Macro Analysis /
South Africa

South Africa: More load shedding ahead as Eskom runs out of money for diesel

  • Intense power cuts are expected in the next 24 months due to insufficient generation capacity

  • Eskom's current energy availability factor at 58.5% is well below 75% target which is "daunting"

  • Eskom aims at raising EAF to 65% in 2023/24 and to 70% in 2024/25

South Africa: More load shedding ahead as Eskom runs out of money for diesel
EmergingMarketWatch
16 November 2022

Power utility Eskom outlined a grim picture for power supply in South Africa over the next couple of years. The company is struggling to maintain its failing coal plants while it supplies power demand. Eskom started stage 3 load shedding on the evenings on Monday and Tuesday and this will continue Wednesday evening as well, the company said at a press briefing.

Eskom confirmed it needed between 4,000 and 6,000MW of additional capacity installed in order to reduce load shedding. Aged coal plants are utilized at a rate of more than 90% which helps them to frequently break down. Out of the 13 coal plants only three, Matimba, Lethabo and Medupi are performing well, with energy availability factor (EAF) of over 70%, six of the coal plants are in bad shape and account for 55% of all breakdowns, while another four will be shut down by 2025 but are still run to alleviate some of the capacity constraints. In the year-to-date, Eskom's overall EAF dropped to 58.5%, well below the 75% target set by the government. Eskom's coal fleet EAF was only 53.9% ytd, officials said at the briefing. Eskom said it will aim at EAF of 65% in 2023/24 and 70% in 2024/25, while it described the 75% target as daunting, basically unrealistic.

Eskom implemented load shedding on 155 days by Nov 11, officials reported. The excessive amount of breakdowns has led to the extensive use of emergency diesel-run open cycle gas turbines (OCGT). Eskom has spent ZAR 12bn on burning diesel between April and November, against an initial budget of ZAR 6.1bn, which was raised subsequently to ZAR 11.1bn. The cost of running private OCGT plants came to additional ZAR 6bn. There is no more money for diesel, COO Jan Oberholzer told the journalists, and the power utility would be forced to implement load shedding in order to reduce the burning of diesel. The official pointed out that the municipalities owe ZAR 52bn to Eskom which is holding its breath for details about the government's plan to take on part of Eskom's ZAR 400bn debt. Oberholzer said the municipal debt problem required a structural intervention as the situation was unsustainable.

Finally, Eskom presented a plan to recover 6,000MW from its own fleet in the next 24 months. The power utility intends to devote special efforts to maintaining six power plants which is expected to result in the recovery of 3,890MW by reducing the risk of unplanned outages. Another 1,800MW would be added from the completion of Kusile power plant and the rebuilding of Medupi Unit 4. Eskom said these interventions should add 3,200MW in 12 months' time but highlighted the urgency of adding non-Eskom capacity in the meantime.