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Primacy of Performance

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Primacy of Performance

17th April 2015

By: Terence Creamer
Creamer Media Editor

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In a recent presentation on the effect of South Africa’s electricity crisis on the mining sector, Chamber of Mines COO Roger Baxter included a PowerPoint slide titled Problem Statement.

He included the following points under this heading:

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  • The country’s available electricity supply of 27 GW to 29 GW is insufficient to meet demand for 29 GW to 32 GW.
  • The lack of available plant and the thin reserve margin has forced Eskom to continue to load-shed the large industrial sectors (since 2007), but it has now spread the load to the commercial and household sectors.
  • The lack of reserve margin increases the risk of load-shedding and of a total blackout should the system become unstable.
  • The maintenance backlog has increased – older power stations running for longer periods require longer downtime for maintenance.
  • A critical issue for Eskom is the lack of sufficient flexibility to catch up on planned maintenance.
  • Eskom is having to run very expensive open-cycle gas turbines as baseload capacity.
  • The country’s economy is affected from a production and confidence perspective.

It’s a useful slide largely because it helps remind South Africans – who are constantly distracted by other issues (not least the unhelpful goings-on at the Eskom board) – of the key issue: the need to urgently arrest the decline in the performance of the existing generation fleet so as to bolster security of supply.

This decline in performance is brought into sharp relief again in the National Energy Regulator of South Africa’s latest ‘System Adequacy Outlook’ statement, which uses Eskom reports to provide a historic snapshot of the performance of the generation system.

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It shows that the amount of energy sent out by Eskom has fallen consistently over the past eight years, from 245 610 GWh in 2007 to 233 777 GWh last year. The figure for the year to date, meanwhile, is 53 265 GWh, which is again lower than the same period last year. Over the period, peak demand has also generally declined, although it did rise to a record 36 664 MW in 2010. By comparison, peak demand stood at only 34 768 MW in 2010.

The most worrying trend, though, relates to plant performance, with the unplanned capacity loss factor, or UCLF, rising from 4 993 MW in 2013, or 9.54% of total capacity, to 5 189 MW in 2014, which represents 12.32% of capacity. The year-to-date UCLF is a dismal 7 619 MW, or 18.1% of capacity.

Unquestionably, factors other than electricity shortages (such as policy uncertainty and logistical constraints) need to take much of the blame for the 1% a year fall in the mining industry’s gross domestic product contribution between 2001 and 2008, notwithstanding a commodity boom. However, there is little doubt that the power constraint (together with labour instability) is proving to be a serious headwind currently.

The quickest and cheapest way to ease the constraint – one that is not only limiting growth in mining, but in many other sectors – lies in improving the performance of the existing power plants. Encouragingly, it appears that the war room and Deputy President Cyril Ramaphosa have grasped this reality. However, stability at Eskom is also crucial if operational performance, rather than leadership uncertainty, is to receive the attention it so despe- rately deserves.

That said, the riddle that is Eskom’s operational performance remains wrapped in a financial enigma that still needs to be tackled, and urgently so.

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