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President Cyril Ramaphosa, who cut short his international engagements as South Africa once again descended into Stage 6 load-shedding, has acknowledged that priority has to be given to solving the electricity crisis if the country aims to attract the investment required to raise growth and tackle high levels of unemployment.

Writing in his weekly newsletter following a meeting in Washington DC with US President Joe Biden, where it was agreed that a joint task force on trade and investment be established to increase business ties between the two countries, Ramaphosa said: “First and foremost, we have to overcome the electricity crisis”.

“Solving the electricity crisis is necessary if we are to realise the potential of our economy.

“In 2018, we launched an ambitious investment drive to raise R1.2-trillion in new investments over five years.

“To date, and with still a year to go, we have raised more than 90% of that amount in commitments from both domestic and foreign investors.

“Of these commitments around R330-billion has already flowed into the economy, opening new factories, expanding production lines and creating new jobs,” he wrote, highlighting Ford South Africa’s R16-billion investment to expand the local production of the new-generation Ford Ranger, as well as recent plant openings by Sappi and Hesto Harnesses.

Notably avoiding any criticism of the current Eskom leadership, the President said the severe load-shedding of recent weeks was a reminder of how unstable Eskom’s ageing power stations had become.

It had also given “greater urgency” to the measures announced on July 25 to stabilise electricity supply.

“On Sunday, I held an urgent virtual meeting with Ministers and officials on the reasons for the current load-shedding and the steps being taken to reduce the severity and frequency of load-shedding in the coming days and weeks.

“Eskom has already announced some of the measures it is taking, and we will remain seized with this issue until the situation is resolved.”

The State-owned utility had received board and shareholder approval to buy 1 000 MW of existing surplus capacity from existing independent power producers (IPPs), industrial businesses with generating capacity and from countries in the region that were in a position to export electricity to South Africa.

Eskom and Public Enterprises Minister Pravin Gordhan indicated that the first power arising from IPPs and co-generators should be available soon, with the utility indicating that it aims to sign the first power supply agreement during the course of the current week.

“Additionally, Eskom has the go-ahead to procure over 200 MW from the Southern African Power Pool, as part of our immediate solutions to our energy shortfall,” Gordhan announced.

He also reported that Eskom had recruited experienced former employees and energy experts who responded to the call to assist Eskom, reporting that in the past week alone 18 seasoned energy specialists had re-entered the Eskom system to assist with operations.

A signing ceremony will be held on Thursday for three wind projects that were selected in October last year as preferred bidders under Bid Window Five (BW5) of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

In total, 25 wind and solar photovoltaic (PV) projects were named as preferred bidders by Mineral Resources and Energy Minister Gwede Mantashe following a bidding process that was launched in April last year.

The Department of Mineral Resources and Energy has confirmed that the ceremony will take place at the IPP Office in Centurion, Gauteng, where project agreements will be signed for the Coleskop, San Kraal and Phezukomoya wind farms.

No mention was made about the nature of the agreements to be signed, but it is anticipated that actual financial close will follow at a later stage.

In addition, the department reports that information will be provided on Thursday regarding the “status of the preparations to sign with the remaining 22 preferred bidders under the REIPPPP BW5”.

The bid window was the first bidding round to be held following a seven-year disruption to the REIPPPP after Eskom refused to enter into contracts to buy electricity from projects procured in 2014.

There was an initial expectation that the projects would reach financial close by the end of April at the latest, but the process has been hampered by slow delivery of grid connection Budget Quotes from Eskom, as well as difficulties solar projects had in meeting the local-content stipulation placed on PV panels.

In addition, there have been several reports indicating that the commercial viability of several of the projects has been severely undermined by steep inflation in energy markets, fuelled by Covid lockdowns in China and by Russia’s invasion of Ukraine.

The Brunel Solar Team from the Netherlands has won the 2022 Sasol Solar Challenge, followed by the Agoria team, from Belgium, with the Tshwane University of Technology (TUT) team placed third.

Brunel won with a distance of 4 228.2 km, with Agoria at 4 189.9 km, and TUT some distance back, at 2 682.4 km.

The solar challenge is a distance-based race, and not a timed race, with the team harvesting the most kilometres from the sun during the event declared the winner.

The race started in Johannesburg on September 9, with the teams driving across five provinces and through 18 towns to reach Cape Town on September 16.

“A key focus of the Sasol Solar Challenge is to bring our youth closer to science, technology, engineering, maths, and alternative energy innovations and, in so doing, give them the opportunity to experience these concepts hands-on in order to have a better understanding of how these sectors can benefit our society,” says Sasol group communication and brand management VP Elton Fortuin.

