Category Archives: Eskom

Eskom’s latest work on the IRP for the DoE rejects nuclear

Engineering News, Chris Yelland, 24 November, 2017.

Nuclear doesn’t make sense, does it?

The findings of the latest work on the draft Integrated Resource Plan for Electricity, IRP 2017, by Eskom for the South African Department of Energy (DoE) are proving to be somewhat problematic for Energy Minister David Mahlobo.

As a result, this latest work by Eskom, and all further work on IRP 2017, has now been taken out of the hands of both Eskom and the DoE planning technocrats by Minister Mahlobo and his nuclear team so they can “massage” it further with “policy adjustment”.

The Eskom work confirms studies by other respected research bodies in South Africa and abroad, as well as the statements by Finance Minister Malusi Gigaba at the recent World Bank and International Monetary Fund summit in New York, and in his medium-term budget policy statement, that the new-nuclear option for South Africa is both unnecessary and costly.

After modelling numerous scenarios in the latest work by Eskom, the study focusses on five broad scenario options, referred to by Eskom as: the Reference Case; the Optimum Plan; the Low Growth Scenario; the Carbon Budget Plan; and the Forced Nuclear scenario.

In the Forced Nuclear scenario, some 9,6 GW of new-nuclear power is “hardwired” (or forced) into the IRP model in the years to 2050, because none of the other scenarios modelled come up with this particular outcome, which appears to be preferred by the DoE nuclear team and the Zuma administration.

For the first time, this latest work by Eskom incorporates the cost of transmission infrastructure, by including these costs for all the generation technologies and scenarios modelled. Eskom concludes that contrary to what is often heard, the total cost of grid integration of renewable energy, coal, gas or nuclear is actually minimal in comparison to the cost of the generation component.

Based on local and international studies, and real-world experience, and again contrary to what is often heard from nuclear evangelists (including those within Eskom itself), the latest Eskom study shows that the overnight capital cost of new nuclear in SA is the highest by far of all the generation technologies, significantly higher even than that of concentrating solar power (CSP) with nine hours of energy storage.

Specifically, the study finds that the overnight capital cost of new nuclear power in South Africa comes in at US $5141 per kW installed. This is compared to $680 per kW for OCGT, $747 for CCGT, $1390 per kW for wind, $1220 per kW for fixed-tilt solar PV, $4336 per kW for CSP with nine hours of energy storage, and from $2950 to $3560 per kW for new coal.

The Forced Nuclear scenario, in which 9,6 GW of nuclear new-build is “hardwired” into the IRP model, would increase the electricity price trajectory in South Africa significantly more than that for any of the other viable scenarios modelled, with prices approximately R0,15 per kWh higher than that of the Optimum Case.

The Eskom study goes further to show that from 2030 to 2050 the cumulative electricity cost to customers resulting from the R0,15 per kWh higher electricity price of the Forced Nuclear scenario is some R800-billion higher than that of the Optimum Plan scenario, and R500-billion higher than that of the Reference (Base) Case scenario.

In the Carbon Budget scenario modelled by Eskom, a median demand growth is assumed, and a more demanding approach to CO2 emission reduction is taken. In addition, solar PV and wind capacity is artificially (i.e. politically) constrained at 1 GW and 1,8 GW per annum respectively. This forces 5,6 GW of new nuclear power into the IRP (made up of  4 x 1,4 GW reactors), but these are only required in 2039, 2040, 2045 and 2046 respectively.

In the Optimum Plan scenario modelled by Eskom, where a median demand growth is assumed, together with the more moderate “peak-plateau-decline” approach to CO2 emission reduction, and with no annual caps on wind and solar PV, the study shows that no new nuclear power is required at all in the years to 2050.

In fact, even in the base case Reference Plan scenario, where the artificial annual constraints of 1 GW and 1,8 GW per annum are imposed for wind and solar PV, together with a median demand growth forecast and the “peak-plateau-decline” approach to CO2 emission reduction, no new nuclear is required by 2050 at all.

In response to this article, Eskom has indicated that it unable to comment as it is not aware of the contents of the IRP. “The Eskom team is only involved in terms of providing the modelling work, with the approach and inputs given by the Department of Energy”, said Eskom spokesman Khulu Phasiwe. The DoE did not respond when given the opportunity for right-of-reply.

In summary, the Eskom modelling work makes it clear that the unconstrained least-cost scenario of the Optimum Plan does not include any new nuclear power, regardless of demand projections and COlimits. Furthermore, the modelling shows that the only way to getting new nuclear into the IRP is by artificially constraining renewable energy, or by taking a hardwired “Forced Nuclear” approach.

Perhaps it is these realities highlighted in the latest modelling work and findings by Eskom that are giving the DoE planners and nuclear team some headaches, leading to the delay in the release of IRP 2017 from the mid-November date indicated only a few weeks ago by the energy minister.

The unfolding events around the Energy Indaba mooted by the DoE for early December 2017, and the pending release of IRP 2017 following “policy adjustment” input by the cabinet, with the possibility of “Forced Nuclear”, could be dramatic. Watch this space!

