Coal chaos in South Africa: No energy, no investment
South Africa’s state energy company Eskom has a serious energy shortage on its hands. No energy means no more investment – as well as blackouts for existing businesses
On January 14, Bongani Nquwababa, chief financial officer of Eskom, called upon the South African Government to “no longer promote SA as an investment destination until 2017 when we will have reliable power once more.” Eskom, the vertically integrated power monopoly which generates, transmits and distributes 95% of all electricity used in South Africa, has been battling over the past year to meet the country’s rising demand for electricity. “No more electricity-hungry projects” should be allowed, Nquwababa argued, because “you cannot sell what you do not have.”
For the past 20 years Eskom has not built a new power station and has neglected the maintenance of its ageing stations, most of which use coal. Yet it has also opposed attempts to allow competition from private power generators and ignored alternative energy sources. Now the electricity demand of the growing South African economy has exceeded the system’s capacity to deliver. Despite rising profits, the utility’s pursuit of affirmative action policies has also run down its pool of experienced manpower, limiting its capacity to address the problem in the short term. Eskom and the Government ignored it for years but now the system has been pushed over the edge.
Caught cold
On January 24, Eskom alerted its 138 largest industrial customers (who account for a third of its load) that its “electricity supply position could be characterised as emergency or force majeure.” Dick Kruger, Chamber of Mines spokesperson on energy, says this left the mining companies unable to guarantee the safety of their workers underground. So the bulk of South Africa’s deep-level gold and platinum miners, as well as many coal and chrome mines, stopped operations. In total half a million mining jobs were placed in jeopardy as platinum and gold reached new record highs on fears of supply shortages.
Eskom partially restored power to the mines six days later. By then, Nick Goodwin, gold analyst at T-Sec calculated, £70 million in revenue had been lost. Andrew Etzinger, Eskom GM for demand side management, claims “Eskom did the “responsible thing” (requesting mines shut down) “in order to get back onto our feet.” Harmony Gold’s Graham Briggs complained that Eskom “was probably not as honest as it should have been about the situation in the past… We’ve got all the costs right now, and are not producing gold, so we loose up to R60 million per day.”
Brent Hegger, who manages the Coega aluminium smelter project for Rio Tinto Alcan, puts on a brave face, claiming the project, which will need 1350MW of electrical power, is “on track”. Coega is, however, making arrangements to get its power from a non-Eskom source.
Amid crisis meetings with Government and business, the utility entered its second week of regularly rotating 10% of all consumers off the grid for two to four hours to keep the system going. It calls this “load shedding”. The problem was that the utility published the schedule – to which it adhered rather arbitrarily – only on its website. Scant help for the millions of businesses on the other side of the digital divide.
Early warnings ignored
In 1994, Eskom advised parliament that big coal-fired power stations took over a decade to build, and the time to start was now if the country was to avoid power shortages as existing stations aged and the economy grew. The only response was a slight change in the law to encourage private power producers to enter the market. “But”, says John Ledger, chairperson of the Sustainable Energy Society of South Africa (SESSA), “in the face of cheap Eskom electricity, investors not could find a business case and renewable technologies struggled to gain a foothold.” Less than 0.5% of South Africa’s electricity comes from renewables.
Critics such as Greenpeace-affiliate Earthlife Africa charge that over the past decade Eskom stage-managed a charade of exploring renewable alternatives. A small experimental windfarm was built and benignly neglected, except for PR purposes – wind turbines regularly appeared in Eskom’s publications. During the 2002 Johannesburg Summit on Sustainable Development, a single solar collector was set up as a very visible ‘demonstration model’ next to a busy highway. Passing stakeholders noted that the dish was generally pointed downward.
In 1998 Government ignored its own White Paper that predicted the country would run out of electricity by 2007. By 2004, with the first power cuts hitting Cape Town, Government again invited private investors to enter the power-generating market, but stated that Eskom electricity should remain cheap and coal should remain dominant.
In 2006, maintenance problems at the country’s only nuclear plant, Koeberg, which supplies Cape Town, plunged the city into darkness for weeks because Eskom had no more spare capacity. The Cape Town City Council swiftly moved to become the first municipality to table a byelaw that would have made alternative energy systems such as solar water heaters a requirement for future building approvals. Meanwhile Eskom, faced with restoring power to the nation, found that another of its cherished policies, affirmative action, had deprived it of the technical skills to do so. Eskom CEO Jacob Maroga wants to solve Eskom’s skills crisis by fast-tracking engineering students currently on Eskom bursaries straight into key positions.
