loss to “save jobs”. They subsidised the price of bread, so pig farmers used bread to feed their pigs instead of wheat because the bread was cheaper. They did not allow opposing views that questioned the authority of the party. This lead to the Chernobyl disaster, the fall of the Berlin Wall and the bankruptcy and breakup of the USSR.

This is the ANC. They do not want to abandon Eskom for the jobs. The subsidized cost of Eskom employees kills the spending power of the average citizen. They block any advancements to protect their cronies. They stall green energy to keep on mining coal at a loss. Just like Chernobil, Eskom will implode. Just like the Berlin Wall, Luthuli House will be dismantled. The communists will bankrupt our finances, as they did in the USSR.

“Ultimately, Communism must be defeated by progressive political programs which wipe out the poverty, misery, and discontent on which it thrives.” – Robert Kennedy

I agree. However, the holier than though Pravin Gordhan is a true communist and will not allow anything to be privatised either partly or in whole. He is still of the archaic view that government can run companies successfully.

Seems as if this latest plan is to say if we can run at 25 000 MW, then we do not have to announce any load shedding.

Nothing will work if they keep deploying from the ANC. They don’t have a single person that can fix this.

Close the “Deployment committee” “BBBEE” FOREVER.

This is also a highly risky strategy as it would be very easy to bring the country to its knees if there was sabotage in the past. What if it happens again?

Whatever happened to the sabotage investigation? Was it just a big fat ANC lie?

Finally, downgrade to junk status time.

Transformation & BBBEE are the two fundamental problems.

In the meantime you have a PUTZ holding back independent power producers. I guess the country will be run by black outs

So easy to criticise hey! Not one of you have suggested a credible solution. Sitting around waiting for better days isn’t going to solve South Africa’s problem. Either leave or look for some hope. This sounds like a reason to hope…. and it’s good to see it’s come from a currently disadvantaged minority player!

“Either leave or look for some hope”

Is that your credible solution?

Your proposal to “Either leave or look for some hope” is no more constructive than any of the comments you criticise .
Just saying, because my constructive comments may be deemed no better than anyone else’s.

I have given one before, some new additions.

Sell all the power generation plants on the OPEN market; no BEE etc bs, all to different bidders, within reason. Make their staffing an essential service, no striking. Let them tender to supply power to individual municipalities and big users. No free electricity to anyone. No extension of RBM type sweetheart contracts.

Space and time for maintenance is one thing but things go wrong when they need to apply BEE (NOT BBBEE) to the process. That is when the wastage,corruption, premium comes in that the tax paying portion of the public pays for.

The only way out is to ringfenc the entire entity from BEE.

Ja well no fine… So assuming unplanned outages stay at current levels and a further 9GW is removed for planned maintenance, does this mean that Eskom will soon be distributing loadshedding schedules for stages 9 through 15?

The drededBEE will get in the way.

Eskom is already doing 5000MW to 6000MW of planned maintenance, without meeting their own metrics to restore plant reliability after extended outages. Where will we get the resources, maintenance space and money to do another 5000MW of deep maintenance? Perhaps a good place to start will be to refocus and ensure the planned maintenance currently in the plan is done professionally and diligently and deliver reliable plant when returned to service

Eskom are treasonous. They should have loooong ago requested tenders to supply electricity; something they cannot do. In the national interest; not the ANC one of looting and idle employment for cadres and pals.

As long as the anc is in charge, eskom will fail

Finally, an article about Eskom that does not use the contradictory term “unplanned breakdowns”!

Part of the plan should also be to prosecute illegal connections and theft of electricity.

Not holding my breath on this one

Jan Oberholzers plan for Eskom gives me hope. Better than sitting around and moaning!

Sitting in the dark hoping…

In my mind there are two distinct problems here. 1) the generation issue and 2) the debt issue.

Problem 1 is the most critical in the short term. There has been plenty of coverage on this, but needless to say, unpredictable blackouts are doing direct harm to the economy and indirect harm to the confidence in the country as a whole. This problem can absolutely be fixed though.