“In the past eight days this is exactly what the teams have done and we are proud to have touched many young minds and hopefully inspired curiosity and passion in science and technology.”

Other awards for the 2022 event include the navigation award, won by the University of the Free State solar car team, with Agoria again on the podium for winning the award for covering the longest distance in a day, at 609.4 km.

The biennial Sasol Solar Challenge is now in its fourteenth year.

Eskom is requesting the National Energy Regulator of South Africa (Nersa) to approve diesel costs of R16.9-billion for its upcoming financial year in line with a material upward revision in the assumed load factor of its diesel-fuelled open cycle gas turbines (OCGTs) from 5% to 12%.

The increase is designed to accommodate a steep reduction in the expected energy availability factor (EAF) from the State-owned utility’s coal-dominant fleet, which has been reduced to 59%.

In Eskom’s original fifth multiyear price determination (MYPD5) application, submitted in June last year, the assumed EAF was 72%, which was lowered to 62% in January during Nersa’s adjudication of Eskom’s 2023 tariff request.

The regulator is currently hosting public hearings into Eskom’s application for a 32% tariff hike for the 2024 financial year, followed by a 9.74% increase for 2025.

Nersa granted the utility a 9.6% increase in January for the 2023 financial year, which began on April 1, against an Eskom request for a 20.5% hike.

The diesel costs in the application before Nersa represent a significant increase on the R5-billion outlined in January.

CFO Calib Cassim told Nersa on Monday that the change was premised on a 60% increase in the volumes of diesel that Eskom was now expecting to consume next year, together with a 40% increase in the price of the fuel, which had risen sharply following Russia’s invasion of Ukraine.

During the first six months of the current financial year, Eskom has spent more than R7.7-billion on diesel as it resorted to using its OCGT plants intensively to avoid or limit load-shedding.

Rotational power cuts have been implemented for more than 100 days so far in 2022 to close gaps left by the poorly performing coal fleet and the prolonged unavailability of Koeberg Unit 2, which has tripped again following a recent extended maintenance.

Eskom has a R500-million diesel budget remaining, but has already indicated that it expects to spend a similar amount on diesel during the second half of the financial year to the end of March as it has year-to-date.

Overall, Eskom is seeking R101-billion for primary energy next year to cover expected coal costs of R69-billion (slightly down on the R70-billion outlined in January), diesel cost of R16.9-billion, and start-up fuel oil costs of R6.8-billion (more than double the R3.1-billion assumed in January).

Nersa regulatory member Muzi Mkhize questioned Cassim on why consumers should be expected to pay for the additional diesel costs when such costs would not have been incurred had Eskom sustained an EAF of 72%.

In response, Cassim argued that resorting to the OCGT plants as a “last resort” was prudent to reduce the cost to the economy of power interruptions.

Eskom’s application also outlines a large increase in the depreciation allowance, which accounts for 10.67% of the 32% being sought.

The utility argues that the depreciation adjustment arises from an “incorrect” regulatory asset base (RAB) valuation by Nersa in a 2021 tariff decision, whereby the regulator reduced Eskom’s RAB from over R1.2-trillion to about R550-billion.

Eskom subsequently took the RAB aspect of the decision on legal review and a ruling could be made prior to the next Nersa tariff determination.

In total, Eskom is requesting allowable revenue of R351-billion, which includes R15-billion arising from a settlement reached after the Supreme Court of Appeal ordered that the remaining portion of a R69-billion government equity injection, which was found to have been deducted incorrectly from Eskom’s MYPD4 revenue, be recouped.

It also includes an amount of R1.7-billion arising from a R3.4-billion Regulatory Clearing Account amount awarded to Eskom, which had not yet been liquidated.

The Eskom request is facing strong opposition from business and civil society groups, with the Organisation Undoing Tax Abuse (Outa) calling on Nersa during the first day of hearings to limit any increase to the consumer price index.

“If the economy...

State-owned power utility Eskom is developing a crowdsourcing digital platform to allow it to supplement its existing skills base to help address its operational challenges. It has invited organisations and individuals, including experienced engineers and technical experts, to participate.

The platform will act as a skills database for Eskom to acquire additional expertise and to resolve its urgent business needs.

Skills that are needed include, but are not limited to, mechanical, nuclear, electrical, system and maintenance skills, as well as senior artisans and plant operators for coal and nuclear power stations.

Skilled individuals interested in assisting Eskom will be able to register on the digital platform once it is developed. In the meantime, they are being asked to contact Eskom human resources executive Elsie Pule at [email protected].

“Eskom looks forward to collaborating with South African citizens to address the current electricity supply challenges facing the country,” Eskom CE André de Ruyter says.

