Burning diesel to run Eskom’s open-cycle gas turbines (OCGTs) — intended only for dire emergencies or use during peak demand periods — is a centrepiece in Electricity Minister Kgosientsho Ramokgopa’s short-term plan to stave off higher stages of blackouts, especially during winter.
But Ramokgopa has warned that Eskom’s yet-to-be-finalised budget for diesel might not be enough to sustain the power utility throughout its current financial year or ease power cuts, which could undermine his plan.
A month into its new financial year, which started on 1 April, Eskom has not finalised a diesel budget to run OCGTs, which the power utility has increasingly relied on in recent months to momentarily keep the lights on.
Diesel is used for powering the OCGTs at Ankerlig and Gourikwa, which have a combined energy generation capacity of 2,000MW — equivalent to two stages of rolling blackouts. The OCGTs are used to make up for a shortfall in generation capacity when there are outages and breakdowns at Eskom’s coal-fired stations.
In an interview with Daily Maverick on Tuesday, Ramokgopa said preliminary estimates suggested that R30-billion would be available for Eskom to fund its diesel purchases during its current financial year.
Electricity tariff increase
About R8-billion could be freed from the 18.65% electricity tariff increase that was recently approved by the National Energy Regulator of SA for Eskom during 2023/24, and R22-billion from the funds allocated to the power utility from the fiscus in February.
“At the rate that we want to burn diesel to prevent higher stages of load shedding, we will exhaust the R30-billion before the end of the financial year. We will need to come to the table much later in the year to find more money,” said Ramokgopa.
He expects the R30-billion to be “sufficient” for winter but not enough to cover Eskom for the rest of the year and early 2024. This implies that Eskom is on track for another year of spending massively on diesel to run OCGTs, which have become essential in the face of the loss of generating capacity at Eskom’s power stations.
There is arguably a problem in the mooted R30-billion budget for diesel procurement. There is effectively a limit in how much diesel Eskom is able to burn, as it is not possible for the power utility to burn and use diesel worth more than R2.5-billion a month (about 100 million litres at current wholesale prices).
Even with an unlimited budget, Eskom cannot burn more diesel than this due to the physical and logistical constraints in transporting it to the OCGT plants.
In 2022 alone, Eskom ran out of money to buy diesel and the power utility exceeded its initial diesel budget of R6.1-billion by spending R21-billion. When Eskom ran out of money for diesel purchases, it was forced to approach the government for additional help. The National Treasury denied Eskom’s request for additional funding for diesel. Eventually Minister of Public Enterprises Pravin Gordhan “found” 50-million litres of diesel at PetroSA for Eskom.
Eskom might have to approach the government for help again if it runs through its diesel budget, said Ramokgopa. He also recommended that “the government should consider buying directly from suppliers … so whatever savings can be made by cutting the middle man”.
But former Eskom CEO André de Ruyter made this exact proposal on numerous occasions. In late December, the Department of Mineral Resources and Energy denied an application by Eskom for a wholesale licence for diesel. Eskom’s ability to borrow money from commercial banks to fund its operations has been severely restricted by the National Treasury over the next three years as part of the condition set by the government for taking over a portion of its debt.
Read more in Daily Maverick: Government comes to Eskom’s rescue by taking over R254bn of its debt
The only thing that might prevent Eskom from approaching the government with a begging bowl is if it improves its generating capacity. Ramokgopa said Eskom was hoping to generate an additional 2,800MW from at least three units at Kusile Power Station (Eskom’s newest coal-fired power plant) that are expected to enter commercial operation between December 2023 and February 2024. “Then we hope to make improvements on the generating capacity and we will burn less diesel.”
Ramokgopa’s short-term plan
Ramokgopa recently presented a short-term plan to his ANC colleagues to ease load shedding over the next six months, beginning in May and covering the winter season, which traditionally sees energy demand outstripping Eskom’s supply.
Ramokgopa’s plan includes ramping up the use of OCGTs and managing demand by installing devices in households that can remotely switch off high-energy appliances such as geysers.
Other aspects of the plan include exempting national key points including hospitals, communications infrastructure and police stations from blackouts; and improving Eskom’s five worst performing power stations — Tutuka, Kendal, Majuba, Duvha and Matla — in terms of generating capacity.
The five power stations have recorded an energy availability factor (EAF) of below 50%. An EAF measures the average percentage of power that plants have available to dispatch energy at any one time. A high EAF indicates that plants are well operated and maintained, helping the utility to produce electricity cheaper.
Asked about the electricity situation during winter, Ramokgopa said Eskom and the government want to limit blackouts to a maximum of Stage 5, especially when OCGTs are ramped up. “The worst-case scenario is above Stage 6. We are doing everything to keep it to Stage 5,” he said.
Breakdowns at Eskom power stations happen so often that it is becoming difficult to predict the energy situation, said Ramokgopa.
“Eskom has generated a best-case scenario of the [capacity] losses, as a result of unit failures, will be about 15,000MW during winter. But looking at the past two weeks, we are north of 16,000MW. We are closer to 17,000MW of losses,” said Ramokgopa.
Winter has historically ushered in an average demand of about 35,000MW, peaking at 37,000MW. At current levels, Eskom cannot cater for this demand. DM/BM