Problem 2 is more tricky and cannot be fixed without some kind of debt write off. There has been a lot of attention given to the unsustainable nature of the debt burden. In all likelihood, this problem will need to get worse in the short term as problem 1 gets addressed. Doing things like bringing on more IPPs and having consumers go off-grid will help solve problem 1, but will do nothing for problem 2. It is hard to see how problem 2 can be solved other than some kind of debt write off (few years interest free debt, straight debt haircut, conversion to equity or a combination of these). In this way, all citizens take the pain in some way shape or form. As part of this deal, a labour deal would need to be struck as well to shrink the wage bill at Eskom. Knowing that capital (debt holders) were taking pain may get the Unions over the line for job losses.

Without problem 2 getting solved, SA is in a spiral toward too much debt, lack of confidence in our ability to pay back more debt, at which time a bail out (from the IMF or who knows where) is the only option as SA essentially goes bust. It’s hard to imagine that SA would prefer a bail-out over a collective debt write off (neither isn’t an option at this stage), so we may as well get on with it and take the pain.

Problem 3 the corruption issue

Yes but I’d say that’s been covered to death and it’s pretty clear what action is being taken to reduce that. I’d say SA is tending toward a ‘normal’ level of corruption with the bigger issue on the horizon being the lack of skills as opposed corruption.

We have enough fiscal encouragement for behind the meter solar by way of the accelerated write off.

All that we need is a nationally mandated tariff scheme. My council went from an admittedly liberal scheme to a scheme that is abusive and DESIGNED to discourage solar (their problem is loss of revenue and related margin to pay for the ten free things they provide). They now charge 300/peak kVA and 96c/kWh. 96c is less than their average energy cost. If you have excess solar they credit you 48c which is less than what they pay in offpeak Megaflex.

If you took a dead simple average business that runs 8-5 weekdays, you allow them (if they are not on a shared feeder) to install up to their peak kVA in solar.

So most of these will be roughly network neutral for about 2 hours a day and be half their load another 2 hours a day. Huge load off the grid in THE MOST CRITICAL business hours.

They will in most parts of the country be exporting a massive amount of solar on Saturdays and Sundays, days when the grid can use that energy to restock the pumped storage and for some strange reason refill their diesel tanks.

Make the export tariff (what people are credited for solar exports) a fair number which IMO is about 90c/kWh. That is a bit above what a medium sized private rooftop solar array works out to, properly measured.

If that does not make a business case for the client, he is being ripped off by his solar installer or he lives under a bluegum forest. Time to sink the installers that still charge R14/kW or lease the energy out at 120c/kWh! Any project over 100kVA is do-able below R10/kVA

Johan, I can surely benefit from your advice, if I can afford it. How do I get your email address?

I am not sure – moneyweb knows who I am and they can give you my email no problem. Note : I do not supply solar, I help people figure feasibility and navigate the land mines… it is really not rocket science, might be worth an article with examples of how to and how not to

local debt trap your children,children,children will pay courtesy of anc

They are living in a fool’s paradise! EKSDOM couldn’t organize a p!ss-up in a brewery, whilst simultaneously attempting to nail NERSA to a cross in a court action all at the expense of the SA Tax Payer along with the users of electricity who are in good standing. The only thing which might seem to be a bit strange is that NERSA seems to have grown some Balls in stead of currying favour with EKSDOM over the past 2 decades whilst both sides were under OATH during all the applications for increases. In Africa the enlightened would probably interpret “taking an OATH” as “taking an OAF”!

Twelve years on from the first load-shedding, why would the ANC wake up now and do something about fixing Eskom?

‘This time, however, the plan is not the clichéd definition of insanity’.
So what is the term for expecting the same people who broke Eskom to somehow fix it? They repeat the same actions and expect a different result. Logic says if they were competent it wouldn’t be broken in the first place.

End of comments.





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