Billions blown as Eskom burns through its emergency-use diesel

27 Jul 2023

Just shy of four months into its current financial year, Eskom has already blown R12.4bn on diesel to run its emergency generation fleet — nearly half its budget for the entire year.

Eskom is nearly halfway through its diesel budget of R27.9-billion, four months into the 2023/24 financial year, which ends on 31 March 2024.

To stave off higher stages of rolling blackouts between 1 April and 24 July, the power utility spent R12.4-billion of its total diesel budget on its emergency diesel-powered generation fleet to keep the lights on, Eskom confirmed to Daily Maverick this week.

To put this into perspective, it took eight months for Eskom to spend R12-billion on diesel last year, while the same amount has now been blown in less than four. This suggests that Eskom may be on track for another year of overspending on diesel to run its open-cycle gas turbines (OCGTs), which have become a vital lifeline in the face of the loss of generation capacity at Eskom’s coal-fired power stations.

In May, Electricity Minister Kgosientsho Ramokgopa predicted that a diesel budget of R30-billion would run dry before the financial year is over. But the new electricity minister’s projections seem to be at odds with Eskom, which curiously does not foresee it needing more funds from the government to procure more emergency diesel.

South Africa is enduring its worst year for power cuts by the monopoly energy utility. We are 208 days into a year that has had 207 days of load shedding. (To track the days and stages of rolling blackouts in South Africa, see The Outlier.)

The grid this week required power cuts at stages 4 and 5. The country is currently experiencing Stage 4 load shedding “until further notice”.

To fend off higher stages of power cuts, Eskom has increasingly relied on its OCGTs — which were intended only for emergencies or to run during peak demand periods. The OCGTs are used to make up for a shortfall in generation capacity when there are breakdowns and outages at Eskom’s coal-fired power stations.

Diesel is used for powering Eskom’s OCGTs at Ankerlig and Gourikwa, which have a combined energy generation capacity of 2,067MW — equivalent to two stages of rolling blackouts. There are two additional OCGT power plants, which can generate 1,005MW and are owned and operated by independent power producers (IPPs) and sell electricity to Eskom.

According to Eskom, its R27.9-billion diesel budget for the 2023/24 financial year includes R19.5-billion for Eskom’s OCGTs and R8.4-billion for the IPP OCGTs.

Rising OCGT usage and Eskom’s financial (in)stability

In its 2022 Integrated Report, Eskom’s chairperson, Mpho Makwana, noted that, in terms of Eskom’s financial stability, the use of OCGTs was “a particular cause for concern. Eskom is not in the financial position to carry the burden of extensive use of OCGTs to ensure security of supply to the country,” he said.

Last year, Eskom ran out of money to buy diesel for its OCGTs — eventually spending about R21-billion on diesel for the full 2022/23 financial year, Daily Maverick reported. This was more than double that of the 2021/22 financial year when Eskom spent R8-billion on diesel.

Winter is traditionally a nail-biting season for Eskom, when demand for power generally surpasses the power utility’s supply. This year was expected to be particularly dim, as Eskom headed into the winter season with 3,080MW of capacity less than it had the previous year. (This was because of load losses at Kusile and delays in returning one unit to service at Koeberg.)

Burning more diesel to run Eskom’s OCGTs was among the short-term interventions to ease rolling blackouts this winter that were touted by Ramokgopa in May. In an interview with Daily Maverick, Ramokgopa predicted that at the rate Eskom wanted to burn diesel to prevent higher stages of load shedding, R30-billion for diesel procurement would be sufficient for winter, but would be exhausted before the end of the financial year.

He said Eskom might have to approach the government for help again if it ran its diesel budget dry. (In 2022/23, Eskom had to approach the National Treasury for additional funds.)

Read more in Daily Maverick: Eskom’s take on avoiding blackouts this winter: ‘extremely difficult’

However, Eskom doesn’t foresee exceeding its current budget before the financial year is over.

“Eskom is not expecting that more funds will be required. Any overruns, although unlikely, will be funded from existing budgets,” it said in response to questions from Daily Maverick.

In a recent interview with Ferial Haffajee, Makwana described the utility’s use of OCGTs as “prudent”, which he said comforts the board that it will not run out of diesel.

But an analysis by Daily Maverick of data provided by Eskom has shown that its use of OCGTs has been anything but prudent for the year to date. In the 2022/23 financial year, the load factor for Eskom’s OCGTs averaged 16.6%. And before that, in the financial year 2021/22, it averaged 6.9%. In the year to date, it stands at 25.2%.

