As we plunged into stage 4 load shedding over the weekend, the United Kingdom, United States and European Union were all facing their own various energy crises.
Business Leadership South Africa (BLSA) CEO Busi Mavuso said she found little solace in the fact that South Africa is not alone in facing an energy crisis.
California had warnings of blackouts last week as extreme temperatures led everyone to switch on their air conditioners and put the grid under unprecedented pressure.
The EU and UK are facing record gas and electricity prices, leading to a cost-of-living crisis.
The EU is desperately trying to reduce its reliance on Russian gas for energy.
“These global crises are affecting us though – many countries are accelerating their transition plans, aiming to bring more renewable energy onto the grid faster. Apart from those facing immediate crises, many other countries have aggressive build programmes for renewable generation, led by China which plans to add at least 100GW of renewable energy annually over the next five years (that is about three times our entire nameplate energy capacity every year),” Mavuso said on Monday.
There's a global rush on components for solar and wind energy production that will complicate global supply chains and capacity, just as South Africa is planning an aggressive ramp up in build rates of our own.
“Already we have been tripped up by global conditions. Round 5 of the Renewable Energy Independent Power Producers Programme has been caught out by delays between the finalisation of preferred bidders and financial close. Financial close happens when all financial terms, including the amounts needed for capital expenditure and the cost of finance, are agreed and signed off. Up to that moment, projects are vulnerable to moving market prices,” BLSA’s CEO said in her weekly newsletter.
When Round 5’s preferred bidders were announced, they came in at a record low average of 47c/kWh – less than 20% of the average cost of Eskom’s existing production.
“But the price hikes since have tripped them up. It is now doubtful that all, or even most, of the projects will be able to close,” Mavuso added.
Meanwhile, Eskom COO, Jan Oberholzer, briefed the country on Monday morning, and said that stage 4 was implemented to allow for the replenishment of diesel.
He said load shedding would continue overnight to assist with diesel and dam levels.
Oberholzer said, last week, several generators were shut down following breakdowns. He added that by midweek, five more units had to be taken off, with more units down by the end of the week.
Oberholzer said, by the weekend, Eskom had to take drastic steps to replace diesel.
"It was a disastrous week for generation. We had 42 units tripping during the week, 37 have returned," he said.
Koeberg Unit 2 has been off since the beginning of the month due to mechanical issues, and Oberholzer said teams are working to bring it back to service.
He added that steps put in place to assist or ease the burden of load shedding by President Cyril Ramaphosa could only yield benefits later - not for the next 12 months.
He said, for now, Eskom was relying on its coal fleet.
BLSA says delays must be avoided at all costs
Mavuso went on to state, “The first lesson is that delays must be avoided at all costs. The longer the time between preferred bidder and close, the higher the chance that market prices will move. In the case of Round 5, delays were caused by the Department of Trade, Industry and Competition’s requirement that projects meet targeted volumes of local content. The entire local production capacity is well known, and Round 5 projects exceeded it. Every moment of delay in stabilising our electricity supply comes at a cost to our industrial sector which has been shrinking due to high energy prices and uncertain supply, so these delays were an own goal for overall industrial development. Swift progression from preferred bidder status to financial close needs to be the absolute priority. Efforts to drive localisation must come second.”
She added that localisation is still important, but, “We cannot magically produce capacity into existence, it has to be created over time. For that to happen we need a clear pipeline of new generating capacity We also must ensure that local production matches the prices and quality available internationally. The primary concern, however, must be that we do not delay new energy production coming onto grid.”
“We are now progressing into a massive new 5.2GW Round 6 of the programme that will be hitting global production capacity at the same time as global demand has spiked. Prices are very likely to exceed what was bid in Round 5. But we must learn the lessons and ensure we can swiftly get from preferred bidder status to financial close. We need to minimise risk of markets turning against us and we need to ensure electricity is added to the grid as quickly as possible,” Mavuso further added.
BLSA said it is committed to various initiatives to support government to solve the energy crisis.
BUSINESS REPORT