Eskom burning question

Despite its recent successes in increasing the reliability of its power plants suspending load-shedding, Eskom remains reliant on more expensive diesel-powered open-cycle gas turbines (OCGTs).

National Energy Regulator of South Africa (Nersa) electricity executive Welile Mkhize has said diesel consumption was one of the justifications Eskom provided for its 36.15% tariff hike application.

Other factors include the rising price of coal and the requirement for increased maintenance of Eskom’s generation fleet.

Nersa published Eskom’s Multi-Year Price Determination application last week, confirming that the power utility had requested a massive price hike for next year. This was months after Eskom’s draft application document leaked to Daily Maverick.

Eskom also asked for an 11.81% tariff increase for the 2026/27 financial year, followed by 9.10% in 2027/28.

Its projected OCGT expenditure for the current financial year is R19.15 billion.

The power utility budgeted just over R10 billion in the 2025 financial year to generate the 1,266 gigawatt-hours (GWh) it believes will be required.

This budget increases by R500,000 for each of the following financial years included in its application, keeping budgeted-for GWh constant.

Although Eskom has recently ramped up diesel usage, Mkhize highlighted that the power utility has had some success in decreasing its reliance on fuel-generated energy.

“The cost of running OCGTs that run on diesel has decreased significantly,” said Mkhize.

“From 1 April, at the start of the financial year until August, there has been a decrease of 70% in the amount of diesel used compared to last year.”

After five excellent months, Eskom’s online data portal shows it reverted to burning diesel to cope with South Africa’s energy demands.

In September 2024, it used more capacity from its open-cycle gas turbines (OCGTs) than in the previous two months combined.

Based on the trends in daily and weekly OCGT consumption, the most likely cause appears to be the unannounced shutdown of a unit at Koeberg nuclear power station on 11 September 2024.

Eskom switched the station’s 920MW Unit 1 off after one of its block valves failed a three-monthly routine test.

OCGTs contributed 271.1 GWh of electricity during the first three weeks of September, compared with 211.6 GWh in July and August 2024.

If Eskom’s average daily consumption in the month continued at the current trend, it could use about 369 GWh of OCGTs in September 2024, the same consumption as in September 2023.

That will also be the utility’s highest OCGT consumption since April 2024.

MyBroadband also noticed that OCGTs contributed another 11.9 GWh from Saturday, 21 September 2024, to Sunday, 22 September 2024.

That shows Eskom had to tap into its emergency generation reserves over the weekend despite demand typically being lower at these times.

In addition, the data portal revealed that Eskom and Independent Power Producers’ weekly OCGT load factors increased to well over 30% in the second week of September, their highest levels since April 2024.

A new methodology

According to Matthew Cruise, an energy expert at Forest Energy Solutions, Eskom’s latest application is the first time the power utility’s supply costs have been addressed in its revenue application.

Following the draft document leak, Nersa electricity regulation head Nhlanhla Gumede said that the methodology used for regulating electricity prices has focussed on Eskom’s revenue rather than the cost of supply.

Gumede said this was because of the incorrect interpretation of the Electricity Regulation Act (ERA), which led the regulator to approve Eskom tariff increases of 653% between 2007 and 2022 while inflation only went up by 129%.

Eskom’s price hikes were approved to regulate the power utility’s revenue in accordance with the 1987 Eskom Act, which Gumede said was annulled by the 2001 Eskom Conversion Act and the 2006 ERA.

Nersa rejected his statements, saying that it “distances itself from the contents and views expressed” by Gumede.

Regardless, the adjusted methodology that incorporates the cost of supply has not resulted in a price increase deemed affordable by South Africans.

South African Human Rights Commission chair Chris Nissen warned these price hikes may spark social unrest in the country.

“Unfortunately, when a situation like this is created, you do find opportunistic people who use the issue from a party, political, or individual interest to highlight these issues, but of course with a hidden agenda,” said Nissen.

Electricity minister Kgosientsho Ramokgopa has called for a complete review of Nersa’s tariff methodology.

Ramokgopa believes that Nersa cannot regulate tariff-related issues due to the increasing complexity caused by the liberalisation of the electricity market.

Therefore, Ramokgopa said an urgent review of Nersa’s methodology is needed, which he believes will improve its ability to address affordability and efficiency.