Eskom quickly backpedals on the statement on permanent load shedding for two years, hints at ‘good performance’ incentives for staff

Eskom clarifies its media briefing statement on rolling blackouts while the new Eskom board sets ambitious targets and hints at staff incentives to boost embattled power stations.

few short hours after an “urgent media briefing”, Eskom backtracked somewhat hastily, saying some media headlines that screamed dire warnings of permanent rolling blackouts for two years were incorrect.

“Eskom has considered implementing permanent stage two and three load-shedding to give the public more predictability. However, this is not possible as it would not guarantee that load shedding would remain at the lower levels,” spokesperson Sikonathi Mantshasha clarified on Sunday afternoon.

The confusion from the press came in when the chairman of the Eskom board Mpho Makwana quite clearly said that the execution of the recovery plan relied on power stations being given the space to add additional capacity and do proper maintenance without firefighting, “…or create some predictability by implementing a permanent stage two or three (load shedding) for the next two years in order to give sufficient space for maintenance while giving the country a level of predictability or consistency to plan their livelihoods better. Shuttling from one stage to another within a short space of time is not good for the business community”, he said.

Makwana told journalists earlier in the day that the board had been in office for 110 days and had to hit the ground running, with more than 50 meetings of various board committees over 112 days.

“The generation recovery plan that was approved by the board on 10 December, has been stress tested. The plant performance recovery plan which is at the final stages of being approved by the shareholder will be driven vigorously and an external project management company will assist the board in stress testing and monitoring the execution of this recovery plan,” Makwana said.

Recovery in at least two years

However, he said that realistically, the recovery of the Eskom coal fleet could not be achieved in the short term. “It will take at least two years to improve the energy availability factor (EAF) from the current 58% to 70%. The journey of the turnaround will see a stretch target EAF being driven toward 60% by 31 March 2023, a mere 10 weeks away, then 65% EAF by 31 March 2024 and 70% by 31 March 2025,” he said.

Chris Yelland, an energy analyst and managing director of EE Business Intelligence, says this could be quite difficult and represents an extremely ambitious target. “EAF has been on a downward trend for the last 10 years and it represents an average of 80 generators. Before EAF can start to go up, it needs to bottom out and then start climbing so a two-year growth to an annual EAF of 70% is going to be quite a stretch,” he says.

Meanwhile, at the World Economic Forum last week, an overly confident Finance Minister Enoch Godongwana told Reuters that rolling blackouts would be a thing of the past in 12 to 18 months.

Makwana warned that factors key to the success of Eskom’s recovery include fixing systematic issues such as leadership, organizational culture, and poor internal controls.

Makwana said the quickest targets would be the recovery of the Kendal, Matla, Majuba, Duvha, Tutuka, and Kusile power stations, which should be prioritized in terms of human resources, capital allocation, and original equipment manufacturer (OEM) support.

“The recovery of the three units at Kusile, equivalent to 2,160MW send-out, must be prioritized,” he said, adding that the current estimated return to service is the first quarter of 2024. Other critical action points include driving the commissioning of Kusile unit 5 which will add an additional 720MW by August 2023.

The Eskom board says the combination of restoring the six stations to a “reliable” condition and an additional unit at Kusile will lead to the end of rolling blackouts within two years. However, Makwana said the better-performing power stations such as Matimba, Medupi, and Lethabo would also need Capex allocation, manpower, and maintenance time to ensure continued good performance.

Staff motivation

When it came to internal staff motivation, Makwana said the power utility currently offered “no incentive for good performance”. This hints at increased staff incentives at better-performing power stations. This is unlikely to sit well with Eskom users who face a whopping 18.65% tariff increase from April, followed by another increase of 12.74% from April 2024.
Yelland says it sounds as if the board is considering staff incentives at the power station level, where morale is very low. “But bonuses have to be carefully thought through to avoid perverse incentives by people playing the system,” he cautions.

Makwana warned that although the country is experiencing higher stages of load shedding (stage six in recent weeks and daily rolling blackouts since 1 January), it was likely to deteriorate further in winter when electricity demand was higher.

On another Note … The President

Ramaphosa urges Eskom to delay 19% power price hike

President Cyril Ramaphosa has appealed to the board of South Africa’s cash-strapped power utility to suspend its biggest electricity-price increase in more than a decade as the nation faces two more years of rolling blackouts.

Eskom Holdings SOC Ltd. won approval from the national energy regulator to raise electricity tariffs by an inflation-beating 18.65% and 12.74% for the next two years on Jan. 19. The first increase is set to take effect in April.

“It will not be fair to impose the tariff on our people while there is load-shedding,” he said, using a local term for power cuts.

Ramaphosa’s comments come after Eskom said the country could face two years of persistent blackouts as it overhauls its aging power stations. He spoke in the central Free State province.

South Africa is suffering from an energy crisis, with Eskom implementing blackouts for more than 200 days last year and every day so far in 2023.

The rolling outages are needed to protect the grid from collapse when the company’s aging, mostly coal-fed plants can’t meet demand.

An additional 6,000 megawatts of capacity is needed to stabilize the grid and a “great deal of progress” is being made in unlocking logjams to close the shortfall, Ramaphosa said.

In addition to procuring extra capacity, the government will ensure Eskom’s diesel-fed power stations at Gourikwa and Ankerlig have enough fuel to boost power output when its coal-fired plants can’t meet demand, he said. That would reduce the severity of outages.

Eskom produces almost all the country’s electricity, and blackouts curb output in Africa’s most industrialized economy.

Intense outages imposed earlier this month have taken a toll on industry and agriculture, and there’s a 45% chance of the nation slipping into a recession this year, a Bloomberg survey of economists shows.

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