Electricity supply in South Africa will remain uncertain for the next five years, with a reserve margin of just over half of what it should be, Parliament’s public enterprises portfolio committee heard on Wednesday.
Briefing members of Parliament, Anton Eberhard, a professor at the University of Cape Town’s Graduate School of Business, said one of the main reasons for this was a 2001 Cabinet decision not to allow Eskom to build new generating capacity at that time.
”It’s clear … that South Africa’s security of supply is inadequate … the root cause was … policy uncertainty and the prohibition on Eskom building new capacity. A Cabinet memo in 2001 actually prevented Eskom from building [new generating plants], and we had this critical period between 2001 and 2004 where there was this hiatus.
”The expectation was that private power would come in. In fact nothing was done to facilitate that … it’s not so much that the policy was basically wrong; the policy wasn’t actually implemented.
”So the legislation wasn’t in place, the contracting, the competitive tenders, all those necessary steps to get private sector in, didn’t happen in that period,” he said.
Earlier, Eskom chief executive Thulani Gcabashe told the committee that Eskom’s current reserve margin was between 8% to 10%.
”Ideally it should be at the global benchmark figure of 15%,” he said.
The reserve margin had been declining since 2001, when it was 25%.
Gcabashe said reasons for the decline included a growing Eskom customer base, which grew from two million in 2001 to four million this year; higher than expected GDP growth over the past three years; and a late start [in 2004] to the construction of new plants.
Speaking to the South African Press Agency after the briefing, he said it could take up to five years (2012) before Eskom’s R97-billion investment in new generating capacity would raise the reserve margin to the benchmark 15%.
Looking ahead to the winter, he told the committee that Eskom would be able to cope over this period — the time when the utility experiences the highest demand.
Demand was forecast to peak at 36 306 megawatts (MW) in June this year, well over last year’s high of 34 807MW.
”We feel we have a manageable situation over this period,” Gcabashe told members, but warned there was a risk of power failures should breakdowns exceed an allowed-for 1 500MW.
Eberhard, referring to the cost of South Africa’s most recent major power cut on January 18, said this had been due to a generating shortfall of about 2 800MW, as well as unplanned outages of 4 900MW, due mainly to boiler leaks.
”The cost of this [power cut] was very significant. Eskom estimates the cost of unserved electricity to be about R75 000 a megawatt-hour, and that was more or less a R3,75-billion hit to the economy.”
He dismissed arguments that higher-than-expected electricity demand linked to higher economic growth was responsible for Eskom’s supply woes.
”In fact, when you look at the figures, they don’t support that premise. Both Eskom and the [National Electricity] Regulator have been remarkably accurate in forecasting electricity demand.”
Plans drawn up by these institutions in 2001, 2003, 2005 and 2006 were ”pretty spot on where our demand was at the end of last year”, he said.
Re-emphasising the medium-term supply situation, Eberhard said: ”The fact that new capacity takes time to put on line, particularly baseload … means that even though we commit a number of investment decisions now, we’re not going to get relief before 2011.”
For the next five years, ”we will remain with a very, very tight situation”, he said. – Sapa