Here is the full article

An alarming picture emerges as Eskom’s liquidity dries up

The reports states that without any further funding, Eskom will have approximately R1,2-billion of liquid assets at the end November 2017 against a target of R20-billion, and will move into a negative liquidity position of approximately R5-billion by end of January 2018. This figure assumes the successful draw-down of R2,2-billion from development finance institution (DFI) loans and R1,3-billion export credit agency (ECA) facilities.

The report further states that the qualified audit opinion in Eskom’s 2016/17 annual financial statements relating to irregular expenditure, governance issues and changes in leadership has had a negative impact on investor sentiment, which is affecting the volume of future funding, current drawdowns and liquidity position of Eskom…

Eskom’s financial position

The report indicates that at 30 September 2017 Eskom Group revenue of R95,5-billion was R3,75-billion lower than budget.

This was attributed to lower than budgeted electricity sales volumes, the capitalisation of pre-commissioning revenue at Medupi and Kusile, and revenue of R2,64-billion deemed uncollectible at the date of sale.

Eskom indicates that average demand from key industrial customers remains low, with no recovery in demand or sales. Average demand for these customers has declined further to approximately 8200 MW during the past quarter, from an average of 8500 MW in the first quarter of the financial year, mainly due to customers’ response to higher winter electricity tariffs.

Primary energy costs were underspent by R3,87-billion across all main categories of coal, OCGTs, IPPs and international purchases.

The group’s operating expenditure (excluding depreciation and amortisation) of R25,3-billion was R4,7-billion below budget, as a result of underspend on employee benefit costs and other operating expenses.

Group capital expenditure amounted to R24,2-billion for the period, which is substantially lower than the budget of R31,8-billion due to underspend mainly at Kusile, Medupi and other power delivery projects, partially due to phasing of expenditure. Much of the capital spend shortfall is however expected to be incurred by year end.

Poor governance – a core issue highlighted in the report

The report highlights that the audit qualification in Eskom’s 2016/17 financial statements relating to irregular expenditure, governance related issues and continuous changes in executive management has had a severe impact on Eskom’s ability to raise funding in the domestic and foreign markets and has also resulted in delays in drawdowns on existing facilities.

Eskom says this will have a negative impact on financial sustainability and its status as a going concern.

The report identifies that in order to improve both liquidity and execution of funding initiatives, it is critical that governance related issues and investigations are resolved, and that stability returns within Eskom’s board and executive management.

Investors indicate that they are heavily reliant on these issues being resolved before any firm commitments on funding will be made.

Rating agencies have also indicated their deep concerns regarding governance and leadership at Eskom, and are closely monitoring the execution of the funding initiatives. Any further downgrades would exacerbate the current situation and put at risk the execution of Eskom’s funding plan.

Note: This article is a collaboration between EE Publishers and Fin24.

Here is the link to the article

Be alert to the risks of legitimising a hollow process for a new electricity IRP

Daily Maverick, Richard Worthington, 13 November, 2017

Imagine that, consistent with recent statements by the new Minister of Energy, an Integrated Resource Plan (IRP) for electricity is released in the next week or two, with a new generation build plan that mandates nuclear procurement. What would our response be?

For argument’s sake, let’s say the plan is scaled back to no more than half the total previously deemed necessary to achieve the benefits of “fleet procurement” (the 9.6 GW contemplated for a Rosatom contract), as a concession to widespread opposition.

Since there is a requirement for consultation, the minister would need to convene some kind of public engagement. There have been calls from various stakeholders for some kind of summit on energy (or the economy more generally), so even a very hastily convened event might be presented as being responsive to stakeholder concerns, as well as fulfilling requirements for the new IRP to be tabled in Parliament subsequently. What would we do?

Unlike the Integrated Energy Plan (IEP) that covers the entire energy system, the requirements for which are explicitly set out in the Energy Act of 2008, the process for seeking common ground on a policy-adjusted plan for the electricity system, before it is tabled for parliamentary approval, is not defined. Determinations by the minister that generation capacity will be procured must, as recently determined by the High Court (Western Cape), be subject to public hearings and Nersa consideration, but the new build plan of the IRP is nevertheless treated as binding…

… However, legitimising a hollow process on an IRP that will set parameters on electricity infrastructure investment for the coming decades carries enormous risk. Like in 2010, we might be assured that it will be regularly updated, but getting this one right – or at the very least ensuring it doesn’t mandate irresponsible procurement and greatly deepen our debt – is imperative for any prospect of reducing poverty and inequality…

he public narrative that we need nuclear power to meet our commitments to climate change mitigation is false, as is clear from work already released in the IRP documentation published for comment a year ago. Robust modelling by several agencies, including the Council for Scientific and Industrial Research, shows that an electricity system without nuclear can meet and exceed our emissions reduction commitment at lower cost and with higher employment than when new nuclear is included. The Energy Research Centre modelled scenarios with a range of cost assumptions and even the most optimistic pricing fails to find nuclear power offering net benefits over renewable energy options…

… With a positive objective in mind – an electricity system contributing to the well-being of all South Africans, with a net value that is positive for society as a whole and over time, when full costs and life cycles are assessed – we must be prepared to reject what might be put forward. To do this, stakeholders not accustomed to parading their interests and positioning in public need to consider how to avoid being complicit in legitimising a plan designed to serve the elite, and to start talking about taking a collective stand on electricity and economic prudence.

