So, the question we set out to answer in the final part of our Eskom trilogy is: does it make sense to reinvest in the coal fleet, or is it time to let the coal fleet die?<\/p>\n
The top six<\/strong><\/p>\n Currently, Eskom\u2019s fleet of 25 power stations is only available to produce electricity 56% of the time (12-month rolling average: 58.7%).<\/p>\n In a bid to reverse this decline, Eskom plans to spend R34-billion a year on maintenance over the next five years. At R170-billion, this is significantly more than the R144-billion spent in the previous five-year period.<\/p>\n Most of the extra budget will be spent on six power stations \u2013 dubbed the \u201ctop six\u201d \u2013 which will receive VIP treatment, meaning the money, skills and time they need to carry out in-depth, restorative maintenance.<\/p>\n The \u201ctop six\u201d coal stations \u2013 Tutuka, Majuba, Matla, Kusile, Kendal and Duvha \u2013 are amongst the worst performers in Eskom\u2019s fleet, with an average energy availability factor (EAF) of 40%.<\/p>\n Tutuka, for instance, has an EAF of only 28%, meaning it produces about as much electricity as a wind or solar plant of the same size, but on a far more unpredictable schedule.<\/p>\n The six VIP stations are all scheduled to keep running after 2030. Tutuka, for instance, is supposed to shut down its last unit in 2040, but the likelihood it will last another 18 years is slim.<\/p>\n Professor Mark Swilling, the chair of the Development Bank and a seasoned energy expert, recently described it as \u201cprobably irredeemably corrupt and therefore damaged beyond repair\u201d.<\/p>\n However, Eskom\u2019s hope is that spending an additional R5.2-billion a year on maintenance \u2013 mostly at these six stations \u2013 can rein in breakdowns and put desperately-needed electrons back on the grid: \u201c[T]his would improve EAF by approximately 7%,\u201d Eskom told us in a written response.<\/p>\n Not overnight, however: a presentation to Parliament in late August indicates that Eskom anticipates that the EAF of the fleet could recover to 61% in 6 months, 63% in a year and so on, only reaching 66% by 2025.<\/p>\n But this is a gamble. With independent power producers we know the cost of the electricity we are buying in rands and cents per gigawatt hour. With the Eskom coal fleet, we are handing over billions, with a hope and a prayer that we are not just throwing good money after bad.<\/p>\n And if the plan fails, Eskom will be deeper in debt and no closer to providing the country with a stable supply of electricity.<\/p>\n The cost of coal<\/strong><\/p>\n Eskom chief executive Andr\u00e9 de Ruyter has made the Reliability Maintenance Recovery programme a key part of his strategy to end loadshedding, but the return on investment is yet to materialise.<\/p>\n Initially, chief operating officer Jan Oberholzer predicted that the EAF would rebound within 18 months. Now, 24 months later, he says it will likely take another 18 months to show results.<\/p>\n If the plan works and Eskom can squeeze another 7% availability out of the existing fleet, it should add electricity to the grid at between 40c and 50c\/kWh, on par with prices paid for new wind and solar.<\/p>\n But those figures are misleading because they are subsidised by the large, sunk costs of the existing coal fleet, which generates power at over R1\/kWh. And while these cheaper electrons would bring down the cost of coal-fired power, this would not be enough to make coal a competitive source of electricity.<\/p>\n AmaBhungane\u2019s own calculations suggest that shutting down under-performing stations like Tutuka, Duvha and Kendal and replacing their capacity with renewables would be a far cheaper and more reliable option.<\/p>\n Eskom\u2019s R170-billion budget also has no room for the technology needed to curb air pollutants, such as SOx, NOx and particulate matter. At R300-billion those may sound like nice-to-haves but nine coal power plants will soon lose their licence to operate unless Eskom installs abatement technology or secures another \u201clegal indulgence\u201d from the regulator.<\/p>\n For financial reasons, if nothing else, coal is on a path to extinction.<\/p>\n Stage-managed decline<\/strong><\/p>\n Knowing this, why would we spend another R170-billion on the coal fleet?<\/p>\n We put this to Eskom chief executive Andr\u00e9 De Ruyter when we interviewed him in July. His view is that the transition to a renewables-dominant system is \u201cinevitable\u201d but that for now Eskom must invest more in maintaining the coal fleet because it cannot pull the plug overnight: \u201c[W]e simply can’t deploy enough renewable energy capacity quickly enough,\u201d he explained.<\/p>\n Under Eskom\u2019s current plan, half of its 46-gigawatt (GW) fleet will be shut down by 2035, including nine coal-fired power stations. This is slightly more aggressive than government\u2019s official plan that would shut down eight by 2035.