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  You are absolutely correct in that the solution would be to split the generation and distribution functions into two companies who are at liberty to do business with whomever they see fit without ANC...  

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Eskom to close four power stations

‘Only option to accommodate renewables’.

Eskom spokesperson Khulu Phasiwe on Tuesday confirmed that the power utility will expedite plans to close four power stations in order to accommodate renewable independent power producers (IPPs).

The stations are the 3 000MW Kriel, 1 000 MW Komati, 2 000 MW Hendrina and the 1 600 MW Camden power station, all in Mpumalanga.

Phasiwe says two of Komati’s six units have in fact already been closed down and its other units as well as the other three stations will be closed down gradually as renewable IPPs connect to the grid.

Phasiwe says the decision to close down the power stations was taken by Eskom management last year and the idea was to first communicate it to stakeholders before making a public announcement. Eskom’s plan was however overtaken by events last week when coal truck drivers publicly protested the phasing out of Eskom’s coal transport contracts in accordance with the closure of the power stations.

Some of the power station units were earlier kept on “idle mode” and only ramped up if supply from renewable IPPs dipped. That however resulted in a reduction in revenue from the stations, while overheads remain unchanged.

Eskom’s efforts to renegotiate the IPP contracts were overruled by government and the utility has no choice but to close down the stations as economic growth and electricity demand remains flat, Phasiwe said.

Phasiwe said Eskom will in due course announce more detailed timelines for the power station closures. At the moment there are “a lot of moving variables,” he said.

He did disclose that Hendrina will be closed by December next year, when the controversial coal supply contract with Gupta-owned company Tegeta comes to an end.

Eskom has started issuing budget quotes to renewable IPPs and will connect the projects to the grid at the tariffs agreed with the department of energy, he said.

Trade union federation has called Eskom arrogant for “unilaterally” deciding to close the power stations. Cosatu said it will meet Eskom and government on the issue and mobilise workers to oppose the move.

“If we have surplus electricity then we must cancel nuclear, reduce prices, export more to Africa and invest in building electric cars,” Cosatu said in a statement.

“We agree with the Num that SA’s climate change obligations to introduce renewable energy into the electricity grid should not result in backdoor privatisation and further commercialisation of Eskom.”

Cosatu demanded that Eskom and government suspend their plan to shut down down the power stations “until a just transition-solution is arrived at by all affected stakeholders”.

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Seriously? We’re shutting down 4 existing PS’s while presumably continuing with the construction of Medupi and Kusile? Until not too long ago Eskom shouted IPP’s down for a number of reasons. Now suddenly they’re a viable alternative power source? If the nuclear program doesnt get the chop now then clearly the Zupta tail is wagging the dog.

The Word ‘LOGIC’ does not exist in most SOE’s and government. Why cant they sell the excess electricity? They are waiting for demand to go up again and start exporting electricity…

It wasn’t that long ago that (ANC) Eskom pulled the budgets for ‘mothballed’ power stations (and the Eskom people suddenly awarded themselves bonuses) and then the generator sets rusted and that is one of the contributing factors why we had power outages.

The total output of the stations due to close is 7.6 MW. At the last count, the nuclear option (still to be built) is 9.6 MW. For an additional 2 MW they will spend a trillion in construction of a nuclear station? All this while they are also finishing the new Medupi station, planned to produce 4760 MW, and which is already producing 1588 MW. The deficit is almost wiped out now (I am ignoring regular closure for maintenance). Kusile is therefore unnecessary, and IPP’s connected to the grid will cover any additional needs. Yes, @horsetrader, there is more than a whiff of Zupta self-enrichment going on here.

Phil you are confusing MEGAs and GIGAs
1000MW = 1GW

the total output for the stations that are closing is 7.6GW or 7600MW

Oops, my bad

This has really come down to a standoff between the ANC and Eskom. Surprisingly most people take the ANC’s side. it seems as if the utility is more hated than the regime itself.

let me tell you britches, I don’t side with the ANC.

The ANC is forcing (and has forced) Eskom to purchase energy at rates significantly above the cost at which it can produce it.

In fact, Eskom has been forced to purchase energy at rates significantly higher than the municipal retail price. This means they purchase it for R2.50 per kWh, transport it on the grid, sell it to the municipality who adds a sizeable margin and sells it to the consumer for R1.60.

Anyone who thinks this makes one scintilla of financial sense is probably dumber than a box of rocks.

So what do Eskom do? they suck it up as they have to and close a number of power stations not needed. They are really calling the ANC’s bluff. What will happen is predicable: the holes in the cheese will line up one day (in the night) and the IPPs will be unable to supply power when it is needed. The grid will collapse.

