Business Maverick
Rolling blackouts set to worsen and reach higher stages as Eskom runs out of money for diesel supplies
Eight months into its current financial year, which will end on 31 March 2023, Eskom has already exceeded its diesel budget of R12bn. Without emergency funding from the government, Eskom cannot purchase diesel to operate its emergency generation fleet, which put South Africa under unprecedented rolling blackout stages.
Eskom has run out of money to buy diesel that can be used to run its emergency generation fleet and generate power, heightening the risk of South Africa being placed under extreme and sustained rolling blackout levels.
Eight months into its current financial year, which will end on 31 March 2023, Eskom has already exceeded its diesel budget of R12-billion. During this period, it had an initial diesel budget of R6.1-billion, which was later revised to R11.1-billion. By November, the power utility had spent R12-billion on diesel.
The sustained rolling blackouts of recent weeks have forced Eskom to burn more diesel in its open-cycle gas turbines (OCGTs) to the extent that the power utility has run out of money to procure more diesel.
Diesel is used for powering the OCGTs at Ankerlig and Gourikwa, which have a combined energy generation capacity of 2,000MW, which is equivalent to two stages of rolling blackouts. The OCGTs are used to make up for a shortfall in generation capacity when there are outages and breakdowns at Eskom’s coal-fired stations. If OCGTs run efficiently, they enable Eskom to avoid implementing higher stages of rolling blackouts.
But Eskom doesn’t have money to buy diesel and run the OCGTs to prevent higher stages of rolling blackouts at a time when more units at its coal-fired power stations face breakdowns. The power utility doesn’t plan to order more diesel until 1 April 2023 unless it receives emergency funding from the government.
It is not clear whether the government plans to throw Eskom a financial lifeline. But Public Enterprises Minister Pravin Gordhan met with the power utility’s board on Sunday night 20 November about the “serious concerns about the risk of higher levels of rolling blackouts in the coming months.” Gordhan, as Eskom’s sole shareholder, is responsible for the power utility’s operations, including its financial affairs.
“The department of public enterprises (DPE) is urgently working with National Treasury and Eskom for it to find the money to buy supplies of diesel,” the Public Enterprises department said in a statement on Monday 21 November.
The department also said it was also engaging with Eskom to look for savings within the power utility’s existing funds for the ongoing purchase of diesel and maintenance.
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Eskom’s empty diesel tanks
The severity of Eskom’s diesel crisis emerged on Sunday when energy analyst Chris Yelland published on Twitter an exchange with the power utility’s Sikonathi Mantshantsha. In the exchange, Mantshantsha confirmed that Eskom did not plan to procure more diesel until 1 April next year and that its tanks at Ankerlig and Gourikwa were empty.
And there are no ships carrying diesel for Eskom that are expected to dock at Mossel Bay and Cape Town. Diesel for the OCGTs at Ankerlig and Gourikwa will not be replenished until 1 April 2023 “at the earliest” said Mantshantsha, or “until someone provides Eskom with more money for procurement of diesel”.
Eskom management first sounded a warning last week about the power utility running out of money for the purchase of diesel. The warning at the time came from Eskom’s chief operations officer Jan Oberholzer during the power utility’s state of the system briefing for the 2022/ 2023 summer period.
Oberholzer said at the time: “If we continue to burn diesel the way we have for the past seven months, the cost would be astronomical. But we do not have the cash to spend. We would be able to pay if the municipalities were paying us.”
Debt owed to Eskom by errant municipalities has more than doubled in recent years, going from R20-billion in 2019 to about R53-billion this year. Eskom also doesn’t generate enough revenue from electricity sales to pay its debt of nearly R400-billion.
Oberholzer said Eskom’s “difficult” financial position was forcing it to implement higher stages of rolling blackouts because it does not “have the money to burn diesel at the rate [it] has been doing up to now”.
Since the start of its financial year in April this year, Eskom has implemented more than 145 days of rolling blackouts. It might implement another 120 days before the end of March next year. DM/BM
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Cut off power supply to all and every municipality that is in arrears, together with all communities where illegal connections have led to rampant electricity theft.
Our country simply cannot afford to carry these destructive freeloaders.
Agreed with exceptions for vulnerable
Your suggestions would be a good place to start but the problem won’t be solved until BEE policies and tenderpreneurship are taken off the table! The only way to stimulate the economy in SA is to have services that work…and the only way to have services that work is to stimulate the economy with new investments….never going to happen as long as prohibitive BEE policies and Tenderpreneurship exists!
It really is simple: cut those who don’t pay off. Once things are fixed and debts are cleared people can get electricity again.
The writer should acknowledge that there is a global diesel shortage. Diesel prices at petrol stations is already R3/l higher than normal petrol. The higher prices contributed to Eskom running out of funds earlier than expected – admittedly only a week or two than would have been the case.
Any competent political party would make their solution to loadshedding core to their 2024 election campaign.
People have to remember that it is not as simple as turning off the power to municipalities that don’t pay. Eskom has a mandate to provide electricity. He would you blame for the deaths in car crashes when traffic lights don’t work, or in hospitals without electricity?
Eskom is really in a tight spot. They can’t turn away customers and they can’t set the price. If you were forced to continuously sell something for R100 that suddenly starts costing you R120 to make, let’s say insulin, and if you stop many people would suffer, what would you do? What could you do?
Yes, cut off the non-payers! But Eskom can’t do this, our government hasn’t and won’t let them. Neither can Eskom reduce costs by retrenching staff, our government won’t let them. Neither can Eskom increase its revenue by implementing cost-reflective tariffs- NERSA, controlled by our government won’t let them.
So don’t blame Eskom for our electricity crisis, blame Gwede Mantashe, Pravin Gordhan and their boss, Cyril Ramaphosa. Perhaps cut off their electricity too!
Regardless of how or why it got here, Eslom is in an impossible position and its shareholder cannot afford to bail them out. Suggest Eskom sell some assets to i) reduce debt ii) fast track BESS and iii) restructure faster. And allow private sector investment.
The group selling the diesel to Eskom must be making a fortune. I wonder who has the tender to supply the diesel?
Very good question!