The concept of loadshedding is one that should not be foreign to any of us here in South Africa. For about 15 years we have lived with it and more recently have been forced to adjust our lives around regularly scheduled blackouts plaguing the country. On 20 December 2022, Eskom announced the implementation of Stage 6 loadshedding caused by the breakdown of six generating units. The announcement was coupled with further detail on the events that led to this, possibly implying that stage 6 loadshedding will not be a frequent occurrence moving forward. However, one would be forgiven for being suspicious of this.
In 2022 South Africa saw the highest level of load reduction since the start of loadshedding in 2007 as Eskom’s Energy Availability Factor (EAF) continued to deteriorate to a record low of 53%. The EAF is the percentage of maximum energy generation that plants are capable of supplying to the electrical grid, limited only by planned and unplanned outages. The two graphs below illustrate this:
Though Eskom has attributed this deterioration in EAF to old power plants and a lack of maintenance under former management, the facts paint a different picture. Eskom’s four newest coal-fired power stations (Kusile, Medupi, Majuba and Kendal) each have an EAF in the range of 33-63%, which is substantially less than that of the Lethabo power plant commissioned in 1985 (with an EAF of 75%). From this, it is evident that Eskom’s excuse of “old power plants” is not a plausible one. The real cause exists purely on an operational level in the form of poorly trained personnel, mismanagement of resources and inefficient procurement policies. Newly elected Eskom board member Mteto Nyathi has spoken out publicly on the level of internal corruption and the little to no willpower coming from Eskom and government to do away with the policies which have caused Eskom’s collapse. The lack of support from government is likely what caused Eskom CEO André de Ruyter to announce his resignation last month.
De Ruyter has stated that in order to prevent continued rolling blackouts, the country would need to secure between 4000-6000 MW (a shortfall resulting in frequent stage 4-6 loadshedding). There may be only two solutions to achieve this: 1) the completion of the Medupi and Kusile power stations; 2) the government’s full commitment in implementing its renewable energy plans as outlined in the 2019 IRP (Integrated Resource Plan) report. The first option requires a further R300 billion investment, and the second option is unlikely to be successful given that the solar tenders awarded last year are only 20% of what was promised, and only 5% of the country’s shortfall. With all this in mind, it’s safe to say that we find ourselves in a difficult situation regarding energy security.
Considering the adverse effects these blackouts have had on the economy in recent years, South African businesses (and homes to some degree) are turning more and more to the option of investing in embedded solar generation. Professor David Walwyn of the University of Pretoria predicts that out of Eskom’s 18 GW customer base subjected to power cuts, at least one half of this will resort to alternative energy sources within the next two years. Though this does require additional investment, considering that the average payback period is 4-6 years, coupled with an average electricity bill saving of 20-40% (based on current tariffs), and SA banks getting more involved in the space, it’s hard to see why this isn’t the most immediate solution for businesses severely impacted by loadshedding. The number of times management teams of JSE listed companies have referred to alternative/renewable energy during earnings calls has increased dramatically over the years. A graph showing the average number of instances the topic of renewable energy was mentioned on an earnings call is presented below:
These times have certainly been tough on all businesses and households alike, and it seems we are forced to accept that we’re likely to struggle with this in some form or another for the medium term.