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Why Ramokgopa’s plan to extend the life of coal-fired power stations will be a global challenge for Ramaphosa

Why Ramokgopa’s plan to extend the life of coal-fired power stations will be a global challenge for Ramaphosa
South Africa’s first Minister of Electricity, Kgosientsho Ramokgopa at the Eskom Holdings Lethabo Power Station in Vereeniging, South Africa, on 23 March 2023. (Photo: Leon Sadiki / Bloomberg via Getty Images)

The minister of electricity, Kgosientsho Ramokgopa, is reportedly pushing to extend the life of Eskom’s coal-fired power plants as a proposal to ease rolling blackouts. SA has already committed to decommissioning coal plants as part of its transition to cleaner energy and creating a smooth path to a different kind of sustainable economy.

The mooted plan by the government to extend the life of Eskom’s coal-fired power stations could undermine and jeopardise SA’s efforts to raise more money from the developed world to fund the country’s Just Energy Transition investment ambitions.  

It was a Herculean effort for SA to raise $8.5-billion from international partners — including the UK, US, France, Germany and the EU — to fund its decarbonisation plan, following the COP26 climate summit in Glasgow in 2021.  

SA, through companies such as Eskom and Sasol, is considered one of the world’s worst polluters. The country is viewed as being behind regarding its transition to cleaner energy and creating a smooth path to a different kind of economy while mitigating the effect on affected communities. 

Several international partners showed their unwillingness to back SA as they opted to award the country concessional loans instead of grants (the first prize) in the $8.5-billion package. Over the next five years, the bulk of the package will go towards the electricity sector and support for two other programmes: electric vehicles and green hydrogen. 

Some of the international partners pledged billions of dollars based on the commitment by the government and Eskom to decommission the oldest coal-fired power stations, in accordance with their scheduled end-of-life cycles.  

The government and Eskom would also commit to repurposing some of the sites of the decommissioned power stations into renewable energy projects. This is also in line with the Integrated Resource Plan of 2019, which is outdated but spells out the country’s energy needs, the decommissioning of coal-fired power stations, and the expansion of the renewable energy procurement programme.   

These commitments by the government and Eskom are believed to have convinced international funders, among them the World Bank-led group of multilateral lenders in the Climate Investment Funds, to write SA a cheque.  

The World Bank has estimated that SA needs $8.5-trillion between now and 2050 to meet the ambitious net-zero goals it has set for itself. So, the $8.5-billion that SA secured is a small fraction of what is required, and the country will still need to convince more funders to give it money.  

The Kgosientsho Ramokgopa rolling blackouts plan  

But talks of the government wanting to renege on its promise of retiring coal-fired power plants could scupper the goodwill it has built with international partners and hamper future efforts to raise more money.  

According to several press reports, the minister of electricity, Kgosientsho Ramokgopa, is pushing to extend the life of Eskom’s coal-fired plants as a way to ease rolling blackouts. The proposal to slow down the retirement of coal power stations was presented by Ramokgopa at a Cabinet meeting. The thinking of Ramokgopa is that although the retirement date of some Eskom power stations has been set, the engineering design and performance of such power stations could allow them to run for much longer than initially planned.  

For instance, Camden Power Station is a 1,600-megawatt (MW) coal-fired power plant in Mpumalanga. Camden is scheduled to be retired by 2026 (the latest time frame), removing more than 1,000MW from the electricity system at a time when SA desperately needs all the generation it can get to avoid higher stages of blackouts. But Camden is ranked among the best-performing Eskom power stations despite it being one of the oldest. Camden has an energy availability factor (EAF) of 70%. 

At a power station level, an EAF is an average percentage of generating units available to dispatch energy at any one time. A high EAF indicates that generating units are well operated and maintained, helping a power station to produce electricity more cheaply. Camden’s EAF is higher than Eskom’s overall EAF (combining the performance of its more than 10 power stations), which has been languishing below 60% for a long time. Other Eskom power stations that have a high EAF are Duvha and Matla, both based in Mpumalanga.  

So, Ramokgopa might want to extend the life cycle of Camden beyond 2026, pushing the engineering design of the power station so that it continues to generate electricity as a stopgap measure to ease blackouts. It seems that the government has taken an “it’s better than nothing” approach, considering that its latest renewable energy procurement plan (Bid Window 6) bombed and previous efforts to end load shedding have been stuck in onerous regulatory processes.  

Read more in Daily Maverick: How the ANC’s years-long delays on renewables plunged SA into darkness and scuppered plan to end blackouts  

Ramokgopa will want to press ahead with this plan for moments when SA faces increasing electricity demand such as during the winter season, which has historically ushered in an average demand of about 35,000MW, peaking at 37,000MW. At current levels and struggles, Eskom cannot cater to this demand.  

But there are holes in Ramokgopa’s power station life extension plan, mainly where the funding will come from to keep the likes of Camden going for longer than planned. 

