Media release on the adopted five-point plan to address the electricity challenges in the country
The Five (5) point plan is a short and medium term (next 30 days, as well the next 3 years) intervention to normalise electricity supply to the grid for the next three years. These interventions are to be implemented in a manner to assist Eskom. This is to secure the developmental role of Eskom in the socio-economic development of the country.
It is also important to note that in order to attract private players into the generation space the current "single buyer" office in Eskom Transmission will have to be ring-fenced within Eskom. This is to ensure fair and open access opportunity to supply into the grid. In addition, it will also assist in the oversight and regulatory monitoring of the Transmission business.
Background
On 9 December 2014, the Economic Sectors, Employment and Infrastructure Development Ministers' Cluster met to consider proposals for resolving the current electricity challenges. The Cluster adopted a Five Point Plan which will serve as a framework for action plans. The Five Point Plan was adopted by the Cabinet meeting on the 10 December 2014.
Cabinet agreed that in addressing the electricity challenges, it is essential that our national interests be our primary consideration. This acknowledges that some parts of society and the business sector may be impacted more than others and Government will need to carefully consider difficult trade-offs.
The purpose of the 5 Point Plan is to present a strategy of immediate and short term interventions (next 3 years), to limit the risk of load shedding, in a manner that also ensures that Eskom is able to play a strategic role in the developmental state despite its constrained capacity to do so over the next 3 years.
These interventions are premised on ensuring that Eskom creates a space to improve plant reliability. Eskom will participate in building new capacity through projects in gas, coal, regional projects and Independent Power Producers.
Government believes that the provision of sufficient electricity is essential to support the economic growth and social development imperatives of the country. It is in this context that we announced an ambitious infrastructure build programme to ensure that going forward, the economy is supported by the requisite infrastructure.
2. Five-point Plan
The five key interventions are as follows:
2.1 Eskom Emergency Measures - next 30 days
I. Focus will be given to improve strategic maintenance and operational efficiency. Approximately 14,000MW or about one-third of total Eskom generation capacity is currently offline. Of this 14,000MW, over 8,000MW is due to unplanned maintenance. An independent assessment on Eskom's maintenance practices will be undertaken to identify areas of improvement.
As part of the interventions, Eskom will prioritise key plants for focused and strategic maintenance. This approach will lead to plants and units accounting for substantial MWs being brought back online. All possible avenues to improve the operational efficiency of Eskom power stations will be explored so as to improve Eskom's current level of availability from 72% to its target of 80%.
II. Given the current capacity supply constraints and the delays in the delivery of the current build programme, Eskom has had to run diesel generators at a higher load factor than what the regulator had provided for. This has exhausted available funds and threatens the financial sustainability of Eskom. Eskom has kept the lights on by deferring plant maintenance which has led to this level of unpredictability of plant performance.
III. It is important that diesel supply constraints are addressed. The collaboration between critical SOCs (PetroSA, TNPA, and Strategic Fuel Fund) is supported by an MoU which was signed on Thursday 11 December 2014. The MOU will resolve the diesel logistics and storage as well as prioritise a supply of diesel to Eskom in light of emergency conditions. This must be balanced against creating artificial diesel shortages in the country which may drive up the price of diesel.
IV. Eskom will provide a detailed finance plan to manage its cash flow until the end of January 2015. This Plan will be presented to the Energy Ministerial Committee by the end of 2014.
V. Simultaneously, Government will finalise the funding model for Eskom by the end of 2014 to ensure the future sustainability of the company.
2.2 Co-generation
I. There is currently 1,390MW being supplied to the grid through co-generation. This is governed by Power Purchase Agreements (PPAs) between the co-generators and Eskom. These PPAs expire in March 2015. These PPAs will be extended by another 3 years by the end of January 2015. This will ensure that this capacity continues to be provided to the system beyond March 2015.
In line with the Electricity Regulation Act, government will be going on a procurement process for additional co-generation opportunities that exist. An additional 1,000MW are available within South Africa which will be brought online within the next 18 months. This will ensure additional electricity supply to the grid.
II. The Minister of Energy, Ms Tina Joemat-Pettersson has provided for 800MW of new co-generation capacity from, inter alia, the Sugar and Paper industries. To unlock this capacity, the Department of Energy will advertise a Request for Proposal (RFP) in the weekend newspapers on 14 December 2014.
2.3 Gas imports
Gas will be sourced to generate electricity of between 500MW to 2,000MW in the short to medium term.
This would be new-build and should come on-stream within 36 months. In addition, importation of gas through Saldanha will replace diesel for Eskom's Ankerlig OCGT plant. This will result in efficiency improvements and an additional 10% capacity improvement.
Government will embark on country to country negotiations to access gas from African countries that are able to supply South Africa. A key opportunity is for gas to be shipped via Saldanha Bay and/or alternatively from Mozambique.
2.4 Coal Independent Power Producers (IPPs)
This programme is at an advanced level following an RFI issued earlier this year and will provide for IPPs with a generation capacity of about 2,400MW. The RFP will be issued and advertised in the newspapers this weekend on 14 December 2014. As with co-generation, the emphasis in this programme will not only be to ensure additional electricity supply to the grid but, also to make sure that costs are contained through extensive contact management oversight.
2.5 Demand-side Management
(a) Government and Eskom will be engaging the energy intensive users to explore further efficiency improvement opportunities.
(b) There are demand-side measures that have not been utilised in the country. The Demand Response will free up 500 MW within 6 months. An expression of interest will be issued on Sunday 14 October 2104 regarding the demand management measures that could be used to reduce demand as quickly as possible.
3. Technical Implementation Arrangements
A Technical Implementation War-room on the Electricity Crisis has been established. It comprises of DOE, COGTA, DPE, NT, DTI, EDD, DWS, and Eskom. The War-room is housed at Eskom. The War-room will report to the Co-ordinating Ministers and provide further details and public updates regarding the implementation of this plan.
Statement issued by Zodwa Visser, Department of Energy, December 15 2014
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