“A diverse cross-section of South Africans have sent enquiries and made themselves available to respond to the call to national service. Eskom is in the process of matching the skills that have already been made available to its needs and will be recruiting the suitable candidates imminently,” he adds.

Crowdsourcing is the practice of obtaining information or input into a task or project by enlisting the services of a large number of people, either paid or unpaid, typically through a digital platform.

As South Africa has a pool of skilled persons, crowdsourcing of these skills may offer a unique opportunity for available and willing citizens to support Eskom to resolve its business challenges.

“In order for Eskom to reap the highest benefit from this diversity of skills, it must also develop a governance mechanism and a platform that will provide equitable opportunity to all those willing to be considered for service,” says Pule.

“The process will be driven by the needs of Eskom and will follow a standard governance process for fixed-term contracting.”

The crowdsourcing initiative will also leverage partnerships with statutory and non-statutory bodies, such as the Engineering Council of South Africa and others, to ensure Eskom is able to access the best candidates in the electricity supply industry, engineering and technical professions.

In recent months, Eskom has received an overwhelming response to its call for skilled personnel to come forward to assist in rebuilding skills inside the organisation, and numerous organisations and individuals have come forward to respond to this critical call for national service.

This crowdsourcing initiative was prompted by several offers and submissions received from organisations and individuals, including experienced engineers and technical experts, who have indicated that they could potentially assist Eskom.

The Department of Mineral Resources and Energy (DMRE) has moved to clarify a statement made by Minister Gwede Mantashe that a Bid Window Five (BW5) project under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) had reached financial close earlier this week.

Mantashe made the statement in response to a question posed during a briefing held to provide an update on the implementation of the Economic Reconstruction and Recovery Plan, which includes energy security as a priority intervention.

In response to an Engineering News enquiry regarding the identity of the project in question, the DMRE made the following statement:

“The Minister was referring to confirmation received from the first cohort of projects under BW5 in relation to signing the project agreements by the end of the month.”

“The BW5 projects are currently preparing for legal close, to be followed by commercial and ultimately financial close.”

In October last year, Mantashe announced the names of the 25 wind and solar projects that emerged as preferred bidders following BW5; the first bidding round to be held following a seven-year disruption to the REIPPPP after Eskom refused to enter into contracts to buy electricity from projects procured in 2014.

At the time, there was an expectation that the projects would reach financial close by the end of April at the latest.

Progress was hindered, however, by slow delivery of grid connection Budget Quotes from Eskom, as well as difficulties solar projects had in meeting the 100% local-content stipulation placed on photovoltaic (PV) panels. An exemption was later provided lowering the threshold to 35%.

The viability of the projects, which were bid at an average tariff of 47.3c/kWh, was also rocked by component and input inflation, which arose as a result of supply-chain disruptions associated with Covid lockdowns in China and which was further amplified following Russia’s invasion of Ukraine.

The IPP Office initially announced that the financial-close deadline had been shifted to the end of July for the first 14 BW5 projects and to the end of September for the remaining 11.

After the July deadline was missed it was confirmed that the projects had until the end of September to reach financial close.

However, DMRE’s latest statement indicates that this too is unlikely, referring only to “signing the project agreements by the end of the month”, without specific reference to financial close.

In the meantime, the IPP Office is gearing up for BW6, which has been enlarged from 2 600 MW to 4 200 MW as part of a larger plan announced in July to tackle intensifying load-shedding and close an estimated 6 000 MW supply gap.

President Cyril Ramaphosa initially announced that BW6 would be expanded to 5 200 MW.

However, the National Energy Crisis Committee reported on September 11 that the decision to proceed with a 4 200 MW round instead had been made to ensure that the procurement process was not delayed by the fact that the energy regulator still needed to concur with a Ministerial determination opening the way for the procurement of more solar PV.

On September 16, the National Energy Regulator of South Africa’s public comment period closed in relation to it providing concurrence with Ministerial determinations allowing for the procurement of an additional 18 791 MW of new electricity capacity, including 14 791 MW of new ‘Storage’, ‘PV’ and ‘Wind’.

The BW6 submission deadline, meanwhile, is September 22, which was itself shifted from August 11 following the announced enlargement of the round.

The National Energy Crisis Committee said government may still seek to procure the full 5 200 MW, but that BW6 would proceed with a 4 200 MW allocation so as to ensure that the round was not delayed.

Engineering News Editor Terence Creamer discusses power utility Eskom's revenue application for the 2024 and 2025 financial years; how the declining performance of the utility's coal fleet is reflected in the revenue application; and the likely outcome.