 

Here is the full article

 

 

EXCLUSIVE: Eskom’s cash dries up

fin24, 13 November, 2017.

Johannesburg – Struggling power utility Eskom’s poor governance has left it teetering on the edge of insolvency, with only R1.2bn of liquidity reserves expected to be in hand at the end of the month.

Eskom’s latest report to its shareholder representative, Public Enterprises Minister Lynne Brown, showed that the state utility’s liquidity is fast drying up, as it struggles to raise funds in an unsympathetic market.

The report for the second quarter of 2017 painted an alarming picture of funding difficulties and declining liquidity, primarily driven by perceptions of poor governance.

Most importantly, the report, which has been viewed by EE Publishers and Fin24, raised issues of Eskom’s status as a going concern by its auditors. In the report, Eskom tells Brown that its governance issues are having a negative impact on financial sustainability and the utility’s ability to keep going.

Several key Eskom executives, including suspended chief financial officer Anoj Singh, ex-Eskom boss Brian Molefe and suspended executive Matshela Koko are being investigated for their role in state capture at the state utility, while parliament has heard shocking revelations of how looting took place at Eskom with the assistance of key executives.

Eskom spokesperson Khulu Phasiwe told Fin24 that drawdowns from committed facility agreements are being expedited to improve liquidity as a main priority. He added that investors had told Eskom that the parliamentary inquiry was vital in revealing issues that need to be dealt with.

“Once in the open, a way forward can be paved  for addressing the issues and potential future investment.”

Asked about whether the reinstatement of Koko was a risk to Eskom, Phasiwe said the indication from investors is that a stable management structure is required to access additional funding.

Ministerial spokesperson Colin Cruywagen said Brown as a practice did not comment on correspondence between her and other parties, including state owned enterprises.

“This is an Eskom operational matter,” he said.

Only R1.2bn left in the kitty

The reports showed that the state utility will only have R1.2bn cash in hand at the end November 2017 against a target of R20bn.

Here is the article

Press release: ENVIRONMENTAL AND FAITH-BASED NGOS CALL ON MINISTER OF ENERGY AND ESKOM TO HALT THE NUCLEAR DEAL TENDER PROCESS

SAFCEI and Earthlife Africa, 9 November, 2017.

Yesterday, the Southern African Faith Communities’ Environment Institute (SAFCEI) and
Earthlife Africa Johannesburg (ELA-JHB) issued letters to the Ministers of Energy and
Public Enterprises, Eskom and the National Energy Regulator of South Africa (NERSA). The
organisations have called on Minister Mahlobo and Eskom to immediately halt the nuclear
tender process, as outlined by the judgement decided in the Western Cape High Court in
April 2017.
This urgent call is underlined by the High Court judgement, which holds that any decision
made by South Africa’s Minister of Energy about new electricity generation, must be done
in conjunction with NERSA, through a lawful and procedurally fair Section 34
determination. This determination would have to specify why new nuclear energy
electricity generation is needed so urgently and what percentage of South Africa’s energy
mix it would fulfil.

According to Liziwe McDaid of SAFCEI, current news reports which highlight the Minister of
Energy David Mahlobo’s unexplained fast-tracking of the Integrated Resource Plan (IRP) by
4 months at the expense of clarity and certainty exacerbate concerns about the process.
In circumstances where the Minister of Finance Malusi Gigaba stated that that the South
African economy cannot afford nuclear currently, nor does the country need new intensive
energy production, Eskom’s readiness to commence the nuclear tender process
immediately upon IRP approval is cause for alarm.

“We cannot ignore the many serious allegations of state capture and irregular
procurement processes by senior Eskom officials at the parastatal which is currently under
scrutiny by Parliament’s Public Enterprises Committee,” says McDaid.

Makoma Lekalakala of ELA–JHB says that the High Court decision emphasises public
participation as part of the Section 34 determination processes. “Clarity and transparency
is needed with regard to procurement of energy and its related processes, including the
negotiation or renegotiation of International Governmental Agreements (IGAs).”

Should Eskom not provide this undertaking by Monday 13 th November 2017, SAFCEI and
ELA-JHB will assume that Eskom is determined to go ahead without following legal and
constitutional Section 34 determination. An urgent application to the High Court may be
sought as urgent relief to ensure that the High Court judgment is respected and that
government acts openly and transparently. Both SAFCEI and ELA-JHB are members of a
Campaign for a Just Energy Future, a national movement geared at mobilising South
African citizens to hold government accountable for its energy decisionsENDS

Issued by Erna Curry and Natasha Adonis, on behalf of SAFCEI and ELA-JHB.
For more information and interviews, contact:
 Liz McDaid 0827315643 /liziwe@mweb.co.za
 Erna Curry SAFCEI 0744-661- 238 / erna@safcei.org.za
 Natasha Adonis 0797-999- 654 / adonisnatasha@yahoo.co.uk