Eskom: What really Happened?

Numerous reasons have been trotted out over the years by the powers-that-be as to the exact cause of load shedding. Amongst them were the unbelievable such as the coal being wet to the non-sensible excuse in which Apartheid was blamed. In the latter case, the logic was that Blacks were now permitted to use electricity, thus creating additional demand. Finally, last week, the real underlying cause of the shortage of electricity was eventually revealed. Why have these reasons been hidden from the public’s purview for so long?

Main picture: Cartoon encapsulating two of South Africa’s ogres – corruption and load-shedding

What should have raised the commentariat’s suspicion that management at Eskom was spinning a yarn regarding the actual reasons for the current state of affairs was the fact that despite additional capacity coming onto stream and demand declining, yet Eskom could not meet demand. Even more amazing was the fact that none of the Energy Experts, whose opinions were desperately sought, even suspected what the underlying source of the problem was not the obvious reasons such as state capture. Not that they did not contribute to this state of affairs, but it obscured the elephant in the room.

Not even the fact that PRASA’s “oh sh*t” moment when locomotives that were “too tall” were ordered, would the penny drop as to alternative causes. In their defence, the pot of State Capture malfeasance was vigorously boiling, and all eyes were on the mush oozing from the pot and onto the stove, setting fire to the house. Nonetheless, amongst the oversized cynical egos in the press corps, none reflected on this conundrum.

A metaphor of Eskom fading away

It was approximately a week before the disclosure of the well-kept secret that my brother Blaine commented to me in a telephonic discussion that reported electricity production did not match Eskom’s capability as its capacity far exceeded demand. My throw-away line was that the new plants, Medupi and Kusile, were obviously not operating at design capacity. Between two non-energy experts, the charade had been “exposed”. But not proved. Within a week, Chris Yelland would reveal the technical details of why the generating units at these  two plants were unable to each produce 800MW of power per generating sets as they were designed to do. It was a sorry saga. At the crux of the issue was that critical components were incorrectly specified resulting in lower output, more frequent maintenance and thus higher costs!

I’ve found out so much about electricity that I’ve reached the point where I understand nothing and can explain nothing.”
Pieter van Musschenbroek

According to initial information on the cause of the almost simultaneous loss of seven generating units at Medupi and Kusile, it appears that fine ash, mixed with oil or water, at one power station is linked to the collapse of at least some of the seven units. Furthermore it appears that cell phone usage in the highly sensitive power generating environment is affecting the enormous fans the generating plants use, leading to shutdowns that can take between four and six hours to reverse.

Construction of a power station

What has now been revealed

In reality Eskom did not wilfully withhold the underlying causes of its technical and design problems with Medupi and Kusile but they did not cast a sharp light on their quagmire. From my perspective, it appears that the whole of South Africa was just too focused on the fact that Eskom required exorbitant tariff increases and the deleterious effects of state capture, rather that the root causes of the new plants incapacity to generate electricity from these new plants.

In its updated tariff application to the National Energy Regulator of SA (Nersa), Eskom listed seven technical and design problems. A multiplicity of faults has been identified as common to both Medupi and Kusile.

Eskom power lines are seen running in the southern suburbs of Joburg on 29 January 2015. EPA KIM LUDBROOK

These technical design issue include such serious issues as:

(1) the boiler design results in high temperatures that the spray water system cannot adequately cool, leading to frequent tripping. The design causes excessive ash accumulation, and ash bags must be frequently replaced. This causes ash blockages, frequent tripping and load losses.

(2) None of the coal mills, which pulverise the coal going into the burner, meet technical specifications, with the consequence that they must be serviced twice as frequently as normal.

(3) The gas air heaters, which capture waste heat and transfer it to combustion air, thereby enhancing the efficiency of the boiler, do not meet technical requirements.

(4) The dust handling plant, which is vital for safety, environmental and occupational health reasons, requires more frequent maintenance due to high ash accumulation, leaks and the scarce availability of spare parts.

(5) The distributed control system – the computerised control system – frequently fails, causing plant trips, and does not meet technical requirements.

(6) Lastly, there are a high number of vibrations on the cooling loop.

From this shopping list of serious technical issues, it appears to me, as an averred non-technical expert, that the design of the generating units is seriously flawed. Possibly fatally so. This calls into question the whole inflated investment into these two power stations which were touted as the panacea to South Africa’s supply of the ensuing several decades.

