South Africa utility Eskom says reserves exhausted, power outages inevitable - CNBC Africa

South Africa utility Eskom says reserves exhausted, power outages inevitable

Southern Africa

by Reuters 0

South Africa will face rolling blackouts for up to three years. PHOTO: wicfoundationinc

The rolling blackouts will be part of life in the continent's most advanced economy for up to three years, state-run power utility Eskom warned on Thursday.

South Africa has been hamstrung by power shortages, which have curtailed output and are seen as a deterrent to foreign investment. Last year it suffered its worst outages since 2008, hurt by outdated infrastructure and plant failures.

(READ MORE: S.Africa's Eskom implements rolling power outages)

Power outages in South Africa have global market implications as it is the world's top platinum producer and a major producer and exporter of commodities such as coal and gold.

Eskom Chief Executive Tshediso Matona, who compared the situation to driving a badly maintained car which has almost no fuel left, told a news briefing that margins were razor thin and the loss of just 1,000 megawatts would trigger power outages.

South African power demand typically ranges from around 30,000 to 35,000 megawatts, so the country's reserves to keep the lights on is only around 3 per cent.

The rand fell 1 per cent against the U.S. dollar on his comments, reflecting worries about the impact of power shortages on the economy.

"For the next two to three years the system will be constrained. When we have more demand than supply we will have to load shed," Khulu Phasiwe told Reuters ahead of the news conference, referring to rolling blackouts.

Such controlled outages are needed to prevent a collapse of the grid, the consequences of which would be almost unthinkable as it could take two weeks to reboot the system, according to Eskom engineers.  

The grid was almost overwhelmed in 2008 - costing the mining industry billions of dollars in lost output. Matona said in the subsequent scramble to keep power flowing, Eskom had been deferring maintenance and relying on diesel to fire up some of its turbines.

"Our equipment has become so unreliable that the risk of breakdown is an ever present reality and that creates havoc for us," he said.

"We are at the point where we can continue to do this and then create the kind of maintenance backlog that could be catastrophic for the country or we pause and really take a hard, rational decision."

(READ MORE: SACCI concerned over Eskom's load shedding)

Even with a 20 billion rand cash injection from the government and permission to raise electricity tariffs, Eskom has repeatedly said it needs more funds to ensure liquidity.

Construction of new power stations has been hampered by shoddy workmanship, cost over-runs and violent labour protests.

The first unit of the much-delayed Medupi power plant would be synchronised to the grid soon and reach commercial or full output of 794 MW by June. Another five units will follow and the first unit of the new Kusile plant should come online in 2017.

The Energy Intensive User Group (EIUG), an industry body, told South Africa's energy minister this week that further power constraints would lead to reduced mine output and plant closures.

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