Load factor is the ratio of energy generated versus maximum generating capacity over a specific period of time.

To minimise load shedding in winter, Eskom had only planned to increase the utilisation of OCGTs to a 20% load factor for the season.

Big spender

This May, the country experienced 271 hours (adding up to 11 days and seven hours) of Stage 6 load shedding. Breakdowns at Eskom power stations reached just over 19,000MW in early May, and South Africans were enduring daily power outages of up to 10 hours.

Eskom’s data portal shows that the load factor for its two OCGTs shot up to between 19.26% and 37.45% during that time.

Eskom confirmed to Daily Maverick that May was the highest month of use of OCGTs on record. According to the power utility, it had budgeted R3.4-billion on OCGTs (Eskom and IPPs) in May, but had spent R4.5-billion.

Eskom remained within budget for the months of April and June — both of which experienced a slight reduction in load shedding because demand dipped. However, its diesel expenditure soared again in July, after icy cold fronts and frequent breakdowns forced Eskom to use more of its OCGTs to keep the lights on.

eskom diesel Open-cycle gas turbine production and cost for the 2022/23 financial year. (Screenshot: Supplied / Eskom)

“There have been some significant cold spells that have required more OCGTs to be run more often in July than in June. Notably, the two coldest spells also coincided with multiple generator failures requiring additional reliance on the OCGTs.

“However, cold is not the only determining factor — loss of other generating capacity coinciding with the cold weather required extensive use of the OCGTs,” Eskom told Daily Maverick.

Eskom had budgeted R1.8-billion on OCGTs (Eskom and IPPs) for July, but as of 24 July, it had already spent R2.9-billion.

In response to questions from Daily Maverick this week, Ramokgopa’s spokesperson, Kutlwano Huma, said: “It was always envisaged that Eskom will use the OCGTs, Eskom and IPPs extensively during winter, with the three Kusile units and Koeberg unit out.

“Although the OCGTs were used extensively during the winter, it is still within the budget for that period. The budget includes funding for the Risk Mitigation Programme and IPPs. The current projection reflects that there will be a surplus available in these budgets that can be utilised to fund any additional diesel requirements.”

While Eskom’s diesel spend is indeed within its forecast budget of R12.44-billion for 1 April to 31 July 2023, it had already spent R12.42-billion as of 24 July. This means the utility will need to keep its diesel purchases under R26.3-million (the difference between the forecast budget and the expenditure so far) until 31 July to remain within budget.

With seven months remaining in the current financial year, electrical engineer and energy analyst Chris Yelland said it was unlikely that Eskom would not exceed its diesel budget.

Yelland told Daily Maverick, “At the current rate of usage, and the current load factor at which the OCGTs are currently running, I expect the diesel spend to be about R36-billion.”

OCGTs are an expensive source of generation and are particularly vulnerable to fuel price fluctuations. The power utility’s diesel spend in the following months could be affected if the diesel price were to increase, Yelland explained.

Generating capacity

The only thing that might prevent Eskom from approaching the National Treasury with a begging bowl is if it improves its generation capacity. This could be a challenge if delays in returning Unit 1 at Koeberg Power Station to service continue — a touchpoint that has become a headache for Ramokgopa.

Because Unit 1 is taking so long to come back online, it’s increasingly likely that both Koeberg units will be offline at the same time, Daily Maverick reported. If both units are out at the same time, the national grid will lose 1,840MW of capacity — megawatts we can’t afford to lose, given the current performance of Eskom’s coal-fired power stations.

Read more in Daily Maverick: Further delay in life extension of Koeberg nuclear reactor worsens power outlook

Eskom’s energy availability factor (EAF) is traditionally better in winter, as the cool months bode well for the performance of Eskom’s fleet, Daily Maverick’s Ray Mahlaka reported.

EAF measures the average percentage of electricity that power stations have available to dispatch energy at any one time. A high EAF indicates that plants are maintained and operating well.

eskom diesel (Graph: Chris Yelland/EE Business Intelligence)

Yelland explained that Eskom’s weekly EAF for the first 28 weeks of this year was 54.08%, which is about five percentage points lower than the EAF of 59.23% for the same period last year. In a nutshell, this shows Eskom’s fleet is still underperforming compared with 2022. DM

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South Africa

Rising OCGT usage and Eskom’s financial (in)stability

Big spender

Generating capacity