Eskom’s headquarters in Sandton

Recap of the non-technical issues

In the Nersa presentation, Eskom admitted to other problems such as several of the above-mentioned problems being adversely affected by poor coal quality, as well as, a shortage of skilled people and unavailability of spare parts as an eighth factor negatively affecting Medupi and Kusile.

The result of the problems has meant that Medupi’s unit 6 (the first of three so far commissioned) has barely reached 60% of its capacity since June 2018. The remaining two units perform at about 70% capacity.

Not alluded to in the application

Eskom is struggling to maintain operational sustainability due to ageing generation fleet, about 37 years on average, essential mid-life refurbishments not having being implemented, poor quality of maintenance due to poor workmanship with 40% of plant breakdowns due to human error.

Numbers in context
 
The numbers are mind numbing:
 
The average electricity price changed from 17.9 to 83.6c/kWh
 
This is a factor 4.7
 
Or an average increase of 15% for each of the 11 years.
 
If the price had increased at an inflation rate of 5% then the price would have only risen to 30.6c/kWh. (factor 1.7)

It also faces ongoing coal shortages due to poor management and lack of investments in cost plus mines. The current stop-gap measure of trucking coal to power plants is hugely expensive and unsustainable. Imagine the response of the unions when Eskom is compelled to revert to conveyor belt transportation of coal its plants. Will not sabotage of these systems become the order of the day?

Even though Eskom did mention that it was experiencing a significant loss of critical skills, it did not allude to the fact that these skills were either forced out or voluntarily resigned due to the toxic work environment. Neither did they mention the deleterious effect of BEE regulations. In one instance, during an interview on 702 Talk Radio some time ago, it was revealed that a highly qualified heavy current engineer with all the requisite qualifications was refused employment as he did not meet the demographic requirements i.e. a black skin, to be employed. Race categorisation trumped Eskom’s dire shortage of skilled workers. Even though this concern has been highlighted as critical to resolving Eskom’s problems, Eskom’s race-based obsession, it will still override the peimary operational requirements.

Also not stated in this application was that the building of Medupi and Kusile power stations suffered from massive delays and cost overruns due to poor planning, poor engineering designs, poor procurement practices or poor contracting and corruption.

Financial melt down

The worst nettle that has to be grasped irrespective of how excruciatingly sore it stings one’s hand,  is the fact that Eskom is technically insolvent. It is now estimated  that, at the current trajectory, it will not survive beyond April 2019. The gravity of this situation is underscored by the announcement that Eskom’s debt burden of R420bn represents 15% of the sovereign’s debt. Hence if the power utility defaults on its debt, it will threaten the economy.

Cash generated by the company does not cover operating and debt servicing costs. Compounding these ills are the escalation of municipality and Soweto debt to around R28bn.

Furthermore, the financial performance of Eskom has been exacerbated by the increase in the number of Eskom employees from 32,000 in 2007 to 48,000 in 2018 with associated cost growing from R9.5bn to R29.5bn inspite of stagnant sales and output. Moreover, the costs for the two new plants have escalated significantly to over R300bn – Medupi from R24.9bn to R145bn and Kusile from R80.7bn to R161.4bn. Systemic corruption, malfeasance, fraud and state capture have compromised the credibility of the organisation and eroded investor confidence.

Rod Crompton’s apocalyptic synopsis

Rod Crompton, adjunct professor at the African Energy Leadership Centre at Wits Business School, said that Eskom has two major problems – its operating costs are too high, and it cannot pay its debt.

It owes over R400 billion and does not generate enough cash to even service the interest on its debt.” As a consequence, it has literally reached the end of the road.

“Eskom has been getting steep tariff increases in recent years, but these have driven some customers off-grid and shut others down. Eskom’s sales have been declining by about 1% per annum. The less it sells, the higher the tariff it wants, and the less it sells – the utility death spiral,” he said.

Commenting on how the power utility reached this stage, Crompton said that the main cause of its troubles is its decision to build two of the biggest coal-fired generating plants in the world – Medupi and Kusile.

“These plants are running way behind schedule, they are over budget and the bits that are complete, don’t work properly,” he said. “They are probably the single largest disaster in South Africa’s economic history.” Crompton added that state captu `re, corruption and poor management have led to overstaffing and neglected maintenance, resulting in constant breakdowns. Electricity theft, a culture of non-payment and defaulting municipalities have also deepened the crisis, he said.