<\/p>\n De Ruyter has long urged government to embrace the global transition away from high carbon fossil fuels like coal. He sees his role as shepherding Eskom through a break-up that will leave it smaller \u2013 12 coal power plants and thousands of employees lighter \u2013 but alive.<\/p>\n To others, De Ruyter is a grim reaper bringing death and the destruction of livelihoods to the Mpumalanga coal fields and, significantly, wiping out roughly R229-billion in future sales for a new generation of coal barons.<\/p>\n \u201cI’m accused of being deployed to break Eskom, so that Patrice Motsepe can make money from renewable energy to line the President’s pockets and all sorts of conspiracy theories \u2013 which I can tell you are absolutely unfounded,\u201d he told us.<\/p>\n Eskom has looked at all the options, De Ruyter said, including whether it is cost-effective to extend the life of the coal fleet. \u201c[T]he one that we’ve landed on … is this staged-managed deliberate decline, not \u2018run it until it blows up\u2019, which comes with its own risks.\u201d<\/p>\n To restore Hendrina power station, for instance, and run it for five years past its 2026 shutdown date would cost roughly R12-billion, De Ruyter told us.<\/p>\n \u201cIf you do the math, it doesn’t make sense. And therefore it’s far better to spend the R12-billion on enabling cleaner and greener generation capacity to be added by private sector by investing in the grid, … but also by ensuring that from a system operator perspective that we run a grid that can supply the 50 hertz 24\/7, which is a huge challenge, significantly exacerbated by … renewable energies.\u201d<\/p>\n In terms of value for money, \u201cthis is the best strategy … that we have been able to come up with,\u201d De Ruyter said.<\/p>\n \u2018The uncertainty of the plan must be understood\u2019<\/strong><\/p>\n However, executing this maintenance-for-GW strategy means accepting the risk of more severe loadshedding in the short-term.<\/p>\n Eskom desperately needs another 4 to 6GW of additional capacity \u2013 new power plants, in other words \u2013 to shoulder the burden of providing electricity to the country while it conducts maintenance.<\/p>\n But thanks to the Department of Mineral Resources and Energy (DMRE) slow-walking the rollout of renewables, those are, at best, two years away.<\/p>\n \u201cMaintenance is not a solution to meaningfully shift the dial on loadshedding…\u201d analyst Peter Attard Montalto of Intellidex wrote in a recent briefing note to clients. \u201cEskom\u2019s strategy of doing just enough to try and stabilise the system whilst not exacerbating loadshedding is the\u00a0correct\u00a0one given the age of the fleet and historic lack of maintenance as well as financial constraints.\u201d<\/p>\n In the absence of the 4 to 6GW of additional capacity, Eskom is pressing ahead with their strategy anyway.<\/p>\n \u201cThe uncertainty of the plan must be clearly communicated and understood by all stakeholders including government and the public,\u201d Eskom officials warned Parliament in late August.<\/p>\n \u201cThe plan is \u2018tight\u2019 and any significant outage slips\u201d \u2013 where maintenance runs over schedule \u2013 \u201cwill have a knock-on effect that will influence the plan from that point forward.\u201d<\/p>\n To give the plan the best chance of success, Eskom built in a bigger buffer zone for breakdowns, assuming that 13 of the system\u2019s 49 GW would be lost to breakdowns at any one time, up from the previous assumption of 10GW.<\/p>\n Eskom assured Parliament that if this new base-case scenario materialised, there should be no loadshedding in the upcoming months of September and October.<\/p>\n Instead, September would deliver 25 days of loadshedding and October 27 days of up to stage 6 loadshedding.<\/p>\n <\/p>\n When we interviewed De Ruyter back in July, his Reliability Maintenance strategy seemed to have the support of government. But an energy crisis years in the making was not going to be solved overnight. And as loadshedding intensified, so too did calls for De Ruyter\u2019s head.<\/p>\n Marching orders<\/strong><\/p>\n \u201cThis is not about any political instruction, this is about what the country needs,\u201d public enterprises minister Pravin Gordhan told journalists on a Friday afternoon in late September.<\/p>\n What the country needed, in government\u2019s view, was to end loadshedding and restore Eskom\u2019s aging fleet to 75% EAF, far more than the 66% in De Ruyter\u2019s already ambitious plan.<\/p>\n \u201c[I]f experts tell me and others that it is possible to get there, then every effort must be made … to reach as close to 75% … as is possible,\u201d Gordhan said.