ESKOM CEO sparks fears of total grid collapse

The admission by Eskom’s CEO, Tshediso Matona, that it faces serious financial trouble and that load shedding will commence as from next week onwards do not bode well for South Africans and business in particular. Nevertheless business commends the CEO for admitting that Eskom faces a national emergency!

A bigger worry, though, is the fear of unforeseen incidents that might cause the entire system to collapse. Eskom’s diesel budget is also very limited and it pins it hopes on government to assist. The Afrikaanse Handelsinstitute, AHi, wants Eskom to provide a detailed finance plan to government, outlining how it will manage its cash flow. However, many municipalities are not paying their bills and according to Van der Rheede (AHi) municipal debt bedevils Eskom’s financial sustainability as some municipalities are “completely dysfunctional”.

h3. Liquidity

Eskom’s liquidity position is also heading for a significant decline in profit due to rising costs and it’s reserves, valued at R20bn, are under severe pressure, according to the AHi. “Megaprojects are delayed, but Eskom is very close to synchronising Medupi unit 6, with Kusile to follow by the end of year. Erratic power will flow to the grid before full power is achieved during the first half of 2015,” said Van der Rheede. “System constraints will heightened from January 2015, with load shedding as from next week onwards.” The AHi encourages businesses to prepare themselves for a rough ride and to rather invest in their own power supply.

h3. Deals with Private Suppliers

The current energy challenges have put Eskom’s Renewable Energy Independent Power Producer (IPP) Procurement Programme in the spotlight again. Eskom stated on Tuesday that it is important to note that its IPP programme is being driven by the department of energy and that the current IPPs that have signed – about 22 of them – have been connected over two years ago already. Plans are underway to connect even more.

“Eskom remains committed to developing the electricity supply industry by facilitating the integration of IPPs into the national grid and buying electricity from IPPs for national distribution,” Eskom said. “IPPs play an important role in ensuring the security of supply at a time when Eskom’s generating capacity is closely matched by electricity demand.” Eskom interfaces with IPPs through two organisational units. Firstly, Eskom’s grid access unit manages the end-to-end network service relationship with generators and IPPs connecting to Eskom’s grid. “Its other key role is to facilitate grid access by ensuring the process is efficient and all commercial options for IPPs are available in a transparent and non-discriminatory manner,” according to Eskom.

Secondly, the buyer is housed in the energy planning and market development unit, which enters into power purchase agreements with IPPs. This unit also assists the department of energy with the country’s integrated resource plan. The first project under the RE-IPP was connected to the grid on September 27 2013 and the first IPP was commissioned on 15 November 2013. Eskom has successfully facilitated the connection of 22 renewable energy independent power producer (RE-IPP) projects with a capacity of 1 076 MW to the grid. Of these a total of 467.3 MW is currently available to the system.

The department of energy has approved an additional 1 457 MW pursuant to the third bid submission. No contracts have yet been signed for this capacity. A further 1 005 MW of capacity was signed under the department of energy’s Peaker programme.

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