Medupi explosion bad news for power prices and load-shedding

The explosion that destroyed one of the generating units at Eskom’s Medupi coal power plant and caused another to trip is bad news for power tariffs and load-shedding in South Africa.

Medupi Unit 4’s generator sustained extensive damage last Sunday night after a blunder by the power plant’s staff created a volatile mix of hydrogen and oxygen that resulted in a devastating blast.

The impact was so big that some residents of Lephalale (formerly Ellisras), which is located about 10km from the plant, mistook it for an earthquake.

While no one was hurt during the incident, Eskom CEO Andre De Ruyter said repairs would cost between R1.5 billion and R2 billion and take around 2 years.

Energy expert Chris Yelland said that Eskom could reduce the repair time if an unused generator from the Kusile power station replaces the damaged one at Medupi.

While it is a complicated task to move the generator from Kusile to Medupi, it is quicker than building and importing a new unit.

Either way, Eskom will be without the 794MW of electricity that Medupi’s Unit 4 was designed to generate for some time.

To compensate for this shortfall, the power utility will likely have to rely more on its open-cycle gas turbines (OCGTs) to provide emergency generation at times of high demand.

These OCGTs are expensive to operate over prolonged periods, as they require diesel.

Nevertheless, Eskom has spent billions to run them to avoid load-shedding, particularly during peak usage periods.

For example, during 11 months of its 2020/2021 financial year, Eskom spent R3.2 billion on diesel, far beyond the R789 million it had budgeted for.

Eskom’s expenditure on diesel forms part of the unexpected costs it attempts to recover via electricity price increases approved by the national energy regulator (Nersa).

The further it stretches its diesel spending beyond budget, the greater the potential increase in electricity tariffs.

Eskom’s increased OCGT reliance could already be seen in the immediate days following Unit 4’s explosion.

The week before the blast, Eskom did not have to use any OCGT’s to supplement generation during peak hours, as shown in Twitter posts from the utility’s spokesperson, Sikonathi Mantshantsha.

In the three days following the explosion, the utility had to run them continuously to keep up with demand, as the adjacent Unit 5 was also temporarily knocked out by the impact.

Even after Eskom returned that unit to service on Wednesday, Eskom’s still had to run six OCGTs during peak usage.

In addition to the OCGT usage, Eskom extensively used the Virtua Power Station and interruptible load supply mechanisms.

These allow Eskom to interrupt power supply to certain customers and ask pre-agreed customers with intensive consumption, such as aluminium smelters, to switch off for about two hours during periods of shortages.

Increased use of these mechanisms will impact productivity for various industries and come at a cost to Eskom.

These users are compensated with a special tariff, or for the loss in production, at a rate approved by Nersa.

Eskom has denied that the explosion will result in load-shedding.

However, while the utility has thus far been able to avoid implementing power cuts as a direct result of Unit 4’s loss, the situation could change by next month.

Former chair of the Energy Intensive Users Group, Piet van Staden, told The City Press that Eskom would struggle to keep up with demand without the over 700MW from Medupi’s Unit 4.

Van Staden said many smelters switched off their plants during the winter to avoid Eskom’s high tariffs during this period.

They then ramp up operations in September, significantly increasing their load on the grid when tariffs are lower.

Now read: How Medupi Unit 4 was blown to smithereens