It’s been an interesting six months,” says Metair CEO Riaz Haffejee as he reflects on his company’s financial results for the six months ended June 30.

CFO Sjoerd Douwenga is perhaps a bit less diplomatic as he describes dealing with the Covid-19 pandemic as mere preparation for a culmination of events that saw Metair’s operating profit drop by 73%, to R144-million.

Revenue was down 2%, to R5.8-billion, compared with the previous six months.

The automotive component and energy storage specialist’s perfect storm was driven by a number of events.

The first is hyperinflation in Türkiye, which houses battery producer Mutlu, one of its biggest subsidiaries.

June inflation reached 78.6%.

Hyperinflation also triggered hyper wage demands, which led to a ten-day strike at Mutlu, explains Douwenga.

The strike made a R30-million dent in operating profit.

The impact of hyperinflation on profit after tax for the six months under review amounted to R95-million.

In Romania, Metair’s Rombat battery business is being impacted by consumer concern, and subsequent frugality, around the war in Ukraine.

Rombat is located only 100 km from the Ukranian border.

The conflict has also seen a surge in energy prices in Europe, with energy costs roughly three times more than they were 12 months ago, notes Douwenga.

Rising energy costs took an almost 4% bite out of operating profit at Rombat for the six months to June 30.

Locally, flooding in KwaZulu-Natal earlier this year shut down the Toyota plant for four months, which took a heavy toll on its supplier network, Metair included, bruising the group’s cash flow and liquidity.

Douwenga notes that Metair expects to reach the R500-million cap on its business interruption insurance for this event. A sum of R150-million has already been received.

Looking ahead, Haffejee says production at Toyota is returning to normal after the plant reopened, while new and expanded production of the new Ford Ranger pickup range will buoy Metair’s component business in the coming months.

Metair is also working to deal with hyperinflation in Türkiye on a day-to-day basis, he adds.

The energy crisis, however, is likely to intensify, he notes, especially with the European winter on the horizon.

“Energy costs can go to three, four times more on top of what they are now,” says Douwenga.

It is unlikely that the Ukranian war will be resolved soon.

Douwenga notes that 80% of the input costs at Mutlu in Türkiye are hard-currency based, as well as up to 60% of its sales, which lessens the impact of the local inflation cycle.

Other good news is that global supply chain costs and predictability are both stabilising.

Haffejee says logistics costs are coming down, and that they are now “three to four times” more than pre-Covid-19 conditions, compared with “seven to eight times” last year.

After updating some key cost assumptions, Eskom has confirmed that it will be applying for a 32% tariff hike for implementation on April 1, 2023. The State-owned utility is also applying for a 9.74% increase for its subsequent financial year.

The increases are outlined in an addendum to Eskom’s fifth multiyear price determination (MYPD5) application, which contains changes to various key assumptions, including those relating to the cost and use of diesel for its open-cycle gas turbines (OCGTs), as well as independent power producer (IPP) costs.

The addendum also outlines a large increase in the depreciation allowance, which accounts for 10.67% of the 32.02% being sought.

Eskom argues that the depreciation adjustment arises from an “incorrect” regulatory asset base (RAB) valuation by the National Energy Regulator of South Africa (Nersa) in a 2021 tariff decision, whereby the regulator reduced Eskom’s RAB from over R1.2-trillion to about R550-billion.

Eskom subsequently took the RAB aspect of the decision on legal review and a ruling could be made prior to the next Nersa tariff determination.

The 2024 financial year hike outlined in the addendum is slightly below the 38.1% increase contained in a Nersa consultation paper released in July.

That paper was published following a court order stipulating that Nersa adjudicate at least Eskom’s 2024 financial year application under the existing MYPD methodology and make a final determination by December 24.

Written comments had to be submitted by September 8 and public hearings will be held from September 19 to 23, with Nersa indicating that it plans to make a decision on November 7.

Following a court order in 2021, the Energy Regulator adjudicated only the first year of the three-year MYPD5 application, which was submitted in June 2021 and covered the three financial years of 2023, 2024 and 2025.

A 9.61% hike was approved for 2023 financial year and was implemented on April 1, 2022, raising Eskom’s allowable revenue to R264-billion for the year. Eskom had applied for a 20.5% increase.

The Nersa consultation paper published in July in relation to the 2024 and 2025 financial years also arose following a court order stipulating that Nersa adjudicate at least the 2024 financial year application under the existing MYPD methodology, as a new methodology was yet to be finalised.

The increase outlined by Eskom in its updated MYPD5 submission is still based on the allowable revenue figure of R335-billion included in the original 2021 application. After RCA and court-ordered revenue allowances, however, the figure rises to R351-billion.

