SA needs ‘another power station the size of Medupi and Kusile’

Johannesburg‚ March 10 (BDpro) — South Africa should already be planning another power station of the size of Medupi or Kusile‚ which are both 4‚800MW coal-fired power stations‚ commentators said on Monday (10/03/2014).

Unplanned power cuts continued on Monday as South Africa returned to work under the shadow of last week’s first official load shedding since the rolling electricity cuts of 2008.

South African Institute of Race Relations deputy CEO Frans Cronje said the institute’s research showed that for as long as Eskom remained the sole major electricity generator‚ even if demand increased at 4% a year‚ South Africa would need Medupi and Kusile adding power to the national grid.

It would also need to bring into operation “new generating capacity on a scale equivalent to Medupi every five years ... for the next 20 years”.

Econometrix senior economist Rob Jeffrey said it was “entirely unfair” to blame only Eskom for the power crisis because a number of policy decisions regarding energy management and generation had been misguided‚ and the state power utility had several times made good recommendations that were turned down by the government.

South Africa has been on a tight power supply since load shedding in 2008 cost the economy billions of rand as demand outstripped supply. Eskom had not built new power generation capacity in more than a decade to 2005.

The utility had budgeted R385bn for building new generation capacity between 2005 and last year‚ and wants to secure much more funding — possibly surpassing R1-trillion by 2026.

“The bottom line is that we will have insufficient generating capacity‚ especially of base load power‚ for several years‚” Mr Jeffrey said. “We may have a temporary reprieve when Medupi and Kusile come online‚ but that is quite some way away and we have fallen behind the power curve.

“That has severely curtailed economic growth ... (and) prevented the (execution of) projects that might have come on stream because people are aware that we have narrow margins.”

South African Chamber of Commerce and Industry CE Neren Rau said the country’s energy constraints were yet another factor in a trying business environment.

“Load shedding causes discomfort and security issues for domestic consumers‚ but for business‚ which is trying to contend with a number of other pressures like high input costs ... they may have to reduce operational capacity‚ and that will have dramatic consequences for job losses and job creation‚” he said.

South Africa suffers structural unemployment that has for a decade hovered around 25% — February’s fourth-quarter unemployment rate of 24.1%‚ from Statistics South Africa‚ was a two-year low — and what some label the world’s largest inequality figures.

Mr Cronje said that without regular commissioning of large power generation projects for the next 20 years‚ South Africa would not be able to “draw and support the investment needed to support an economic growth target of 5% of gross domestic product‚ as set in the National Development Plan (NDP). In that case it becomes impossible to lower the unemployment rate. Hence inequality and poverty levels rise or remain unchanged.”

Mr Jeffrey said South Africa urgently needed another coal-fired power source and the government should prioritise increased economic growth‚ poverty reduction and improved living standards. These are the stated goals of the NDP‚ the government’s blueprint for a better South Africa.

University of Cape Town professor and National Planning Commission member Anton Eberhard said Eskom alone could not fund the magnitude of investment needed to adequately power South Africa‚ and the government needed to act urgently to ensure supply security over the two to three years until the 9‚600MW in extra power from Medupi and Kusile came online.

“Eskom needs to contract every extra bit of power‚” he said.

Prof Eberhard said it was “criminal” that Eskom had let short-term power purchase agreements lapse. These were now reinstated‚ Eskom’s departing CEO‚ Brian Dames‚ said on Friday when the utility apologised to South Africa for Thursday’s load shedding and explained what it had done to secure supply.

Mr Dames said Eskom had renewed the agreements with private producers such as Sappi and Sasol at its own risk‚ extending them to May in the hope that the government would find the money that was not provided for in the tariff determination for these agreements.

Prof Eberhard said the government‚ Eskom and the National Energy Regulator of South Africa needed to get together to ensure energy-saving incentive programmes were “ramped up”‚ and the government needed to urgently conclude the Gas Master Plan.

Other short-term actions to improve the country’s current situation include buying power from Sunbird Energy and importing liquid natural gas. Sunbird‚ in a joint venture with PetroSA‚ is to work on Ibhubesi‚ South Africa’s largest proven gas field.  - By Sue Blaine © BDlive 2013