Eskom: Critical factor in power supply

The electricity industry has three components ‘ the generation of electricity, the transmission system or grid of high voltage lines and the distribution network that gets it to the individual customers. Each component has to be as effective and as efficient as the other for the whole system to operate reliably. There are three other important features of our electricity industry that should be mentioned at the outset. The first is that it is predominantly a coal-based system. This means that we have to factor in a diversification of energy sources in future in order to make our contribution to the reduction of greenhouse gases. The second is that the main generation capacity is located in the north of the country with the Cape being supplied by a grid and transmission lines. Finally there is a limit to what we can import from our neighbours, both through limited existing capacity in the sub-continent and because we wish to depend on this source only for our reserve margin. South Africa is a major producer of electricity and its supply grid is one of the most extensive and effective in the world. This is a very important national asset and one of the most important components of our competitive advantage as an economy. The very large construction programme of the famous ‘six packs’ in the 1970’s and 1980’s meant that when the economy began to stagnate from the early 1980’s through to the mid 1990’s there was considerable excess capacity. Power stations were mothballed and generation capacity receded. One of the first things that the new government looked at after 1994 was the electricity supply system. We took careful note of developments elsewhere and studied the trends toward creating energy markets and bringing private generators into those markets. We have walked a careful path because the issues are complex. In the last few years new lessons are being learnt in the energy sector. It is clear that fragmented private producers in an energy market will not always act in an optimal manner. Further, individual economies run real risks in being exposed to long energy supply lines. California is an illustration of the first problem and the current dilemmas facing many European economies dependent on gas pipelines from Russia an example of the second. The design and security of an electricity and energy system is a macroeconomic and profoundly strategic issue and requires depth of technical expertise. In this latter respect Eskom is indeed a national jewel. Our unique capacities in nuclear technology are also going to be of great strategic importance for future energy production. What no one predicted a few years ago was that we would be caught napping by our own economic success. Fortunately we are well placed to respond to this lapse. The decision was taken in 2004 to mandate Eskom to fast track its planning for new generation capacity. At least 70 percent of this new capacity would be the responsibility of Eskom. It was also important to continue to introduce Independent Power Producers. In order to facilitate this Eskom will be the buyer of their output. In addition the decision to proceed with the Pebble Bed Modular Reactor (PBMR) technology and its incorporation into future planning took careful consideration. As it stands the higher rate of growth is already being factored into the planning process. Since electricity is a key advantage to our economy our planning must try and keep our electricity prices competitive. The fact that Eskom can go into the capital markets and raise private capital at very competitive rates is of huge macroeconomic importance. If R84 billion of investment had to be factored into the National Budget then the implications would be massive. There is therefore very little logic to shift this expenditure to the budget when it does not belong there. The task now is to move forward with alacrity. We also need to take into account the intricacies of the grid and electricity supply. South Africa’s high altitude, heat and propensity for lightning and fires provide additional challenges. Stated simply moving the electricity around thousands of kilometres requires a fine balancing act of the energy system. The demand for electricity fluctuates during the course of the day and over the seasons of the year. It would be costly, wasteful and technically problematic to try and keep the system at full capacity all the time so there are basically different types of generation – a base load, a mid-range that comes into play at certain times and then peaking plants designed to handle short-lived spikes of demand. South Africa’s full operational capacity in 2005 was 37500 MW with a reserve margin of just under 15%. Peak demand in 2005 was 36146 MW. The base load demand has risen significantly over the last few years and this makes dealing with the peaks more difficult. On the supply side the build programme is now on its way. The refurbishment of mothballed stations of Camden, Grootvlei (and Komati is in progress with completion timelines starting 2007. Further, wo new peaking stations are now under construction. In addition other new base load plants are in the pipeline. However, whichever way we look at it 2006 and 2007 are going to be tight years where demand management will be important. As indicated the Cape poses particular problems. The problems lie in the generation capacity located in the three Cape Provinces and the long transmission lines. The full maximum requirement for the Cape is currently being met with one Koeberg unit currently on load, and supplemented by power transfers from Mpumalanga. To meet the morning and evening peak requirements and attend to emergencies, peaking generation and supplementary suplplies are provided from other parts of the country. Koeberg generators and their refuelling process follow strict maintenance schedules and in rotation are taken out of commission. This was done with one of the generators but when it was started up problems emerged. We now know that this was due to extensive damage caused by a bolt. This is now the subject of a criminal investigation and it will only be appropriate to provide more information when it is complete. The second generator also needs to be taken out for maintenance. This therefore posses a major problem for the system and makes it heavily dependent on the long transmission lines. Systems are in place to ensure that the problems being experienced are managed. Expanding and strengthening the South African energy system is an exciting economic development. It will have a major economic impact on many sectors of the economy. It opens a whole new industry in South Africa around the PBMR and it provides a host of technical and professional employment opportunities. So we all need to exercise extra care in our energy use as it is a valuable asset.

March 2006
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