<\/p>\n Government has a long and inglorious history of setting unrealistic EAF targets for Eskom. The 2019 Integrated Resource Plan \u2013 the country\u2019s official energy roadmap \u2013 is based on the flawed assumption that Eskom\u2019s fleet would perform at 75%.<\/p>\n \u201cI think privately many engineers in Eskom were shaking their heads at this,\u201d De Ruyter told us when we asked him about the 75% figure. \u201c[But] this was the answer that government wanted, and therefore that was the answer that government got.\u201d<\/p>\n It is easy to see why improving the EAF is so alluring: an EAF of 75% would be like adding 12.5GW of new capacity to the grid \u2013 far more than the 6GW shortfall causing the current energy crisis.<\/p>\n However, there is very little evidence that this can be achieved. In 2017, Eskom predicted that the country would have an 8GW surplus of capacity by 2022 and an EAF of 80%. Each year since, the EAF number has been revised down but, without fail, has always been too optimistic.<\/p>\n Yet despite the bruising experience of the last five years, government seems determined to plough ahead with the same strategy.<\/p>\n \u201cNormally, shareholder compacts are not just imposed \u2013 there’s also arm-wrestling and debates and discussions about what is realistically possible \u2013 but the job of a shareholder is not to accept at face value the lowest common denominator,\u201d Gordhan told journalists.<\/p>\n \u201cIf it is possible, to get more megawatts out of the system … then clearly, both the board and the management and the shareholder have a responsibility to this country to ensure that the optimal is done.\u201d<\/p>\n As for De Ruyter, his fate would be left in the hands of Eskom\u2019s new board, Gordhan said.<\/p>\n The comeback<\/strong><\/p>\n Within days of being appointed, the new Eskom chair Mpho Makwana weighed in. Makwana is an Eskom veteran: he served as chair from 2009 to 2011 and briefly as CEO.<\/p>\n \u201cThe immediate priority is to keep the lights on,\u201d Makwana said in an interview a few days later. \u201cWe have to grapple with how to return … the EAF to healthy levels. Under normal conditions, the EAF is 86%.\u201d<\/p>\n It is worth noting that the EAF has not been at 86% since 2007, before loadshedding began. During Makwana\u2019s tenure, Eskom implemented the notorious \u2018keeping the lights on\u2019 policy, which resulted in critical maintenance being sacrificed in order to avoid loadshedding.<\/p>\n Although Makwana calls government\u2019s 75% target \u201ca tall order\u201d, he evidently believes it is achievable. (Makwana did not respond to our request for an interview.)<\/p>\n \u201c[T]he challenge is to reignite in Eskom employees a passion for serving their country and its economy. Related to this is the idea of reigniting a sense of internal competitiveness between power stations … to see who maintains the highest EAF levels. This would get us well on the way to maintaining healthy [EAF] across our operations,\u201d he said.<\/p>\n Open revolt<\/strong><\/p>\n Others disagree and are saying so in public.<\/p>\n \u201cThere\u2019s a danger here of chasing unrealistic EAF targets,\u201d outgoing Eskom board member Busisiwe Mavuso wrote in a recent op-ed.<\/p>\n Mavuso, who is also the chief executive of Business Leadership South Africa, warned:\u00a0 \u201cEskom doesn\u2019t have the money that would be required to undertake a high EAF strategy … This wouldn\u2019t be a bit of maintenance around the edges mut would be paying to rebuild the old plants because they\u2019re in such a poor condition.\u201d<\/p>\n Swilling, the DBSA chair and head of the Centre for Sustainable Transitions at Stellenbosch University, echoed this: \u201cI have an uneasy feeling that some recent decisions in the appointment of the new board are inappropriate, and I’m referring specifically to the mandate to this board to achieve a 75% energy availability.\u201d<\/p>\n He compares it to trying to fix an aeroplane: \u201cIf you want to fix an aeroplane, you can\u2019t do it while flying. You can only fix an aeroplane by landing it, putting it into a hangar and opening it up. That takes time. But that\u2019s what you have to do [with the coal fleet]. You have to take them off the grid in a systematic way, shut them down, repair them, rehabilitate them, and bring them back onto the grid.<\/p>\n \u201cBut you can\u2019t do that because you would plunge [South Africa] into permanent loadshedding.\u201d<\/p>\n Asked what it would cost in additional maintenance to get the EAF to 75%, Eskom said this figure \u201chas not been accurately determined\u201d.<\/p>\n The coal lobby<\/strong><\/p>\n De Ruyter his been coy about what he thinks the fleet can realistically achieve, but has said enough to put him on a collision course with the new board.<\/p>\n Last year, he told TechCentral that \u201cgiven the age of the fleet it would be unrealistic to expect a sustained performance above 75%\u201d.