Stage 7 load shedding has already begun, according to economists

While power utility Eskom spent much of last week attempting to avoid the dreaded stage 7 load shedding threshold, economists at the Bureau of Economic Research (BER) said it had already been technically crossed.

“At a point last week, Eskom was technically ‘shedding’ at stage 7, spread between rolling blackouts and load curtailment on heavy industrial users,” the economists said.

Following a high number of breakdowns and the need to preserve emergency generation units, load-shedding was increased to stage 6 on Thursday. While rolling blackouts had been reduced to stage 5 by the weekend, Eskom was forced to manoeuvre and dance around an extremely volatile situation in order to keep the crisis from worsening.

The BER stated that this includes restricting heavy industrial users and delaying the outage of Unit 1 of the Koeberg Nuclear Power Station until Saturday (10 December) until the system stabilises.

However, this was insufficient to reduce load shedding to lower stages; due to further breakdowns, Eskom’s plan to reduce load shedding to stage 2 by Monday (12 December) was thwarted, and stage 5 load shedding remains in effect until further notice.

With Koeberg 1 no longer operational, South Africa’s energy future is in jeopardy. The unit can generate up to 900MW – nearly one stage of load shedding – and will be shut down until at least the middle of 2023. After Unit 1 is restored, Unit 2 will begin its shutdown in October 2023, extending the outage.

The diesel issue

Eskom has warned that load shedding could be extended at higher stages for the rest of the year. The utility has two “solutions” to the shortfall, neither of which is the panacea the country requires.

The first option is to use diesel. Eskom can burn diesel in its Open Cycle Gas Turbines (OCGTs) to avoid up to two stages of load shedding.

However, the group has exceeded its budget for diesel purchases, and National Treasury has so far ruled out any further assistance, claiming that Eskom has not followed the required parliamentary budget processes.

As its budget for acquiring additional diesel to power the OCGTs runs out, Eskom reserves the remaining fuel stocks for “extreme emergency situations.”

According to the BER, National Treasury’s claim that it lacks these funds because they were not requested during the budgetary process is technically correct, “it is not difficult to argue that the situation has changed materially since then”.

“Not supplying the funding comes at an enormous cost to the economy – much more than the roughly R19 billion Eskom is asking for,” it said.

“To be sure, load-shedding would not be solved with more money for diesel, but the higher, more damaging stages could possibly be avoided.”

While third-quarter economic activity data has remained relatively resilient, the economists believe that South Africa will likely only see the real impact of intense load-shedding in the coming months as the’reopening’ boost to the economy and other normalisation effects fade.

“Our October forecast of only around 1% real GDP growth in 2023 is firming up,” it said.

The bid window issue

The second’solution’ to Eskom’s woes is to get more power onto the grid. However, despite the fact that mineral resources and energy minister Gwede Mantashe signed 13 new agreements as part of the country’s bid window 5 (BW5) last week, the longer-term outlook is bleak, with bid window 6 (BW6) falling short so far.

BW6 was released in April 2022, and on October 3, 2022, 56 bids were received.

Following the evaluation, only Solar PV projects totaling 860MW were named preferred bidders. An eligible sixth bidder has also been identified, and the department is discussing appointment conditions with the potential bidder in order to fill the remaining gap of up to 1,000MW.

The round, according to the BER, would have allowed for approximately five times the amount of MW to be allocated.

“Furthermore, not a single wind power project has been appointed, despite a significant number of bids.”

The economists are concerned about the longer-term outlook.

Even the 1,800MW concluded in BW5 is still years away, adding to Eskom’s overall strain.

The Department of Mineral Resources and Energy has completed 19 of the 25 announced projects under Bid Window 5, adding a total of 1,759MW renewable capacity to the national grid, with the signing of the 13 agreements on Thursday (8 December). This includes 784 MW from onshore wind and 975 MW from solar PV.

However, these projects are not expected to be completed until 2025.