Eskom plans are powering ahead

Eskom will not be able to keep the lights on by itself over the next two years. It will need the help of the whole of SA, says the utility's CEO, Brian Dames.

While electricity supply will remain problematic for at least the next five years, the situation will be critical in 2011 and 2012, a new government strategy document warns.

"From 2011 to 2016, rolling blackouts are anticipated unless extraordinary steps are taken to accelerate realisation of non-Eskom generation and energyefficiency projects," it states.

Eskom currently has a maximum capacity of 41000 megawatts (MW), with demand at around 37000MW, leaving the reserve margin at 10%, about half of what is internationally seen as acceptable.

Electricity demand is expected to double by 2030, with tariffs set to increase by 275% in the next 10 years - from 40c/kilowatt hour now to R1.10 in 2020.

Eskom will lead efforts to avoid blackouts, said Dames, but this will have to be done "in partnership with companies, municipalities and consumers".

Where capacity is available for co-generation or for independent power producers (IPPs), partnerships must be urgently finalised, he said.

Demand-side management, or electricity savings, will be a very important part of the strategy to avoid a repeat of the rolling blackouts of 2008. But, unlike 2008, when mines and other big industrial customers were forced to cut usage by 10%, the plan is to cut usage only on a voluntary basis, said Dames.

Industry will have to give a clear forecast of its electricity needs for the next seven years, with an agreement on common reductions when supply is tight. "Hopefully we will not have forced reductions. We don't want to go back to rotational load-shedding - we really want to give the power back to our consumers," said Dames.

The first priority, however, will be to deal with the supply of electricity. Eskom will focus on building its new power stations and ensuring existing stations are run efficiently.

The company will not compromise its maintenance schedule and is working to increase the quality of coal supplies, two big risk factors for security of existing Eskom supply, he said.

"We will not make short-term decisions that will harm the long-term ability of our power stations. We cannot afford to lose the integrity of our stations; the reliability of our fleet is crucial and we won't compromise on adequate maintenance."

While Eskom has sufficient coal supplies, with current stocks able to keep the stations running for 45 days, quality remains a problem.

Dames said current output was reduced by 500MW owing to poor-quality coal, an issue that is being discussed with suppliers. Any re-negotiations will not include an increase in tariffs.

IPPs will also play a crucial role, said Dames. Eskom has signed agreements for the generation of 400MW, of which 270MW is already operational. Various opportunities for co-generation exist - with industrial companies using "waste heat" in their processes to generate electricity - while municipal generation is also available, though not running optimally.

While Grootvlei and Komati, two power stations under refurbishment, will be fully operational by 2012, security of supply will vastly improve once the new 4788MW Medupi and 4800MW Kusile are online. The first unit of Medupi is set to be operational by the end of 2012.

"We've made significant progress, and the first unit is at quite an advanced stage. But it is still a big project and many risks remain. The critical part is the boiler, and that is in the hands of Hitachi. We are engaging with them all the way to their offices in Europe and head office in Japan to ensure they understand the importance of this delivery."

Eskom's board has also given the go-ahead for Kusile, where a lack of funding was a major issue. Dames declined to give details on funding guarantees received at this stage, but said an agreement was in place and Eskom was enjoying "strong support and great co-operation" from government. The first unit is expected to be online by 2015.

Since he took over as CEO in July, various changes have been made at Eskom.

The company has looked at its capital and procurement management, and there is an "intense focus" on performance contracts and transparency. The board has also undertaken a full strategic review of Eskom, and a new strategy will be finalised over the next few months.

"We're out there engaging with key customers and stakeholders, and we're aiming to be very transparent. There is a lot of work to be done.

"Among our staff, there is a great sense of energy, a great sense of anticipation, and hopefully we can deliver on that," he added.