Eskom to ask Nersa for more diesel
As Eskom and the government want to appeal the load-shedding exemption order on public hospitals and schools by the Pretoria high court, the utility has decided to renegotiate its diesel budget with the National Energy Regulator of South Africa (Nersa).
Eskom said it would go back to the drawing board to see where the money to burn diesel would come from.
If successful, this will enable it to burn more diesel to accommodate the exemptions ordered by the high court last week.
Diesel is used for powering the open-cycle gas turbines at the Ankerlig and Gourikwa power stations, which have a combined energy generation capacity of 2 000 megawatts, which is equivalent to two stages of load-shedding. The gas turbines make up for a shortfall in generation capacity when there are outages and breakdowns at Eskom’s coal-fired power stations.
Diesel-powered electricity generation also helps Eskom prevent the need for higher stages of load-shedding during winter’s evening peaks.
In a response to questions, Eskom said it feared the exemptions would endanger the power grid, which was already in a dire situation.
“The utility will await further consultations with our legal team to challenge the decision by the high court. We do fear that the national grid is currently not able to fulfil the exemption as requested by the judgment,” it said.
“The utility is also working on the winter plan and is awaiting confirmation from Nersa to enable us to increase the diesel price from R8 billion to at least R30 billion in accordance with the minister of electricity’s plan.”
Eskom’s interim spokesperson, Daphne Mokwena, said the utility was studying the judgment and had plans to challenge it. She added that there were also plans to “renegotiate the diesel plan with the treasury and Nersa to ensure the utility is able to cover for the shortfalls that will be experienced”.
On Friday, the Pretoria high court ruled in favour of 19 interest groups who sought urgent relief for certain sectors to be spared from load-shedding.
According to the court papers, load-shedding was against South Africans’ constitutional rights. The judge ordered the minister of public enterprises, Pravin Gordhan, to ensure that Eskom provides alternative sources of electricity to these institutions.
“The police stations and schools are even worse off, they simply close or shut down during load-shedding,” the papers read.
In response to the papers, Gordhan announced on Monday that he would challenge the court judgment because it threatened national efforts to stabilise the grid.
“The department has studied the ruling and has determined through legal advice that the prudent step to take is to lodge an appeal to set aside the ruling and allow for the ongoing efforts to end load-shedding to proceed without putting undue risk on the country’s grid infrastructure,” Gordhan said in a statement.
Minister of Electricity Kgosientsho Ramokgopa told the National Council of Provinces on Tuesday afternoon that the utility’s plan to burn R30 billion of diesel and more is what is needed to keep the lights on. “The question is not whether the fiscus can afford [a blackout] but whether the South African economy can afford it.”
Ramokgopa added that farmers required quality and uninterrupted supply of electricity and that the unmet demand increased operational costs, which translated to increases in food prices and the poor being worst affected.
Ramokgopa said major retailers spend up to R500 billion a year to buy diesel and that increases their operational costs.
On Tuesday, Thoko Didiza, the agriculture, land reform and rural development minister, announced that an agro-energy fund was being set up to mitigate load-shedding. She said large-scale farmers would qualify for a 30% grant, capped at R1.5 million, with a 70% loan portion. Medium-scale farmers would qualify for a 50% grant, capped at R1 million, with a 50% loan, and smallholder farmers would qualify for a 70% grant, capped at R500 000, to be matched with a 30% loan.
Ramokgopa said: “We have a choice of saving the billions to run open-cycle gas turbines and save the economy, or choose not to spend and allow the South African economy to collapse. Our principal occupation is about saving the South African economy, especially the poor that are disproportionately affected by load-shedding.”
He added that if Nersa does not allow Eskom to increase its diesel usage, it risks an economic downturn and increased unemployment rate.
“The SA Reserve Bank projected that just one stage of unmet demand translates to R300 billion lost to the South African economy and a contraction of about 5% in GDP. In 2022, 650 000 jobs were lost as a result of load-shedding. At the current rate we are on course to lose 850 000 plus jobs.”
Although purchasing diesel would come at great cost to the fiscus, Ramokgopa warned that if diesel was not used there could be higher stages of load-shedding.
“We run the open-cycle gas turbines so that the stages do not exceed stage six. It is desirable to bring lower stages of load-shedding,” he said.
The utility’s winter plan is mainly based on its diesel plan which it is updating to accommodate the court ruling. If it does not get approval from Nersa to increase its diesel budget, South Africa could see the utility implementing stage 10 load-shedding.
Ramokgopa argued that there was money available for the utility to use but Nersa stood in the way.
“There was R8 billion dedicated to purchasing diesel, and out of the R254 billion relief funds for Eskom R22 billion would be directed to buy diesel,” he said.
Energy analyst Lungile Mashele on Tuesday told the Mail & Guardian that Eskom had a deficit of about 6 000 megawatts, and the power utility could supply only 25 000 megawatts against the electricity demand of about 31 000 megawatts.
“I anticipate that during this week, we are going to see stage seven and stage eight load-shedding, which we have seen before, but obviously the utility will not communicate it as they typically do, and they will simply say we are load-shedding at stage six even though the number hours is much higher,” she said.
Rudi Dicks, the head of project management in the presidency, said renegotiating the diesel arrangement will be welcomed. He cautioned Eskom against limiting its diesel budget to avoid not having enough money for diesel reserves.
Last year, the utility blew its annual budget for diesel in eight months. Faced with a financial crisis, Eskom scrambled to secure more diesel stocks to ease power cuts. It relied on its open-cycle gas turbines to prevent higher stages of load-shedding.
Wayne Duvenage, the chief executive of the Organisation Undoing Tax Abuse, said the ruling ordering Eskom to provide public schools and hospitals with generators would be expensive for the utility. “It’s not just the generators; it’s the diesel. It will cost the taxpayer a lot because general taxes fund the hospitals and police stations.”
Mandisa Nyathi is a climate reporting fellow, funded by the Open Society Foundation for South Africa.