“Eskom needs to simultaneously reduce operating costs, increase tariffs and shed a big chunk of its debt. There is no painless way for South Africans to deal with their Eskom crisis. And it cannot wait until the national elections on 8 May 2019.”

The Union’s utopian dystopia

During the one-day strike on Wednesday 13th February 2019, Cosatu’s
Zingiswa Losi threw down the gauntlet. Essentially the response was a denial that radical solutions were required to rescue Eskom from its dire situation. Amongst its inane demands were no retrenchments, no unbundling, no privatisation and no electricity price increases. In other words, resolve all the problems by not tackling any of the fundamental issues.

Cosatu president Zingiswa Losi. Picture by Sethembiso Zulu EWN

With Cosatu being part of the tripartite alliance together with the S.A. Communist Party and the ANC, what is likely, is an almighty brawl. With President Cyril Ramaphosa’s grasp on power still being tenuous, given that the ANC is riven with factionalism and corrupt cabals, will he be able to plant an unequivocal stake in the ground? This is highly unlikely. Instead it will in all probability be another fudge in an attempt to appease all factions. As Neville Chamberlain was to learn prior to WW2, a policy of appeasement never resolves fundamental issues. Rather it often emboldens the aggressive antagonist to flights of fantasy, and they continue to be cocooned in their cloud cuckoo world.

Conclusion

If, as appears obvious, that the design of South Africa’s saviour plants, is so poor that the nation cannot rely upon them, then the investment in these plants was ‘fruitless expenditure.” In order to meet rising electricity demand, South Africa will be compelled to make significant investments in new plant. Already electricity prices are exorbitant. With the fiscus unable to ameliorate the situation through subsidies, people with the means to do so, will be forced off the grid, sooner rather than later.

During the Karima Brown show on 702 Talk Radio at 20:00 on 13th February 2019, Chris Yelland provided an apocalyptic solution in a DIY world of PV panels, inverters and batteries. On the bright side, a whole new industry of home PV panel installers will rapidly arise in South Africa to meet this demand.

This might mitigate the effect to some extent on the wealthier consumers, but this still leaves unresolved the burden of Eskom which will have to be born in some manner by all South Africans. This will probably take a multiplicity of forms such as a flat charge on all wealthier users whether or not electricity from the grid is used, higher basic tariffs and ultimately higher taxes to fund a spluttering Eskom.

The ANC is in a double bind with national elections scheduled for the 8th May 2019. Can they afford an internecine war with its Union allies and will the cracks in the ANC which have been papered over for electioneering purposes, withstand the strain as all the factions struggle for hegemony?

Will reason and the centre hold with a fascist, populist and racist EFF ready to steal the ANC’s lunch – read voters – or more pertinently, will the centre in the form of Cyril Ramaphosa survive the battle for the soul of the ANC?


1 Comments

  1. Some time back I worked these numbers out but it’s worthwhile revisiting them.

    In 1994 the ANC was presented with a baseload capacity (excl. pumped storage, hydro and gas turbines) of 31100MW That had a weighted average age of 11 years.

    20 years later in 2014, the baseload capacity increased to 39300MW by completing Majuba which had been planned and initiated before they got their grubby mitts on the levers of power and by refurbishing the mothballed Camden, Arnot and Grootvlei power stations. They built nothing new.

    Meanwhile the weighted average age increased to 30 years!

    Everyone blames corruption. True it had its part to play, particularly in the latter years. However the debate should be centred on the true origins of the crisis – AA, BEE and racism.

    I remember the erstwhile CEO Maroga, sometime before the 2008 loadshedding whose only cause was coal supply, boast in an annual report how they moved a large percentage of supply to black suppliers. We all know how that ended up. In fact any virtually any black supplier with a bakkie could drop off coal of dubious quality (Remember the wet coal problem – the problem was they being supplied dust). Also they were paid a premium as they bought their supplies from the WMC owned coal mines, added their allowable premium and trucked it in, destroying the roads in the process. (Note: Our old 3000MW 6 pack power stations use about 900ton each hour on average or 22000ton per day! Poor roads!)

    Also lest we forget their recruitment drive in USA where only Black applicants could apply – racism writ large.

    Finally, I believe the ANC delayed the new power station build until they found a way to monetise the program to the benefit of the ANC which they did via Chancellor house and its fake partnership with Hitachi Africa.

    Reply

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