Low chance of Eskom grid collapse

Various energy experts say a grid collapse in South Africa is unlikely and would require “a set of extraordinary circumstances” to become a reality, the Sunday Times reports.

Coincidentally — and in a surprise turnaround — the South African Special Risk Insurance Association (Sasria) has said its policies would continue to offer grid collapse cover until at least the end of May 2023.

Former senior manager in Eskom’s transmission department Hein Vosloo told Sunday Times that a grid collapse in South Africa is “almost impossible”.

“A complete collapse is possible if we lose several power lines at once, like what happened in the US in 2003,” he said.

“Either that, or if all our power stations go down simultaneously, we are left with no generation capacity.”

Vosloo explained that this would require all diesel power stations in the Cape, supply from Mozambique and Koeberg, and Eskom’s pumped storage stations, to fail.

Energy economist Lungile Mashele and the South African Institute of Electrical Engineers president Jan de Kock agree.

Mashele said Eskom’s System Operator plays a significant role in preventing a grid failure and that it won’t collapse “as long as we have load-shedding”.

De Kock said a collapse would require an extraordinary sequence of events to become a reality.

However, he noted the importance of backup plans, even if a national grid collapse is unlikely.

The possibility of a grid collapse has been on the minds of businesses and economists for some time now, with Nedbank chief economist Nicky Weimar, in April 2023, saying she believed the threat of a grid collapse was elevated.

Weimar said Eskom’s electricity demand and availability figures suggested the grid was on the brink of a blackout in February 2023.

Weimar said that “it almost happened in February”, with electricity demand almost outstripping supply, in response to a question about the possibility of a total blackout.

She added that this was a “wake-up call for businesses to prepare for such an eventuality”.

Sasria retracts grid collapse cover cancellation

Sasria CEO Mpumi Tyikwe told the Sunday Times that although the insurer has retracted an April circular informing policyholders they won’t be covered for grid collapse claims, the reprieve may be short-lived.

“The insurance industry said it hadn’t been properly consulted and had questions around certainty of contract,” he said.

“We have agreed to consult further around these issues. By the end of the month, we will have answers, and then we’ll plot a way forward.”

Sasria notified policyholders it would no longer be liable for any payouts in the event of a total grid failure. This was a telling move as the insurer covers unique risks like terrorism, riots, and public disorders.

The announcement triggered a backlash from clients who sell its policies

GIB Insurance Brokers operation consultant Guy Jameson said that, in light of Sasria’s decision, companies must start considering disaster management plans to prevent losses caused in the event of a grid collapse.

GIB said widespread looting and unrest would likely occur in the event of a grid failure, adding that Eskom would probably face challenges in restoring power due to severe infrastructure damage across the country.

“Although the likelihood of a total blackout is low, the consequences of such an incident could be devastating, making it worth preparing for,” it said.

“Although a total blackout presents several dangers, the primary threat is the time it takes to bring a system back up from that total collapse with estimates stretching into weeks rather than days.”

Odds are low — but not zero

Sasria isn’t the only insurer to announce grid collapse-related amendments to its policies.

In March 2023, Outsurance joined a growing list of insurers that added grid collapse exclusions to their policies, removing cover for any loss, damage or liability caused by an Eskom blackout.

It joined the likes of Hollard, Momentum Insure, Naked Insurance, and Santam.

While Outsurance said the risk of grid failure is still remote, it explained that it could no longer be considered an impossible event.

Senior assistant ombudsman at the ombudsman for short-term insurance, Peter Nkhuna, said he believes grid collapse exclusions are a good thing.

He said the insurance policy amendments ensure that insurers can continue to cover other risks.

“With all the reports and experiences that we have been going through, it has become more and more of a real possibility that there could be a total collapse of the grid,” said Nkhuna.

He explained that one of the issues some insurers have raised — the loss of backing for a total grid collapse from their reinsurers — is primarily to blame for these exclusions.

Now read: Eskom suspends and restarts load-shedding at lower stage

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Low chance of Eskom grid collapse