Power stations that are pushed beyond their life cycle require increased and regular maintenance, which Eskom has neglected over the past decade. Eskom doesn’t have the money for this exercise; the power utility’s borrowing capabilities in the marketplace have been tightly limited by the National Treasury over the next three years as part of its plan to take over a portion of the power utility’s debt.  

Read more in Daily Maverick: Government comes to Eskom’s rescue by taking over R254bn of its debt 

There is also a sense that the government is willing to renege on its commitments made to international partners on the $8.5-billion funding, including emissions reduction targets. 

Ramokgopa’s plan on extending the life cycle of coal-fired power stations will probably force President Cyril Ramaphosa to renegotiate with international partners the terms and conditions of the $8.5-billion package and explain to the partners why his administration is making a U-turn. 

His administration will have to explain to new and potential funders why SA’s love affair with coal continues when the world has rapidly moved on to greener options. It arguably adds to the policy uncertainty and confusion that has bedevilled SA for decades. DM/BM


Comments - Please in order to comment.

  • Ian McClure says:

    What happened to de Ruyters much publicised presentation to parliament on Eskom sabotage , fraud and ANC / political involvement ?

  • Neil Parker says:

    They do not have the slightest clue – they’ve replaced a competent but (unfortunately for him) honest manager with a dunce. But then as far as energy is concerned the entire ANC are dunces. They haven’t grasped the nettle that coal and fossil fuels in general are on the way out nor the nettle with the sharpest sting: “you can’t steal from the sun.” Not to forget the classic befuddlement whereby some luminary claimed he had calculated that “nuclear was 10 times cheaper than IPP” and “coal was 7 times cheaper than IPP”. Eskom now does its master’s bidding – it’s absolutely appalling that they’ve stopped a municipality from dealing with load shedding through the provision of solar power. I think that case needs to go forward to a court wherein the technical merits or otherwise of Eskom’s case are properly debated and human rights (access to water/electricity) are properly defended.

    • Deon Botha-Richards says:

      Renewable energy is always quoted as being the cheapest. And yes arguably nuclear is the most expensive.

      But once the lifetime cost is actually accounted for renewables turn out to be ruinously expensive.

      Just look at every country that has adopted large scale renewables. Their electricity prices have risen precipitously. 3 times in the case of Germany.

      That’s not to say we shouldn’t implement them. But we can’t replace cheap reliable poster for really expensive intermittent power.

      As an example nuclear in SA costs Eskom 9 cents per Kw/h. Coal around 44 cents but renewables are over R1.60. Their diesels over R2.

      New coal will be about the same as renewables and new nuclear too in the long run.

      • Campbell Tyler says:

        You quote costs for various forms of electricity which contradict others I have seen. Would you mind naming your sources for these numbers? It would certainly make them more believable.

        • William Stucke says:

          Koeberg’s costs are very low, as the plant has completely paid for itself 20 years ago. The remaining cost is simply the O&M (Operations and Maintenance). This is excluding the 20-year life extension which is currently in progress. That will raise the effective cost, but not by all that much.

          Energy costs are critically dependent on the cost of funding. And this is where it gets interesting. State funding is typically 1% – 3%. Commercial funding typically comes in at 6% – 10%. The latter means that a capital intensive, long payback but long-life plant like nuclear comes in at several times the price per kWh of a low capital, short lifetime plant like solar PV.

          Especially when the latter interest rates are assumed as opposed to the former. If you look at paying off the capital and interest costs over the first 20 years of a plant that will run for 60 years, the average cost per kWh becomes very low.

          Also, when you consider that a well-run nuclear plant has an EAF of well over 90%, whereas even the best Solar PV plant cannot exceed 25%, then solar becomes much more expensive, as the cost of storage is far from trivial.

          In the real (non-USA) world, state funding is commonly used, such as the example in Egypt, where the Russian state loan will cover 85% of the plant’s construction costs (at 3%), with Egypt to raise the remainder from private investors. Construction started in July 2022.

          A 2017 article in News24 by Dr Anthonie Cilliers gives an interesting analysis.

  • Paddy Ross says:

    It seems that Gwede Mantashe having been set aside and essentially replaced by Ramokgopa is still the puppet master. Interesting to read what a high performer Camden is as I seem to remember some major corruption episode there?

  • Deon Botha-Richards says:

    Let’s just get one thing clear. It will be unconscionable to decommission a perfectly working station if the capacity has not already been replaced. Whether by renewables or any other solution.

    We absolutely cannot reduce the amount of generation capacity for what ever reason.

    And extending the life of old stations or delaying the decommissioning of coal shouldn’t impact on the funding for renewables. These will take time to implement anyway and it cannot be said to be a requirement to shutter capacity before the replacement is actually commissioned.

    Surely the plan to build renewables to replace coal is structured in such a way as to increase capacity not reduce it.

    Thus that risk of losing funding surely is irrelevant. If there is a risk then the renewable plan was unworkable from the outset. But in the renewables space that wouldn’t surprise me in the least bit. Those activists can’t create a workable solution for anything including the “proverbial” in a brewery.

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