<\/p>\n Of its more modest target of getting to 67%, Eskom recently told us it is \u201ccommitted to doing everything we can to achieve this. However, without adequate space (and funding) … any performance improvement will be a challenge.\u201d<\/p>\n Eskom\u2019s system adequacy report, released over the weekend, says a \u201cmore likely\u201d scenario is that we will see an average EAF of 58% over the next five years: \u201cSouth Africa has been faced with chronic power supply constraints for over 10 years. The current year has been the worst yet, and it is evident from this study that the situation will worsen as the plant performance of Eskom\u2019s fleet continue to trend downwards, power stations shut down, and demand grows.\u201d<\/p>\n When we asked De Ruyter in July if it was time to give up the dream of improving the EAF, he said: \u201cI think that that’s a fair challenge. But you but you also need to think about the reality of the environment in which Eskom operates. [If] we go out there and we say \u2018all is lost, it’s all over\u2019, not only will there be significant pressure on the shareholder to remove management \u2013 because that’s not an acceptable message \u2013 [but] there’s a very strong coal lobby.<\/p>\n \u201cSo we need to maintain a balancing act between, on the one hand, trying to arrest the rate of decline as much as we can. But on the other hand … deploying renewable energy [to] scale as quickly as possible.\u201d<\/p>\n The EAF matters to the coal industry. The difference between 58% and 75% is potentially R7-billion a year in coal sales. Add in the accelerated shutdown of Tutuka, and Eskom\u2019s current strategy could cost the coal industry R279-billion by 2050.<\/p>\n Mantashe, the self-proclaimed \u201ccoal fundamentalist\u201d, has made it clear he opposes any attempt to shutdown coal-fired power stations, even a station like Tutuka which has an abysmal EAF of 29%.<\/p>\n \u201c[Tutuka] has had a much higher EAF than 29%. The [Tutuka] problem must be found and resolved ASAP to improve its EAF … Until we understand the real reason behind EAF decline (which we are expecting the Necom work to uncover) it is wrong to assume this is an impossible task,\u201d he told us in August.<\/p>\n There is no indication that either Gordhan or Makwana are trying to protect the coal industry with the 75% EAF target, but even the of strategy of shutting down 22GW of coal by 2035, including Tutuka \u2013 which De Ruyter and Oberholzer have trumpeted in public \u2013 is now in question.<\/p>\n Asked for a copy of the shutdown schedule, Eskom declined, saying the strategy \u201cis due for a review by the newly-appointed board … the Board will in the coming months either confirm or revise the current Strategy.\u201d<\/p>\n De Ruyter was remarkably frank with us when we interviewed him in July. But he was also aware of how much is at stake.<\/p>\n \u201c[T]here’s a fine balancing act you need to play in transitioning to this new electricity industry,\u201d he said. Investor confidence, employee morale, a repeat of the wildcat strikes that shut down power plants in June \u2013 these were all the things that played on his mind.<\/p>\n \u201c[M]aybe you\u2019ll say, \u2018you’re playing your cards very close your chest and you’re not being fully transparent\u2019, but I’m more than happy to let informed commentators make the conclusions on our behalf rather than me sticking my head above the parapet and getting it chopped off.\u201d<\/p>\n He is not speaking metaphorically either. De Ruyter has received death threats and now travels with a bodyguard. Every time he talks about closing a coal-fired power station, he adds a new target to his back.<\/p>\n The war over coal begins<\/strong><\/p>\n Shooting for 75% is not the problem. The problem is that Eskom and government have, in the past, put all their chips on achieving a 75% EAF and failed to plan for any other eventuality.<\/p>\n As we have tried to demonstrate with this series, we are in an energy crisis today because both refused to acknowledge that the coal fleet was collapsing, and clung to unrealistic projections of how much electricity it could produce.<\/p>\n As a result, South Africa has a 6GW shortfall today and an official energy plan that is full of holes.<\/p>\n It is assumed, for instance, that the 1.5GW of new coal in the IRP will never be built. Eskom estimates that new coal would be two to four times more expensive than renewables, and take 10 to 12 years to build, \u201cresulting in more years of loadshedding\u201d.<\/p>\n The emergency plan, announced by Ramaphosa, will bring forward the timeline for all the rest of the new capacity in the Integrated Resource Plan (IRP): instead of gradually building 15GW of renewables, 3GW of gas and 0.5GW of storage by 2030, we will now add it as soon as is logistically possible.