Eskom cannot afford IPP prices - Dames

This solar power farm near Hazelmere Dam was officially opened President Jacob Zuma . The project is part of the government’s effort to use more renewable energy sources.partnership between Soitec and Ethekwini Municipality,has resulted in this solar plant.Picture supplied

This solar power farm near Hazelmere Dam was officially opened President Jacob Zuma . The project is part of the government’s effort to use more renewable energy sources.partnership between Soitec and Ethekwini Municipality,has resulted in this solar plant.Picture supplied

Published Mar 10, 2014

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Johannesburg - While Eskom was committed to using regional independent power producers (IPPs), most contracts that could have contributed to more power generation could not be concluded due to high price expectations, including payment in dollars, outgoing chief executive Brian Dames said on Friday.

He said Eskom had spent a substantial time negotiating with the four IPPs but could not agree on a price. The IPPs could have supplied 1 750 megawatts and had a potential of supplying 2 320MW; 1MW is enough to power about 200 middle-income South African homes at peak times.

Dames named the IPPs as Kudu to supply 600MW; Mmamabula, 900MW, Zesco, 200MW and Kariba South, 50MW.

He addressed a media briefing to explain the reintroduction of nationwide load shedding last Thursday. He said it was only recently that Eskom was allowed by the government to conclude power agreements with regional independent producers, which can be procured by the Department of Energy.

Dames said the department had introduced three bid windows for the renewable energy IPP purchase programme. Of the 19 renewable IPPs connected to the grid, three projects generating 99MW had achieved their contractual commercial operation date and eight were generating early energy. He said IPP supply agreements expired in December but had been extended to May.

Eskom expected the last project of the first bid window no later than the first half of next year.

Dames said over last week, some power stations in Mpumalanga were challenged due to continuous rainfall that resulted in wet coal. He said at shift change at Kendal, fine and wet coal was received from the open-cast mine, with low delivery of dry coal from the underground mine. Kendal supplemented the shortfall with fine and wet coal from the stockpile. “This makes handling of coal on conveying plants difficult, causing blockages and incline conveyor belts slipping.”

Dames said all emergency reserves were used: open cycle gas turbines were brought in, which was expensive; and demand market participation, including emergency cuts by industrial customers.

He said the four units at Kendal were recovered during the day by getting dryer, coarser underground coal. Dames said the system would remain tight until the end of summer and throughout winter until a substantial part of the build programme at Medupi power station delivered capacity.

“We apologise to all South Africans for the inconvenience caused,” he said, adding that introducing rolling blackouts was “a painful decision. We’re aware of the impact on people’s lives, on the economy.”

He said in anticipation of long duration rainfall, strategic stockpiles were set aside for such situations. However, given the length of this period, these stockpiles were depleted.

He said rainy weather was forecast this week. Any small change would have a significant impact, with risks including fuel shortages and increased plant maintenance.

Dames said Eskom’s plan considered a forced outage allowance of 6 500MW but this did not cater for significant events, such as those experienced last week, which would result in tighter operations and reliance on emergency reserves.

Eskom produces 95 percent of the nation’s power. It declared an emergency on March 6 after rains disrupted the coal supply used to generate more than 80 percent of its electricity.

Although the first rolling blackouts in six years ended the same night, the utility said there was a risk of more scheduled cuts, or load-shedding.

Chairman Zola Tsotsi said: “We have a vulnerable system and any shock to it can precipitate an emergency.”

Eskom will spend R500 billion through 2017, adding 11 000MW of capacity to the grid and servicing its aging fleet of plants. The first unit of the 4 764MW Medupi coal-fired plant will deliver power from the first of six units in the second half of this year. – Additional reporting by Bloomberg

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