New Eskom board: Switched on or powerless?
Melanie writes that Eskom’s Energy Available Faculty (EAF) currently stands at 59% and the figure is declining.
So, Eskom has a new board and the government wants us to believe that some fresh hands and brains will ultimately make a big difference in the ongoing loadshedding drama.
I am not so sure.
Of course, the previous board’s term expired 18 months ago. Seven directors had left the board over a period of time, so an overhaul was seriously overdue.
I don’t have any concerns about the expertise of individual board members or the chairperson. However, it seems to me that if ever there was a poisoned chalice, this is it.
It is near impossible to fix Eskom in the short term to the extent that we will no longer have loadshedding.
Thanks to the lack of proper maintenance of the power stations for years, looting as part of state capture and ongoing sabotage, the power utility is on its knees and the country is paying for it.
It is estimated that at stage 4 loadshedding, the country loses about R2 billion rand per day in economic output, which in turn impacts on the growth rate, job creation and general social well-being.
Until recently we were made to believe that the big problem is money. We were told that Eskom was basically bankrupt and needed billions in order to keep running.
It now turns out that is not the worst of it.
Recently I was a panellist at an investor conference hosted by JP Morgan in the UK where – unsurprisingly - the main point of discussion was Eskom. JP Morgan’s energy analyst made it clear that money (albeit a big problem) was not the main obstacle in Eskom’s recovery. Most energy experts agree.
Eskom’s major problem is the need to refurbish and maintain their ageing power plants, as well as the faulty newer ones.
As it goes the ageing power plants are becoming less and less efficient and thus unable to generate enough capacity. Even the newest ones are underperforming with Medupi at around 54% and Tutuka at a shocking 28.1%.
Minister Pravin Gordhan has said that the main task of the new board is to improve Eskom’s Energy Available Faculty (EAF) – basically the average energy output efficiency - and achieve a 75% target. This seems near impossible. Currently Eskom is at 59% and the figure is declining.
As Prof Mark Swilling recently pointed out, to achieve the 75% target Eskom would have to shut the underperforming units off to refurbish them and without any spare capacity, loadshedding would further be increased and possibly result in permanent loadshedding.
This is of course not an option.
Swilling emphasises that : “The only way Eskom can secure the space it needs to properly repair and rehabilitate those machines (in particular the ones that are actually reparable, because some just need to be closed) is if there is new generation capacity on the grid.”
We all know that the government has delayed the process to award licences to alternative energy providers in the past and even though some progress has been made, it is not enough to deal with the crisis in the short term. It will take at least another two years to have 5-10 GW of alternative energy to stop the loadshedding.
Of course, the popular narrative is now to blame Andre De Ruyter. The minister has left the decision on whether he should be replaced to the new board. I don’t personally know De Ruyter and undoubtedly some mistakes were made along the way. However, it seems insane to want to replace him now.
Assuming you can find someone who would be crazy enough to take on the job, any new CEO would take months - if not years - to get to the bottom of the problems in Eskom. These are months that we don’t have.
So, it seems to me that even if the new Board members have magic wands, they will not be able to clean up the Zuma-inherited mess in the immediate future.
To again quote Prof Swilling: “What South Africa needs to realise is that no matter what the President or the cabinet may decide today (and no matter how sound their policies are), nothing will stop load shedding tomorrow.”