By Lehlohonolo Lehana.
State owned power utility Eskom’s decision to postpone the decommissioning of three of its older, coal-fired power stations will cost the utility between R85bn and R90bn.
Early last year, South Africa told its partners in the pact it planned to delay the planned shutdown of coal-fired plants — 14 of which are operated by state utility Eskom — to address record electricity outages. The authorities didn’t set new closure dates.
These costs would mostly be for purchasing the coal to power stations and operational maintenance, Eskom CEO Dan Marokane told the Presidential Climate Commission (PCC), at a meeting in Johannesburg on Friday.
Marokane said: “We have a figure of just about R85 to R90-billion rands for that extended coal operation. About 55 to 60% of that relates to fuel costs, oil costs, of which coal costs would have been incurred otherwise elsewhere in the stations that were going to pick up the load for taking these stations out. So that’s a ‘no regret’ part of our cost.”
He continued that “the remaining component deals with the operational maintenance aspects of running [the power stations’] units. There’s a revenue associated with this operation of about R102-billion, so on a net basis it cancels off”.
He said that when he considered how long it would take to bring on other technologies to address the energy supply shortfall that decommissioning would incur, it made “more sense” to do it this way.
Morokane also explained that the Eskom executive team has been in touch with the PCC and the Just Energy Transition (JET) project management unit in the presidency to “understand the storyline from the perspective of us delaying the decommissioning of some of the coal stations”.
He elaborated on the context and rationale behind the move to delay the decommissioning of the power stations.
“There’s a context that needs to be taken into consideration as we begin to navigate these issues with how we transition and for us, the issue of the national circumstances is an important one. And I think I don’t have to remind the members here of the impacts of the intense load shedding that was experienced last year, and the implications on the economy as a whole. So for us as Eskom, looking at that programme of decommissioning power stations, we had to take into consideration the reality and the threat that still remains with regards to load shedding and the need to balance supply and demand.”
Morokane continued that “when we departed and set out the strategy for the Eskom 2025 strategy, there are some underpinning assumptions that are quite material. First one being the energy availability factor (EAF) at the time, and where we saw it going. We know that assumption has been violated in the sense that we are more on the negative aspect of it and hence the results that we saw.”
“The second one is that whilst the DMRE had really moved swiftly with the risk mitigation initiatives around the independent power producers, those projects did not come into place as we expected, and so you sit with a situation where the material conditions that are meant to ensure that your situation from a supplier perspective have not panned out as anticipated, and therefore the risk remains and in the face of that, by taking off operational units you can only increase the risk the country is likely to face. And that’s really the context that we sit with.”
South Africa will propose that it close Eskom’s Camden, Grootvlei and Hendrina power plants between 2027 and 2030, instead of a prior schedule of 2023 to 2027. In addition, in order to meet an annual emission-reduction target of 50-million to 71-million tons of carbon dioxide equivalent required by the Climate Investment Funds (CIF), the presidency is in talks with Eskom to close a number of units at other power plants. That number has yet to be decided.
Meanwhile load shedding has been suspended for 72 days, Eskom said on Friday, with generation performance still surpassing the year’s winter forecast.
The Unplanned Capacity Loss Factor (UCLF) decreased to 28.0% in the financial year to date (1 April 2024 to 6 June 2024), a reduction from 35.7% recorded in the same period last year (1 April 2023 to 6 June 2023), Eskom said.
This reduction in UCLF represents an ~8% improvement in the current financial year (1 April 2024 to 6 June 2024) as compared to the previous year in the same period, it added.