<\/p>\n That might solve the short-term problem, but in the long-term the IRP still falls woefully short. And it is here that a battle is brewing.<\/p>\n On Friday, Eskom released its annual transmission plan, which looks at how the grid needs to expand over the next decade. Normally, the plan takes its cue from the IRP, but this year Eskom went off-script: \u201d[A] substantial amount of additional generation capacity, over and above what is reflected in the IRP2019, would be required by 2032 to meet the country\u2019s needs,\u201d Segomoco Scheppers, the managing director of Eskom Transmission, warned.<\/p>\n South Africa currently has around 6.5GW of renewables on the grid. Scheppers estimates that we will need another 53GW by 2032, mostly from renewables to keep the lights on. Those projects will largely be funded and built by the private sector, but Scheppers says Eskom Transmission will need at least R72-billion to expand the grid in the parts of the country with the best renewable resources. (De Ruyter puts the figures for transmission and distribution at R186-billion by 2030.)<\/p>\n If we want to accelerate the shutdown of coal \u2013 or if the performance of the coal fleet deteriorates further \u2013 we will need more, faster.<\/p>\n When Ramaphosa announced his emergency energy plan in July, the expectation was that government would adopt a single-minded approach to solving the energy crisis. \u201c[W]e as a nation will have to grit our teeth as things get worse, while we all pull together to achieve this one unifying strategic mission\u201d of ending loadshedding, Swilling wrote in an op-ed in May.<\/p>\n But instead of unity, what we are seeing is open warfare.<\/p>\n On Monday, finance minister Enoch Godongwana told a group of business leaders that Treasury would only agree to take over R400-billion of Eskom\u2019s debt if the utility agreed to invest more money in \u201cold reliable technologies\u201d like nuclear and gas.<\/p>\n The DMRE has committed to drafting a new IRP to respond to the energy crisis, but it is unlikely to give up on coal. Instead, Mantashe wants to up the government\u2019s high stakes gamble on coal by investing in carbon capture technology.<\/p>\n The hope, he said during the recent Council for Geosciences Summit, is that \u201cour Just Energy Transition programme can be attained with one of our most valuable commodit[ies]\u201d: \u201cOur commitment to the international protocol on climate change remains resolute. Our transition from high to low carbon emissions might be achieved with coal as part of the solution, if the hypothesis of clean coal is proven.\u201d<\/p>\n That is a big \u201cif\u201d and the consequences for the country would be unthinkable if the experiment fails: Eskom\u2019s own research says that failing to cut carbon emissions will soon put 46% of South Africa\u2019s exports at risk as other countries impose carbon taxes at their borders.<\/p>\n Even if<\/em> we can resuscitate the ailing coal fleet, and even if<\/em> we develop as-yet-unproven carbon capture technology, what will we achieve?<\/p>\n Coal is already more expensive than new generation technology. Add the cost of carbon capture and the cost of air pollution abatement technology and we may as well burn R100 notes in Eskom\u2019s furnaces to keep the lights on.<\/p>\n","protected":false},"excerpt":{"rendered":" It took 33 days of continuous loadshedding in June and July this year, to finally spur president Cyril Ramaphosa into action. \u201cAfter more than a decade without a reliable electricity supply, South Africans are justifiably frustrated and angry. They are…<\/p>\n","protected":false},"author":6,"featured_media":24680,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[1112,117,1161,1113,662,1162,1163,830,1164,1165,1166,255,1167,1168,1169],"class_list":["post-24677","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories","tag-duvha","tag-eskom","tag-kendal","tag-kusile-plant","tag-loadshedding","tag-majuba","tag-matla","tag-minister-gwede-mantashe","tag-mondli-gungubele","tag-national-energy-crisis-committee","tag-necom","tag-president-cyril-ramaphosa","tag-professor-mark-swilling","tag-reliability-maintenance-recovery","tag-tutuka"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/24677","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=24677"}],"version-history":[{"count":0,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/24677\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/24680"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=24677"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=24677"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=24677"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Coal](\"https:\/\/amabhungane.org\/wp-content\/uploads\/2022\/11\/Coal-part-3_GRAPHIC-1.png\")
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