R15bn, perhaps more: Eskom prepares for rising diesel costs as it fights load reduction

Energy costs have soared between Russia and Ukraine which have suffered from supply constraints.

  • Eskom has relied heavily on diesel-powered open-cycle gas turbines to meet the demand for electricity.
  • The surge in global diesel prices will impact Eskom’s diesel spending, which is estimated to exceed Rand 15 billion in the financial year.
  • South Africans have experienced 32 days of load shedding so far this year, according to Eskom.

As Eskom relies on open-cycle gas turbines, which power diesel to meet energy demand, it expects to suffer from the impact of the surge in global fuel prices.

On Wednesday, Eskom’s management team provided an update on the status of the electricity system. South Africa has experienced 32 days of load shedding since January 2022, outnumbering the same period last year.

Although load shedding has persisted for 14 years, CEO André de Ruyter warned against accepting it as the “new normal”. During the briefing, De Ruyter reiterated that in order to address the load reduction, it is necessary to add a new generation capacity – between 4 000 MW and 6 000 MW – of power to the grid.

Overall, the electricity company’s Energy Availability Factor (EAF), a measure of the energy supplied by Eskom’s power plants to the rid, is 62%, below the 74% target. Acting head of the Rhulani Mathebula generation, who took over from Phillip Dukashe, explained that the existing generation plants were not operating at full capacity. Eskom’s planned maintenance program contributed significantly to the low EAF, with unplanned failures adding to the challenges.

To fill the gaps, Eskom ran open-cycle gas turbines. Spending on these amounted to R6.4 billion for the year ending March 2022. In the previous financial year, it was R4.1 billion.

But in the current fiscal year, Eskom expects diesel spending to exceed Rand 15 billion, impacted by global price increases.

Globally, energy costs rose to new records in some cases during the Russia-Ukraine war. There is currently a shortage of diesel supply due to lower exports from Russia. Nationwide this has seen diesel prices rise.

Operations director Jan Oberholzer said global fuel prices would have a “quite significant” impact on Eskom.

The increase in the price of diesel also has a negative impact on the cost of a ton of coal, as some mines rely on plants that use diesel.

“We have done our best to quantify what the impact could be. It is between R15 billion and R20 billion, currently in the financial year,” said Oberholzer.

“Anything south of R15 billion is what we believe the current impact will be on the cost of our business,” he stressed.

READ | The head of the Eskom generation closes

Speaking more broadly of load shedding prospects for the rest of the year, Eskom expects generation availability to improve over the winter. This is because the maintenance schedule will be shortened to meet demand.

In its scenario planning, Eskom expects to have up to 104 days of load shedding during the winter, a revision from 101 days earlier. The highest load shedding phase to be implemented will be Phase 3. However, Eskom’s broadcast chief executive Segomoco Scheppers pointed out that this was not a projection, but merely a scenario planning.

Overall, Eskom’s generation business continues to underperform its transmission and distribution businesses. But De Ruyter said the priority was to get the additional generation capacity needed.

Due to breakdowns in the floor, the power utility will implement Phase 2 load shedding on Wednesday evenings, from 17:00 to 22:00.