Groping for solutions
With President Mbeki already having apologized on national television, Eskom admitted there was a crisis when on January 29 when all its stations reported technical problems. Eskom CEO Jacob Maroga admitted this “will persist for five to seven years”. South Africa is due to host the Soccer World Cup in 2010.
Maroga’s answer is to bring three ancient and inefficient coal-fired power stations back into action to ease problems. South African businesses like Sasol and Mondi plc who do generate their own power from sources as diverse as hydro, biomass, wood and biogas, started queuing up to sell their surplus (equivalent to what the three power stations could generate) into the Eskom grid. The utility announced it was prepared to pay half of what it charged for electricity to these new suppliers.
These co-generation projects are already operational or approved by the private sector and amount to 5300 MW, according to one estimate, making up most of the current shortfall. Thus this crisis offers South Africa the opportunity to diversify its energy supply.
Meanwhile Eskom, whose chairman is Valli Moosa, President of the World Conservation Union (IUCN), has long-term plans to build more nuclear and coal-fired power stations. Under Moosa, the utility is stifling with red tape an initiative to place 1 million solar water heaters on the country’s roofs, by spending the past two years “developing” the administrative support process.
With the potential to take the equivalent of a 3000MW coal-fired power station off the grid at peak times, such greener alternatives would make an impact years before the first of Eskom’s coal-fired stations would be ready. Eskom continues to lobby Government to set aside environmental requirements and air quality laws so as to speed up its plans to rush into operation another two coal-fired power stations.
According to Maroga, the “solution lies in rationing”. Everyone, he says must “use 10, 15 maybe 20% less electricity” for the next five to seven years. This is not yet an option for sectors like food processing, which rely on full power at key times to preserve processed food such as milk. Shortages and higher food prices will be the result. Many banks are buying generators just to keep their ATMs going, while branches are plunged into darkness.
On January 30th parliament held an emergency session to discuss the power crisis during which Government affirmed that no leader would be held accountable for taking the country into this dead end. The Minister of Mines dispensed some advice on how to meet Eskom’s rationing target. “Go to sleep early, turn off all the lights and you will wake up cleverer for having slept longer” she suggested. This approach seems sum up the mentality of how Eskom, run by political appointees and more concerned about their well-being and affirmative action ignored the need to build, maintain and diversify a power infrastructure necessary to sustain the South African economy.
On January 14, Bongani Nquwababa, chief financial officer of Eskom, called upon the South African Government to “no longer promote SA as an investment destination until 2017 when we will have reliable power once more.” Eskom, the vertically integrated power monopoly which generates, transmits and distributes 95% of all electricity used in South Africa, has been battling over the past year to meet the country’s rising demand for electricity. “No more electricity-hungry projects” should be allowed, Nquwababa argued, because “you cannot sell what you do not have.”
For the past 20 years Eskom has not built a new power station and has neglected the maintenance of its ageing stations, most of which use coal. Yet it has also opposed attempts to allow competition from private power generators and ignored alternative energy sources. Now the electricity demand of the growing South African economy has exceeded the system’s capacity to deliver. Despite rising profits, the utility’s pursuit of affirmative action policies has also run down its pool of experienced manpower, limiting its capacity to address the problem in the short term. Eskom and the Government ignored it for years but now the system has been pushed over the edge.
Caught cold
On January 24, Eskom alerted its 138 largest industrial customers (who account for a third of its load) that its “electricity supply position could be characterised as emergency or force majeure.” Dick Kruger, Chamber of Mines spokesperson on energy, says this left the mining companies unable to guarantee the safety of their workers underground. So the bulk of South Africa’s deep-level gold and platinum miners, as well as many coal and chrome mines, stopped operations. In total half a million mining jobs were placed in jeopardy as platinum and gold reached new record highs on fears of supply shortages.
Eskom partially restored power to the mines six days later. By then, Nick Goodwin, gold analyst at T-Sec calculated, £70 million in revenue had been lost. Andrew Etzinger, Eskom GM for demand side management, claims “Eskom did the “responsible thing” (requesting mines shut down) “in order to get back onto our feet.” Harmony Gold’s Graham Briggs complained that Eskom “was probably not as honest as it should have been about the situation in the past… We’ve got all the costs right now, and are not producing gold, so we loose up to R60 million per day.”
Brent Hegger, who manages the Coega aluminium smelter project for Rio Tinto Alcan, puts on a brave face, claiming the project, which will need 1350MW of electrical power, is “on track”. Coega is, however, making arrangements to get its power from a non-Eskom source.
