Eskom may run out of money for diesel, as global prices soar

Utility to approach market for gas.
Eskom’s emergency reserves are currently consuming 9m litres of diesel per day. The ships used to import the diesel typically hold 30m litres. Image: Bloomberg

Embattled Eskom will in the near future approach the market for gas to run its diesel-gobbling open-cycle gas turbines (OCGTs).

This was announced on Wednesday at an emergency media briefing, shortly after the utility told the country that it will be subjected to Stage 4 load shedding until 05:00 on Friday (March 11). Thereafter Stage 2 will apply until 05:00 on Monday (March 14).

Eskom has been in a battle to keep the lights on since the start of the week due to “multiple generating unit failures over the past 24 hours”.

At first it anticipated that Stage 2 load shedding, which lowers demand by 2 000 megawatts (MW), would suffice to stabilise the power system if limited to the hours between 21:00 and 05:00 on Monday and Tuesday night.

The situation however deteriorated as more of its poorly maintained coal-fired units tripped.

Constraints

According to Eskom head of generation Phillip Dukashe the availability of the coal-fired fleet dipped below 60% with more than 20 000 MW out of service.

Planned maintenance accounts for 5 505 MW of that and unplanned breakdowns for 15 439 MW.

On Wednesday morning Eskom chief operating officer Jan Oberholzer told journalists that Eskom is using its emergency reserves faster that it is able to replenish them.

“Stage 4 load shedding will therefore give us the space required to replenish the emergency reserves and continue to manage the system safely,” Eskom said in a statement.

The emergency reserves are pump-storage schemes and the OCGTs. Eskom utilised all 20 of its own OCGT units for an extended time on Monday and Tuesday, Oberholzer said.

Currently they consume a mind-boggling nine million litres of diesel per day, he said, adding that the shipping vessels used to import the diesel typically hold 30 million litres.

Impact of Russia’s invasion of Ukraine

Eskom expressed its concern over rising international diesel prices in the light of the war in the Ukraine.

The running cost of each OCGT unit has already increased by 40% to R700 000 per unit per hour, Oberholzer said.

Eskom chief financial officer Calib Cassim warned that should diesel prices continue to rise at the current rapid pace, there will come a point where the pressure on Eskom’s liquidity will simply not allow it to continue buying diesel to keep the lights on.

That may mean either increased load shedding, or government having to further assist Eskom with taxpayer money.

Read:
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Although Eskom is entitled to recover the cost it incurs for supplying energy from consumers through tariffs, this is limited to prudently-incurred cost.

It may be allowed to recover amounts due to an unexpected increase in the diesel price that is outside its control after the end of the financial year by adding it onto tariffs retrospectively. Energy regulator Nersa has in the past been careful to exclude excessive spending on OCGT as a result of the poor performance of Eskom’s coal fleet.

Expenditure YTD

In the current financial year Eskom has spent about R10 billion on diesel, including its own and privately-owned OCGTs.

This is far beyond the amount approved by Nersa.

Nersa has approved a 3% OCGT load factor for 2022/’23, which roughly translates to a budget of R3 billion, said Cassim.

In light of the rising international energy prices this could however increase drastically.

Cassim earlier said Eskom is considering hedging against price movement, but the timing is very bad.

Gas options

Eskom has been talking about switching the OCGTs to run on gas for years, since it will be cheaper. The plant has been converted to dual feed, but that is where it stopped.

According to Oberholzer the utility now plans to ask the market for proposals for gas supply to its Gourikwa and Ankerlig OCGT plants, both in the Western Cape, as well as the repurpose of its old coal-fired Komati Power Station in Mpumalanga to run on gas.

He acknowledged that there is currently no infrastructure for gas utilisation and said the request for proposals will specify the gas required, gas volumes and quality to be delivered “at the gate” of the power stations.

Minerals and Energy Minister Gwede Mantashe recently stated that South Africa should increasingly look towards its own continent for its energy requirements. He specifically referred to oil discoveries in Namibia and pointed to the possibility of buying gas from the Gulf of Guinea and the whole West Coast region.

Read:
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COMMENTS   7

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Well yes. This company’s business model is:

1. Buy hammers at R10 each.
2. Sell hammers at R5 each.
3. Make a R5 per hammer loss
4. Tell everyone how you are battling to buy and sell hammers and that
people should buy less hammers.

Can you imagine how above board buying gas from West African countries is going to be? 100% mark up on the deal – 50% for you and 50% for me in Crypto currency or on Dubai! Just saying……that’s how things work now in our “democracy”

The ANC is losing power because Eskom is losing power. SOEs are bankrupt because the ANC is morally and financially bankrupt.

The implosion of power supply reflects directly on the ANC and its inherent incompetence. Remember that the old Eskom had to navigate the oil embargo of the 70’s when the oil price spiked by 300%. The old Eskom supplied the most affordable and most reliable electricity in the world. They provided electricity to everyone who could pay. Now, even those who do pay have to endure loadshedding.

The destruction of Eskom, the bankruptcy of SOEs and municipalities, and the evidence before the Zondo Commission prove that the ANC and its supporters are hopelessly incompetent, criminal, and beyond useless as deployed cadres.

Soon, we will have to build everything from scratch when the ANC loses power. The ANC destroys the advanced infrastructure to the point where the quality of infrastructure reflects the mindset of the voter. Eskom now resembles Luthuli House.

Jip Sensei !!

They destruction is evident everywhere.
Small wonder – The ANC vowed to destroy the country and make it ungovernable from the sixties already !!
Remember their hero that bombed the Wimpey and the one that bombed Koeberg under construction.

Viva ANC — Amandla !!

These pathetic and cowardly “fighters” intentionally killed women and children when they bombed Magoos bar in Durban and Heidelberg Tavern in Observatory in the name of the ANC. Then they awarded the coward with a senior political position.

Imagine what the Karpowership deal would look like since it was priced at a fee plus gas cost.

We REALLY need to get the pumped storage system at least doubled in GW with around 40h storage; then we add huge renewables to fill the storage.

That would be the best way to spend that concession finance – along with the transmission changes needed.

But, contracts must be EPC turnkey or Eskom will again overspend like on Ingula. Or even better outsource operation of the new pumped storage schemes!

Someone might want to take more than a cursory glance at the “performance” of the contracted ESKOM coal suppliers. Global coal prices have exploded upwards over the last few weeks and of course a lot of international buyers are currently wining and dining various producers in South Africa. Those with suitable quality to export – are focusing limited resources away from the low paying ESKOM contracts to the far more lucrative exports…

In short ESKOM would do well to to pay more attention to contract enforcement (volumes and quality) at the moment and monitor exports via RB where there is an overlap.

At peak rainy season as we have had – ESKOM feed quality is dropping, more mud and wet coal equals less heat – boilers kick out – load shedding… this is naturally compounded by better qualities being removed from “ESKOM” stock piles and being added to export piles in this price environment.

My point is that there is a far bigger picture to look at here – diesel issues are a politically easier excuse to make as it slots into the current geopolitical headlines – whilst deflecting the spot light away from a real and growing issue that needs to be addressed.

End of comments.

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