Eskom told the regulator on Tuesday that its immediate focus was on returning 14 coal units to service over the coming four days, in an effort to recover 8 012 MW of coal generation so as to ease load-shedding, which was being implemented at Stage 5.

Although the National Energy Regulator of South Africa’s (Nersa’s) hearings are concerned primarily with the State-owned utility’s request for a 32% tariff hike, regulatory members had requested an update on load-shedding and its implications for the utility’s costs during the first day of hearings on Monday.

Members were particularly concerned about Eskom’s newly-published energy availability factor (EAF) assumption of 59% for the coming two financial years, which would result in a heavy reliance on the open-cycle gas turbines (OCGTs).

Eskom is currently assuming that the load factor of the OCGT plants will rise from 5% to 12%, which would trigger a surge in its diesel costs to R16.9-billion in 2023/24 and R17.7-billion in 2024/25.

For the year to date, a period that coincides with South Africa’s worst-ever load-shedding, Eskom has already spent R7.7-billion on diesel and has been operating the OCGT plants at an average load factor of 14%.

On the second day of hearings, Eskom generation executive Eric Shunmagum revealed that the utility was aiming to return eight units, with a combine capacity of 3 990 MW, during the course of Tuesday, September 20.

It was targeting three more, representing 1 115 MW, on Wednesday and another three units, with a combined capacity of 1 837 MW, on Friday, so as to ramp down rotational cuts to Stage 2 by the weekend.

Shunmagum said the generation unit’s operational recovery plan was geared towards improving the EAF from 59% to at least 70% from the end of March 2024 onwards, by when some older stations would have been decommissioned and Kusile completed.

Until then, the OCGTs would be used extensively, as had been the case since the start of the current financial year on April 1, when the load factor had dipped below 10% in just a single month (August) and had been as high as 18.8% during June.

Questioned about the prudency of using the OCGT plants so extensively, Eskom argued that the cost to the country was “much cheaper when compared to higher levels of load-shedding”.

Beyond the immediate return to service plan for the current week, Shunmagum said the recovery plan would focus on the ‘Top 6 priority stations’ of Tutuka, Duvha, Majuba, Kusile Matla and Kendal.

“All our efforts will be going into those stations as we begin shutting the oldest stations in the next two to three years.”

After March 31, the focus would shift to the next set of priority stations of Matimba, Lethabo, Medupi, Kriel and Arnot.

“These stations were specifically selected as they are amongst the highest contributors to the unplanned load losses and any improvement at these stations will see a massive change in the EAF,” Shunmagum asserted.

Priority would also be given to a successful execution of the steam generator replacement projects at Koeberg Unit 1, following serious difficulties at Unit 2.

Koeberg Unit 2 was returned to service in August without the steam generators having been replaced because of a lack of project preparation by Eskom and had since tripped, further intensifying September load-shedding.

Intergovernmental organisation the International Energy Agency (IEA) in its 'Breakthrough Agenda Report 2022' says international collaboration will be critical to successfully transition to sustainability, given the global scale and fast pace of change that is required.

"Action by governments and businesses individually is necessary, but not sufficient. Well-targeted international collaboration can make low-carbon transitions faster, less difficult and lower cost.

“By aligning and coordinating actions internationally, countries and businesses can accelerate innovation, create stronger signals for investment and larger economies of scale, and establish level playing fields, where needed, to ensure that competition is a driver of the transition and not a brake," it says.

"International assistance, finance and the sharing of best practice can support widespread adoption of effective policies and available technologies. International infrastructure can enable cross-border flows of clean energy. Without international collaboration, the transition to net-zero global emissions could be delayed by decades," the IEA emphasises.

The IEA Breakthrough Agenda Report 2022 focuses on actions in five sectors – power, hydrogen, road transport, steel and agriculture, which account for more than 50% of global greenhouse-gas emissions, and for which the signatories have so far agreed on goals under the Breakthrough Agenda.

"Clean technologies and sustainable solutions are not yet the most affordable or accessible options in these sectors, except in the power sector, and even in the power sector, this is not yet the case in all countries.

"Meeting the Breakthrough Agenda goals in these sectors will require concerted action from governments, businesses and civil society, while doing so could enable all countries to make faster progress, greatly increasing the chances of avoiding more dangerous levels of climate change and meeting the United Nations Sustainable Development Goals," the IEA says.

SECTOR RECOMMENDATIONS

The power sector accounts for about 13 Gt of carbon dioxide equivalent (CO2e), or 23%, of total emissions, which has risen by about 10% since 2010 and needs to fall by more than 50% by 2030.

Investment will need to grow 25% each year, reaching $2-trillion a year by 2030.

Hydrogen production and use, meanwhile, accounts for about 0.9 Gt of CO2e, or 1.5% of total emissions.

Renewable and low-carbon hydrogen production currently accounts for less than 1% of total production. Targets and commitments to use low-carbon and renewable hydrogen are equivalent to 3% of current total hydrogen demand. Currently, 15% of ammonia and 28% of methanol is internationally traded, the IEA report indicates.

"Governments and companies should coordinate internationally to increase commitments for the use of low-carbon and renewable hydrogen in sectors where hydrogen is currently used, supported by specific policies and purchase agreements to collectively send a strong demand signal and mobilise investment in production.

"In new priority application sectors, countries should share learning to accelerate early deployment. This should be done in a manner that ensures a level playing field in international trade," the IEA recommends.

Further, the road transport sector accounts for about 6 Gt of CO2e, or 10% of total emissions, which has risen by 13% since 2010 and needs to decrease by nearly 33% by 2030.

"Public charging infrastructure needs to increase ten-fold by 2030. If major markets align their policies with zero-emissions vehicle (ZEV) sales by 2035, cost parity between ZEVs and internal combustion engine vehicles could be reached several years earlier.

“Further, more than 60% of the vehicles added to the roads in Africa each year are imported used vehicles," the IEA report highlights.

Meanwhile, the steel sector accounts for about 3 Gt of CO2e, or 5% of total emissions, which has risen by about 15% since 2010 and needs to fall by about 25% by 2030.

Glob...

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.