Arresting Eskom’s decline26 April 2019
So far the Medupi and Kusile coal megaprojects, each 6 x 800 MW, are not having their intended effect of adding much needed new generating capacity in South Africa. An 11 February statement from the Eskom board (in response to an escalation in “load shedding” requirements) noted that: “The Medupi and Kusile power stations – the core of the new build programme – are continuing to show a lack of reliability to contribute meaningfully to Eskom’s generating capacity, which is a serious concern.”
The Eskom board says it “has resolved to institute an urgent review to establish when, realistically, these projects will be completed, the extent of design and other operational faults, what steps can be implemented to minimise the ever-escalating costs and what can be done to increase output.”
“We remain uncomfortable about the stability of the generating system,” said the board chairman Jabu Mabuza.
One particular issue affecting the operating units at the Medupi and Kusile stations (which are being brought on line progressively) is ash handling, with embarrassingly large accumulations of ash. The supplier of the ash handling equipment, Clyde Bergemann, has ascribed the problems to poor operating practices by Eskom, pointing out that similar ash handling equipment has been operating well at Eskom’s Matla and Kriel plants. It has also been suggested that the quality of coal being used is much lower than the design level, due to Eskom’s continuing financial malaise and its need to save money.
As well as the Medupi and Kusile problems, Eskom has also experienced a general decline in generating plant performance. At January hearings by the South African energy regulator NERSA on Eskom’s request for a 15% rate increase over the next three years, Brad Ross- Jones, generation group manager, said there were numerous factors contributing to this decline.
“The root cause goes back to the late 90s when Eskom needed to make decisions on building new stations by 1999 at the latest, to meet demand by 2007 but was not allowed to. This meant that the final investment decision could only be taken in December 2006 which was too late,” Ross-Jones said.
“This was later exacerbated by delays in the construction of Medupi and Kusile. It should also be noted that one of the key reasons for the delays was an accelerated design period as a result of the late decision and the subsequent over-optimistic expectations on delivery dates,” he said.
This all led to inadequate capacity to meet demand meaning inadequate maintenance space to perform an ideal level of preventative maintenance, particularly mid-life refurbishments.
Eskom is operating an ageing generation fleet, notwithstanding the new power stations under construction, with more than half of its coal plants over 37 years old.
Due to various constraints, most notably inadequate capacity and financial limitations, the mid-life refurbishment and enhancement projects that are required to maintain and improve technical performance as plants age, have generally not been implemented.
Together with high plant utilisation that places higher than expected wear and tear on components and systems, in particular since 2008, this has contributed to a steady decline in generating plant availability over the past decade.
“In the lead up to and during the 2010 World Cup, Eskom had a de facto obligation to meet national electricity demand embodied by the “Keep the Lights On” (KLO) requirement in Eskom’s shareholder compact and required Eskom to both defer maintenance and run the plant very hard when it was available”, Ross-Jones said.
This situation was not sustainable and in subsequent years, planned maintenance levels and spend were increased despite the fact that this resulted in load shedding. This was essential but only possible because the shareholder (the South African government) removed the KLO requirement from the shareholder compact as from 1 April 2013.
Due to a combination of performance improvements, additional capacity from both Eskom and IPPs, as well as stagnant demand, the average energy availability factor improved to 78% in 2017/18 from a low point of 72%.
“This improvement was, unfortunately, short- lived and the reasons for this latest decline are many, complex and varied. The historical under- maintenance and hard running of an ageing fleet still has the highest impact on plant failures, but shortages of experienced skills and staff morale, driven by the recent State Capture allegations and current uncertainty are also amongst the contributing factors,” Ross-Jones said. “The solution is not simple but can be made simpler by focussing on what’s most important:
1. Costs have to be reduced, but in a manner that ensures that the skills we do have and require are retained and even sourced from outside whilst reviving the morale of all staff.
2. Even with significant cost reductions, the price of electricity must increase to restore the generation performance levels.
3. An optimum level of maintenance must be executed, even if this means high levels of expensive OCGT usage and/or load shedding.
4. The new build units at Medupi and Kusile are not performing as expected, mostly due to design defects that need to be addressed.
5. All activities and targets that do not directly contribute to the above points should be parked until Eskom is sustainably stabilised.”
Cleaning up at Eskom
As part of its submissions to the NERSA regulatory hearings on the proposed 15% rate increase over the next three years Eskom emphasised it was “committed to rooting out fraud and corruption, pointing to the following recent actions:
- 14 implicated senior executives exited. Finalisation of outstanding disciplinary hearings relating to senior executives being accelerated.
- 12 criminal cases opened, five of which involve nine senior executives.
- A total of 1 049 outstanding cases since April 2018, of which 934 have been finalised, resulting in 115 under consideration.
- As of 31 December 2018, some 295 whistle blow cases were under investigation, 140 cases had been completed.
- ”Lifestyle audits” of senio rmanagement in progress.
- All irregular supplier contracts have been investigated (and five previous suppliers no longer doing business with Eskom). R902 million “overcharged” by McKinsey recovered.
- Co-operating with eight regulatory bodies currently conducting major investigations.