SA faces power crunch from next year

[miningmx.com] — SOUTH Africa’s electricity supply situation will be even tighter than originally forecast over the next five years because of further delays in bringing the Medupi and Kusile power stations on line.

This emerged at a briefing for financial media by Eskom CEO Brian Dames and chairperson Mpho Makwana held at Megawatt Park on Monday.

Dames confirmed that the first generating set at the Medupi station, which had already been delayed to the second quarter of 2012, would only come into commercial operations “towards the end of 2012′.

He also said commercial operation of the first generating set at Kusile – already delayed by a year to mid-2014 – was now only expected at the beginning of 2015.

This latest revised schedule bears out RBC Capital Markets analyst Leon Esterhuizen’s recent pessimistic assessment of South Africa’s power situation.

In a research report based on the two studies on SA’s energy situation future recently released by the government, Esterhuizen highlighted “the very real possibility of the country running short of power for the most part of the next five years.

“This is significant, both because the two new coal-fired stations were previously thought to be enough to lift the supply squeeze, but also because the success of “keeping the lights on’ is now clearly shown to be crucially dependent on mitigation measures.’

When the first contracts were placed for both power stations in 2008, the original commercial start-up date for Medupi was September 2011 and for Kusile June 2013.

At this stage Medupi is running about 15 months behind schedule while Kusile is 18 months behind its original start-up date.

The latest six-month delay at Medupi appears to bear out the forecast made by Exxaro Resources financial director Wim de Klerk in December 2009.

At that stage the first generating set at Medupi was slated to kick in during the first half of 2012. De Klerk predicted a six-month delay because Eskom had insisted on a review of the coal supply contract.

That was denied at the time by Dames who, on Monday, repeated his claim that Exxaro’s estimate had been wrong and that the delay had been caused by other reasons.

Eskom’s latest assessment is that, on its base case supply/demand forecast, “there is a supply gap for the next five years with additional risk on existing commitments.

“Even pulling all levers to close the gap to their maximum potential, we are still short in the next three years.

“A safety net of last-resort measures is needed to close the rest of this gap and mitigate the risk that the levers do not deliver full potential.’

The “levers’ range from improved maintenance rates on Eskom generating plant to securing up to another 3,000MW of “interruptible load’ – power that can be switched off immediately at Eskom’s request – from small industrial and commercial customers as well as the residential sector.

That would be on top of the about 2,500MW of interruptible load already negotiated from large industrial customers.

Dames stressed that even when both Medupi and Kusile are up and running at full capacity, the country will still face major supply problems in the longer-term if it does not act swiftly on the next power station that must be built to kick in after Kusile.

In June, when Eskom released its 2010 annual results, chief officer for customer network business Erica Johnson said decisions had to be taken “within months’ on the next power station to be built after Kusile to avoid shortages from 2017.

Asked about this, Dames said that since then the government had delivered its integrated energy resource plan (IRP) laying out future policy.

He said: “The next power station to be built after Kusile will be a nuclear station and Eskom will be involved, but we need to get going soon because of the long lead times involved in such a project.’