Delaying coal power plant shutdowns could push costs to R90bn, warns Eskom CEO

Eskom CEO Dan Marokane. (Photo: Gallo Images/Financial Mail/Trevor Samson).

By Ethan van Diemen

7 Jun 2024

In a meeting of the Presidential Climate Commission on Friday, Eskom CEO Dan Morokane said that delaying shutting down some of the utility’s coal power stations will cost the taxpayer up to R90-billion. Despite the figure, it is still a net benefit, he explained.

Eskom’s decision to delay its initially planned decommissioning of three of its older coal-fired power stations will cost the utility between R85 and R90-billion, according to CEO Dan Morokane. Most of these expenses will be for fuel costs and operational maintenance, he said at a meeting of the Presidential Climate Commission on Friday, 7 June.

South Africa has pledged to reduce emissions to between 350 and 420 million metric tons annually by 2030, down from the current 442 million tons per year. Eskom is the main contributor to South Africa’s greenhouse gas emissions.

Responding to a question from one of the commissioners, the Eskom boss said: “I can share the numbers with you. We have a figure of just about R85 to R90-billion rands for that extended coal operation. About 55 to 60% of that relates to fuel costs, oil costs, of which coal costs would have been incurred otherwise elsewhere in the stations that were going to pick up the load for taking these stations out. So that’s a ‘no regret’ part of our cost.”

He continued that “the remaining component deals with the operational maintenance aspects of running [the power stations’] units. There’s a revenue associated with this operation of about R102-billion, so on a net basis it cancels off”.

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He said that when he considered how long it would take to bring on other technologies to address the energy supply shortfall that decommissioning would incur, it made “more sense” to do it this way.

Morokane also explained that the Eskom executive team has been in touch with the PCC and the Just Energy Transition (JET) project management unit in the presidency to “understand the storyline from the perspective of us delaying the decommissioning of some of the coal stations”.

Eskom CEO Dan Marokane. (Photo: Gallo Images/Financial Mail/Trevor Samson).

Reasons to delay decommissioning

He elaborated on the context and rationale behind the move to delay the decommissioning of the power stations.

“There’s a context that needs to be taken into consideration as we begin to navigate these issues with how we transition and for us, the issue of the national circumstances is an important one. And I think I don’t have to remind the members here of the impacts of the intense load shedding that was experienced last year, and the implications on the economy as a whole. So for us as Eskom, looking at that programme of decommissioning power stations, we had to take into consideration the reality and the threat that still remains with regards to load shedding and the need to balance supply and demand.”

Morokane continued that “when we departed and set out the strategy for the Eskom 2025 strategy, there are some underpinning assumptions that are quite material. First one being the energy availability factor (EAF) at the time, and where we saw it going. We know that assumption has been violated in the sense that we are more on the negative aspect of it and hence the results that we saw.

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“The second one is that whilst the DMRE had really moved swiftly with the risk mitigation initiatives around the independent power producers, those projects did not come into place as we expected, and so you sit with a situation where the material conditions that are meant to ensure that your situation from a supplier perspective have not panned out as anticipated, and therefore the risk remains and in the face of that, by taking off operational units you can only increase the risk the country is likely to face. And that’s really the context that we sit with.”

Daily Maverick previously reported on a Centre for Research on Energy and Clean Air (CREA) health impact assessment (HIA), which revealed the impact of delaying the decommissioning of Eskom’s coal-fired power plants.

Among others, the assessment found that delaying the decommissioning of all plants currently scheduled to begin decommissioning by 2030, so that decommissioning only begins in 2030 and beyond “would cause a projected 15,300 excess air pollution-related deaths” and total economic costs of R345-billion.

Cautious optimism?

But there is reason for cautious optimism, Morokane explained.

“What we are comforted with as Eskom is that these units are units that were returned from mothballing in the early 2010s, and so in the fleet they actually have better technology from an emissions perspective, and overall they contribute about 8% of our overall supply. So we have argued that we need to afford ourselves the opportunity to run the stations up to 2030. We have accepted that as the passage of time evolves, we have the opportunity to reassess that position so we have a five-year planning horizon, we have an annual review of this planning horizon and as assumptions materialise we have the opportunity to revisit the sequencing towards the end of this five-year plan.”

“In as far as the expected reduction in the CO2 equivalent target that we have, we believe that we will be able to meet that. We are approaching a period of intense fluctuation from a certainty perspective, and we need to be revisiting our plans and assumptions on a much shorter interval than was the case before… and we’ve expressed that view with the IPG (international partners group) members that we’ve met with in the last two months.” DM

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Reasons to delay decommissioning

Cautious optimism?