Amid crisis meetings with Government and business, the utility entered its second week of regularly rotating 10% of all consumers off the grid for two to four hours to keep the system going. It calls this “load shedding”. The problem was that the utility published the schedule – to which it adhered rather arbitrarily – only on its website. Scant help for the millions of businesses on the other side of the digital divide.
Early warnings ignored
In 1994, Eskom advised parliament that big coal-fired power stations took over a decade to build, and the time to start was now if the country was to avoid power shortages as existing stations aged and the economy grew. The only response was a slight change in the law to encourage private power producers to enter the market. “But”, says John Ledger, chairperson of the Sustainable Energy Society of South Africa (SESSA), “in the face of cheap Eskom electricity, investors not could find a business case and renewable technologies struggled to gain a foothold.” Less than 0.5% of South Africa’s electricity comes from renewables.
Critics such as Greenpeace-affiliate Earthlife Africa charge that over the past decade Eskom stage-managed a charade of exploring renewable alternatives. A small experimental windfarm was built and benignly neglected, except for PR purposes – wind turbines regularly appeared in Eskom’s publications. During the 2002 Johannesburg Summit on Sustainable Development, a single solar collector was set up as a very visible ‘demonstration model’ next to a busy highway. Passing stakeholders noted that the dish was generally pointed downward.
In 1998 Government ignored its own White Paper that predicted the country would run out of electricity by 2007. By 2004, with the first power cuts hitting Cape Town, Government again invited private investors to enter the power-generating market, but stated that Eskom electricity should remain cheap and coal should remain dominant.
In 2006, maintenance problems at the country’s only nuclear plant, Koeberg, which supplies Cape Town, plunged the city into darkness for weeks because Eskom had no more spare capacity. The Cape Town City Council swiftly moved to become the first municipality to table a byelaw that would have made alternative energy systems such as solar water heaters a requirement for future building approvals. Meanwhile Eskom, faced with restoring power to the nation, found that another of its cherished policies, affirmative action, had deprived it of the technical skills to do so. Eskom CEO Jacob Maroga wants to solve Eskom’s skills crisis by fast-tracking engineering students currently on Eskom bursaries straight into key positions.
Groping for solutions
With President Mbeki already having apologized on national television, Eskom admitted there was a crisis when on January 29 when all its stations reported technical problems. Eskom CEO Jacob Maroga admitted this “will persist for five to seven years”. South Africa is due to host the Soccer World Cup in 2010.
Maroga’s answer is to bring three ancient and inefficient coal-fired power stations back into action to ease problems. South African businesses like Sasol and Mondi plc who do generate their own power from sources as diverse as hydro, biomass, wood and biogas, started queuing up to sell their surplus (equivalent to what the three power stations could generate) into the Eskom grid. The utility announced it was prepared to pay half of what it charged for electricity to these new suppliers.
These co-generation projects are already operational or approved by the private sector and amount to 5300 MW, according to one estimate, making up most of the current shortfall. Thus this crisis offers South Africa the opportunity to diversify its energy supply.
Meanwhile Eskom, whose chairman is Valli Moosa, President of the World Conservation Union (IUCN), has long-term plans to build more nuclear and coal-fired power stations. Under Moosa, the utility is stifling with red tape an initiative to place 1 million solar water heaters on the country’s roofs, by spending the past two years “developing” the administrative support process.
With the potential to take the equivalent of a 3000MW coal-fired power station off the grid at peak times, such greener alternatives would make an impact years before the first of Eskom’s coal-fired stations would be ready. Eskom continues to lobby Government to set aside environmental requirements and air quality laws so as to speed up its plans to rush into operation another two coal-fired power stations.
According to Maroga, the “solution lies in rationing”. Everyone, he says must “use 10, 15 maybe 20% less electricity” for the next five to seven years. This is not yet an option for sectors like food processing, which rely on full power at key times to preserve processed food such as milk. Shortages and higher food prices will be the result. Many banks are buying generators just to keep their ATMs going, while branches are plunged into darkness.
On January 30th parliament held an emergency session to discuss the power crisis during which Government affirmed that no leader would be held accountable for taking the country into this dead end. The Minister of Mines dispensed some advice on how to meet Eskom’s rationing target. “Go to sleep early, turn off all the lights and you will wake up cleverer for having slept longer” she suggested. This approach seems sum up the mentality of how Eskom, run by political appointees and more concerned about their well-being and affirmative action ignored the need to build, maintain and diversify a power infrastructure necessary to sustain the South African economy.
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