No sense in Eskom investing in new plants, says De Ruyter

The energy landscape in SA is already changing rapidly. Amid an almost weeklong stretch of stage 4 power cuts, in a year that is already shaping up to be the worst one yet for load-shedding, South Africans can be forgiven for arguing that it is not changing fast enough.

But, two major moves to liberate the electricity sector are already under way and this is likely to see Eskom become a much smaller, and perhaps even a minority, player in the generation of power.

Among several reforms under way, two of the most significant are the split of Eskom into three divisions, and the exception which came into effect last year that raised the registration threshold for self-generation facilities from 1MW to 100MW.

On the sidelines of the Agricultural Business Chamber’s annual conference in Sun City last week, Eskom CEO André de Ruyter told Business Day in an exclusive interview that given the changes taking place, it did not make much business sense for Eskom to invest in new generation capacity on a large scale.

“It is very difficult to make a case for Eskom to invest in new generation capacity when there are private investors who are willing to step into that space with no burden to the fiscus and no burden to the electricity consumer.”

SA needs to add between 50,000MW and 60,000MW of new generation capacity over the next decade to compensate for the 22,000MW of capacity (about half of current installed capacity of about 45,000MW) that Eskom will retire by 2035.

This additional capacity, said De Ruyter, was also needed to enable economic growth.

“I think it’s a well-known fact that the lack of energy security has been a constraint on economic growth. That presents a positive opportunity for economic stimulus. And that’s why I think we could see the crisis as an opportunity.”

But, he added, this would also mean that ultimately “Eskom’s generation footprint will indeed become smaller and smaller”.

Eskom does have “modest aspirations” to expand its renewable plants, but these are not going to be nearly enough to tackle the overall generation capacity shortfall.

“This is why we are going to try to do everything we can now to enable the private sector to come in and invest as quickly, in as large an amount [of generation capacity] as possible.”

Instead of building new power plants, Eskom’s focus is shifting to finding solutions for the decommissioning of its old, coal-fired power stations.

The Integrated Resource Plan (IRP) of 2019 includes plans to add an additional 1,500MW of coal-fired power generation to the energy mix by 2030, but De Ruyter does not foresee Eskom again investing in new coal-fired power stations. “We will complete Kusile, but that, I think, is going to be the last coalfired generation built by Eskom.”

As he pointed out, the global move towards clean energy implies that it will also be a challenge for any private investors to access financing for new coalfired power. “The energy transition is inevitable, it has to happen, the challenge is how do we make it just and fair?”

This year, Eskom will begin with the decommissioning of coal-fired power stations that are “old, inefficient, costly to operate and not environmentally compliant with new emissions regulations”.

The first station that will be permanently retired is Komati, a

1,000MW power station near Middelburg in Mpumalanga. Komati’s last unit will shut down in September, after being in operation since 1961. There are about 250 people employed at the plant, and Eskom is hoping the measures being taken to provide opportunities for these workers will serve as a model for what a “just transition” can look like as SA slowly migrates towards a lowcarbon economy.

Some of the “re-powering” projects that Eskom is working on at Komati include a 100MW solar plant, a 150MW battery storage installation, and more recently, a 70MW wind farm. An assembly line is also being set up for modular microgrids.

The “repurposing” plans include setting up a training centre at Komati, in collaboration with the Cape Peninsula University of Technology’s SA Renewable Energy Technology Centre, where skilled artisans will be trained to be able to work as technicians on the solar and wind installations.