Eskom’s deficiency in forward thinking makes oil firms rich

By Keith Bryer Time of article published Aug 1, 2014

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IF EVER there was a cast-iron argument for a new nuclear power station, it is the news of what it is costing Eskom (and, therefore, all electricity consumers) to meet electricity demand in the Western Cape. The humungous cost of doing this is an even stronger argument against the claim that wind and photovoltaic electricity generation can solve our base-load electricity shortage.

Soaking up Eskom’s cash are the two diesel-powered turbine plants originally intended for back-up power needed when demand surges or there are temporary supply shortfalls.

It is sensible for any electricity supplier to have such facilities. But the way Eskom is compelled to use these fuel-gobbling generators makes for horrendous bills. Their consumption produces beatific smiles on the faces of oil company chief executives.

So huge is the diesel appetite of these monsters that the road tankers bringing in their fuel cannot keep up.

In the past financial year, Eskom said it had spent R10.5 billion on diesel. Significantly, this was double the budget. Two years ago, it spent R8.1bn, having been forced by the National Energy Regulator of SA’s (Nersa’s) clampdown on electricity price rises, against a R2.5bn budget.

Behind these figures lies another truth – the non-budgeted spend had to do with using these diesel generators permanently, rather than as occasional back up.

Poor planning and a failure to take decisions for the long-term, spending for today rather than spending for tomorrow, is Eskom’s fault, nobody else’s. Its management has had 20 years to take the right investment decisions rather than, one suspects, concentrating on employment equity, salaries, and their own perquisites.

What is happening now is a frantic rush by Eskom to catch up. Only a dramatic fall in electricity demand and a massive economic depression will give it the slightest hope of doing so.

Solar panels, wind turbines, salt storage, batteries, inverters and converting to gas are being leapt upon as a way of getting out of a mire of Eskom’s own making.

Medupi has a chance of making some impact on the task but it is coal-fired. For a long-term and safer solution a decision on the nuclear option cannot be put off much longer. It may already be too late.

Of all the alternative strategies being hailed as a solution, popular as they may be with the green lobby, encouraging independent power producers is the most sensible but it is so tangled in the bowels of bureaucracy, it is not happening fast enough.

The gas strategy document, however wise its recommendations, will not – any time soon – become reality.

Even such far-sighted private sector planning as that behind the intended liquefied natural gas import terminal at Saldanha Bay, is being held up by squabbling parastatal organisations – the National Ports Authority, Nersa and the Industrial Development Corporation. Even getting all the approvals the project had to comply with took four years.

This import terminal project has been designated as strategic by the government. It is 50 percent financed by the Industrial Development Corporation. But even this did not speed up the process, to the eternal shame of the regulatory bodies involved. If, as it is rumoured, there is cronyism involved, it is an even greater scandal.

Meanwhile, fracking for gas is being fought tooth and nail by the green lobby and any prospect of a South African source of gas replacing costly diesel is receding.

As far as the oil companies are concerned, this is all good news. Large dollops of cash continue to come rolling in as the Western Cape generators gobble up millions of litres of diesel, with Eskom customers and taxpayers paying the bill.

More turbines may soon be in operation nationally and by then the idea (they hope) is that they will be using cheaper gas.

Until then (never, if the anti-fracking lobby has its way) the Eskom fuel bill will continue to top up oil company profits as its turbines swallow 40 tons of diesel an hour.

Keith Bryer is a retired corporate communications consultant.

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