It comes as no surprise that Eskom faces a recurring woe – on coal shortage of at least four and possibly more of its 15 coal-fired power stations – in less than five days.
The business of coal is messy and within the South African context it is ever so murky. The procurement of coal is intricate and complex. The issue of coal in South Africa is so important that should a coal shortage occur, South Africa could be drawn to its knees.
With over 90% of the electricity produced from coal, South Africa’s reliance on coal means that it is not only central to mineral beneficiation, it is also central to electricity production. This means when the precious feedstock is in shortage, South Africa is left vulnerable. The mere fact that our electricity mix is not diverse leaves us all in peril. The looming coal emergency has massive implications for future tariffs and for due governance. The last time South Africa experienced such an emergency, the response resulted in massive tariff increases, financial irregularities and the undermining of governance process. To this day, the economy has not recovered from the electricity war room interventions of the last great load shedding debacle.
A coal emergency might mean that Eskom may have to procure coal through unconventional powers – bypassing many tender procedures, they have to get treasury permission, they have to get NERSA permission, they have to declare an emergency – that will give them exceptional powers to procure coal from all around the country, wherever it is available. But just remember it comes at a cost.
With reserves running low, Eskom is bound to keep us in the dark. The spate of load shedding in South Africa is a governance-related disaster. When there is load shedding – as a result of Eskom pulling the plug – businesses both large and small struggle to cope.
Eskom’s entire electricity supply approach, which is still based on excess capacities of inflexible, centralised, expensive and dirty coal is hugely vulnerable to any disruption in the system be it plant performance or feedstock shortages.
The monopoly electricity utility provides a critical service that it is very difficult to live without. And while new management at the utility are signalling that the worst is behind the utility, we cannot afford to forget the countless investigations into Eskom’s activities (not limited to governance matters) by Deloitte, the Special Investigations Unit, Dentons, the Public Protector, a Parliamentary enquiry, a commission of inquiry into state capture, PricewaterhouseCoopers & Treasury. Some of these are active, others have been finalised, one or two are in abeyance and a few are still pending.
The chaos, shortage of coal stockpile, the threat of load shedding and questions around Eskom are nothing new. It is clear that this is just the management of a utility in crisis.
The issue is essentially that Eskom does not seem to want to adapt or reposition itself. The problem for Eskom is that internal and external pressures are mounting. From increasingly tense wage negotiations, to highly problematic coal contracts, to numerous questionable tariff applications, to growing criticism of the staff complement, to questions about restructuring the utility and the increasing inability to raise required funds. Eskom finds itself in what appears to be a death spiral.
As far back as 2016, Eskom has consistently stated that it has excess capacity and it is ready to export to neighbouring countries at levels never seen before. However, as the picture around Eskom begins to clear, it has become painfully apparent that the system no longer provides a reliable power supply nor can anyone rely on the information it shares. Eskom is experiencing coal shortages at nearly half of its coal-fired power stations, and has now taken the extraordinary steps of transporting coal from its power stations in Limpopo to Mpumalanga – seemingly the only way to prevent a coal meltdown.
At the same time, protracted wage negotiations between Eskom and labour unions have resulted in an outcome that even Eskom cannot defend. While there seems to be a shortage of coal, it also seems that some of the coal that has been delivered on site is unusable and there have been reports that Eskom has been using emergency open-cycle gas turbines regularly to meet peak demand. Obviously this sounds wrong and unsustainable yet here we are again another crisis at Eskom.
But, no worries Eskom, we have a solution. When your reserves run out, don’t hesitate to turn to the sun and wind – they both offer unlimited reserves.
Eskom’s continued excuse for load shedding is blamed on alleged sabotage of electricity infrastructure, particularly distribution infrastructure by then protesting employees. The unions however believe that this is a disingenuous claim by Eskom because the problems at utility emanate from managerial incompetence specifically with regards to the management and handling of coal stockpiles. And since the end of the wage negotiation, the situation and threat of load shedding has not disappeared, in fact the country is presented with a new explanation of the same problem. The fact is that Eskom is overly reliant on coal and is in a precarious position because of its continued fascination with coal.
Labour unions have said that the utility should have sufficient coal reserves and countermeasures for any and all instances, which makes sense. If your electricity production depends on one key element – which is coal, being stuck without coal somehow feels like the utility has been caught napping.
Industry commentators have listed numerous concerns that have contributed to the current state, which include liquidity issues, the advanced age of the coal power stations, a significant maintenance backlog and the over-use of diesel generators to keep the lights on. The simple answer is that the business of burning coal is no longer lucrative or appropriate.
Essentially, years of mismanagement, the continued and consistent deterioration of public trust and under-investment in key infrastructure was bound to lead to some pretty unpleasant outcomes. The utility has for years ignored its shortcomings and at this point the numerous pressures it is feeling are in most part its own doing.
However, there is a glimmer of hope. Part of the silver lining is that things are so bad at Eskom, that now seems to be an excellent time for Eskom to reposition itself to be a trusted utility that acts in the best interests of South Africans. At the core of this must be affordability and the urgency to address the environmental and social injustices that continue to exist. Eskom has to prioritise access to modern energy services for all South Africans. This absolutely means introducing significant amounts of renewable energy onto Eskom’s energy portfolio. It means that Medupi and Kusile must be decommissioned. The savings from not completing the last units would be a welcome relief to the utility’s balance sheet.
We cannot ignore that every person in South Africa suffers in some way or another when Eskom acts in bad faith. Furthermore, there needs to be an equalisation of workers interests within the utility, the divide between management and workers needs to be reduced and that means that workers need further protection from the impending restructuring processes and from the negative implications of an industry in transition. An honest decision based on available-verifiable evidence needs to be taken with regards to retiring the inefficient and costly archaic coal power stations. For the Department of Energy, this means renewing the electricity sector social contract by producing a progressive, rational Integrated Resource Plan (IRP) that has broad buy-in and that articulates Eskom’s role in shifting focus to renewable energy. DM