In the meanwhile the inflated cost paid to the IPP shareholders (who are creaming it all the way with a guaranteed non market extortionist selling price) will be passed on to the consumer in the guise of higher energy prices.

If South Australia (as in the state in Oz) could not get it right with renewable power, then what chance does South Africa? Luckily South Australia can import power from Victoria and NSW. I suppose South Africa can rely on Zim and Lesotho when the chips are down. Is it a coincidence that South Australia has the highest unemployment rate AND the highest electricity prices in Oz?

I’d be interested to know what the full kWh cost of the plants being shut down is? My understanding is these plants are roughly 40 years old and I’m guessing they would require major overhauls in the near future to continue running, they must also have quite a carbon footprint.

The first round of renewables was expensive yes but that was because they were luring private investment into that space, the subsequent rounds have all been significantly cheaper.

Surely it makes financial sense if renewables product under R1.00 right?

Perhaps if Eskom had built Medupi and Kusile anywhere near the budget that was set originally and on time then this argument would hold some water but they appear to be some of the most expensive coal plants on earth. Renewables or not, I don’t trust Eskom with further capital builds and certainty not nuclear (very few nuclear plants have been built on time and on budget in the world). I don’t have anything against Nuclear and it is relatively clean base load power but there are serious doubts that Eskom could deliver on such a large scale and expensive project.

You isolate South Australia, how about America, Germany, Portugal, China or many other countries where Gigawatts of renewables are being installed?

It is not Eskom’s job to make energy policy, that is the Governments. Eskom is fully remunerated from IPP energy through NERSA tariff increases.

Lastly, Eskom is clearly very conflicted here because IPPs are direct competition to their generation business. What should happen is the transmission business should be split from generation and then generation can compete in an open market regardless of technology.

You are absolutely correct in that the solution would be to split the generation and distribution functions into two companies who are at liberty to do business with whomever they see fit without ANC interference (in choosing whom they do business with). They would operate as regulated monopolies.We could take this further and take the retail function away from municipalities and thus create a third tier.

What would make sense if one business did business with another on a willing buyer – willing seller basis. If the distribution network buys energy at R1.50 per kWh then it would probably make sense to buy power at R1.00 per kWh from an IPP. If on the other hand it buys power at R0.40 per kWh then it would not make sense. So you R1.00 figure is an unanchored meaningless conjecture.

Again Medupi and Kusile being over budget are symptoms of ANC inability and have no bearing on the discussion. Their enormous capital costs are sunk. They are here to stay. They are not going anywhere. Yes this would matter if they were not built but they are built. The Chunnel was bankrupt the day it was built but they didn’t fill it in because the cost of operating it was less than the revenue. The only thing that matters is the cost of producing a kWh. These capital costs are as sunk as almost 50 year old Hendrina which produces electricity at about R0.22 per kWh in 2012 so this would be about R0.50 today.

Q: Where does the price of remunerating Eskom for IPPs come from i.e. how are shareholders pockets lined (through NERSA increases)?

The man on the moon?
The tooth fairy?
Judge Judy?
The consumer of electricity?

You guys got it all wrong, this is not about Eskom or power stations. This is about creating a shortage. In a few years time the general public will have forgotten about the shutting down, they will be told that there is a shortage and that a nuke has to be built. The Swiss bank accounts are open and ready for the kick backs, the Arms deal will be pocket money when this one comes.

And not even “Molefe” can be blamed for this one, funny how this happen so soon after his exodus to politics. It’s all politics to scheme for enragement. They all in cahoots Eskom and government.

All the power stations mentioned are over 50 years old they should have been closed 20 years ago.

The technology is obsolete and expensive to run.

As to the coal miners and truck drivers protesting what have they not figured out yet about how much coal a nuclear power station uses.

Renewable it the way to go

Eskom reminds me of the bling crowd with newly plundered spoils- enough is never enough
they could have double the amount of power required and the distribution would still be a cockup
this is what happens when you replace competent engineers with connected nincompoeps

teamed209 has it correct. Unfortunately, the unions and the truck drivers do not really understand the implications of the decision which has not been properly explained by Eskom leading to this unnecessary debacle and blaming game.

As 209 states, the actual cost of renewables is coming down and the annual increase should be minimal. But to continue with aging technology and dirty fuel, the future is extremely limited for these power stations which do not have the technology to reduce pollution and their carbon emissions as the new power stations do.

To keep trucking unnecessary coal supplies to these old power stations will not benefit the environment, the cost of electricity and the roads between the coal mines and the power stations.

Just as the steam train had to give way to new technology, the truck drivers and their employers as well as the unions have to realise, progress is the real reason for this decision. Face facts and learn a new skill for another job instead of blocking highways.

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