That larger revenue figure includes R15-billion arising from settlement reached after the Supreme Court of Appeal ordered that the remaining portion of a R69-billion government equity injection, which was found to have been deducted incorrectly from Eskom’s MYPD4 revenue, be recouped.

In terms of the settlement, the outstanding R59-billion would be recovered during the financial years from 2024 to 2027.

The R351-billion revenue figure also includes an amount of R1.7-billion arising from a R3.4-billion RCA amount awarded to Eskom, which it has not yet liquidated.

Despite a slight upward adjustment to assumed sales for the year, the standard tariff would need to rise by 32% next year for Eskom to secure the full allowable revenue being sought.

As has become the norm, the request will be strongly resisted by stakeholders during public hearings.

Besides the large depreciation amount outlined, the other two major contributors to the 32% requests relate to primary-energy costs, which make up 7.85% of the increase being sought and IPP costs, which comprise 9.05%

BIG RISE IN DIESEL COSTS OUTLINED

The main driver behind the primary energy cost rise is a revision to Eskom’s assumption regarding diesel, the price of which has increased materially since Russian’s invasion of Ukraine.

The utility is also expecting to rely more heavily on its OCGTs over the coming two years...

A R7.7-billion expansion and environmental upgrade project at paper and pulp company Sappi’s Saiccor mill was officially opened by President Cyril Ramaphosa, on September 13 in Umkomaas, KwaZulu-Natal.

Sappi said the project – which was first announced at the 2018 Presidential Investment Conference – was in response to Ramaphosa’s call for investment into the South African economy.

The President was joined in the ceremonial ribbon-cutting ceremony by a delegation of representatives, including Trade, Industry and Competition Minister Ebrahim Patel, KwaZulu-Natal Premier Nomusa Dube-Ncube and Economic Development, Tourism and Environmental Affairs MEC Siboniso Duma.

They were joined by Sappi chairperson Sir Nigel Rudd, Sappi CEO Steve Binnie and Sappi Southern Africa CEO Alex Thiel.

The expansion and upgrades included a new evaporator, recovery boiler, screening and washing plant, as well as upgrades to the bleach plant and pulp machines, improved recovery circuits and additional magnesium digesters.

New technology employed incorporates improved washing technology to improve water and energy efficiency, better cooking technology for improved pulp quality control, the application of robotics to facilitate debottlenecking, as well as shop-floor digitisation for improved commissioning, control and operational efficiency.

Upgrades to the woodyard were carried out as well to enable smooth logistics supply chain operations. This included the installation of offloading equipment, side-arm rail carriage chargers and new chipper lines.

The expansion also resulted in the installation of the world’s largest sulphite recovery boiler, with the capacity to process up to 1 500 t/d of dry solids.

Additionally, 110 km of cabling was installed, along with 56 km of piping.

More than 2 000 trucks of concrete were used, amounting to about 30 000 t, as well as half the amount of steel that went into building the Eiffel Tower.

Notably, the pipe bridge modularisation was a first for Sappi Southern Africa, which the company believed to be the largest of its kind in South Africa.

“The board believes the South African forestry industry is globally competitive and can make further substantial contributions to the South African economy. This investment reflects our confidence in our South African operations,” Rudd said.

Binnie noted that the reason for Sappi’s investment in dissolving pulp was that global demand continued to grow for renewable textiles derived from sustainable wood fibre.

Fabrics made from cellulose differ from other feedstock fibres in that they are breathable, absorbent, recyclable and biodegradable. Woodfibre provides a sustainable alternative to other feedstocks.

“Sappi supplies over 50% of the world’s Lyocell demand, the next-generation textile material made from cellulosic fibres. This expansion project not only meets customer demand for greater dissolving pulp production – and in particular Lyocell – but also significantly reduces the mill’s environmental footprint and supports Sappi’s decarbonisation journey, while also generating an additional R1-billion a year in direct benefit to the KwaZulu-Natal economy,” he explained.

Binnie commended the Sappi role-players who had conceptualised the project and brought it to fruition, despite difficult conditions and interruptions resulting from Covid-19 restrictions.

“By using renewable and sustainably sourced wood to produce circular, innovative biobased products, Sappi [is] reducing and replacing the need for fossil-based products,” he said.

The Saiccor mill was acquired by Sappi in 1989 and extended its global reach into the international dissolving pulp markets. Since then, the mill has undergone three expansion projects to keep pace with global demand.

Branded as ‘Verve’, almost all of the dissolving pulp produced at the mill is sold globally into the viscose staple fibres markets for use in textiles and clothing for various brands.

The project will help Sappi achieve its target of r...