South African energy crisis
The South African Energy Crisis is an ongoing period when South Africa experiences widespread rolling blackouts as supply falls behind demand, threatening to destabilize the national grid. It began in the later months of 2007 and continues to this day. The government owned national power utility and primary power generator, Eskom, and various parliamentarians attributed these rolling-blackouts to insufficient generation capacity. With a reserve margin estimated at 8% or below, such "load shedding" is implemented whenever generating units are taken offline for maintenance, repairs or re-fueling. According to Eskom and government officials, the solution requires the construction of additional power stations and generators.
Background
Decision makers and leaders both in Eskom and in the government predicted in the late 1990s that Eskom would run out of power reserves by 2007 unless action was taken to prevent it.In 1998 Eskom acquired a minority stake in alternative energy technology company Amazing Amanzi Systems Ltd with the vision of incorporating it into its joint venture with Royal Dutch Shell as part of the Shell Solar Homes project. Controversy erupted at the cancellation of the Shell Solar Project and the roll-out of free and/or subsidized kerosene water heaters and stoves due to political pressure.
First period: 2007 – 2008
The first period of chronic power shortages occurred in late 2007 and lasted until at least May 2008. Investigative television show Carte Blanche reported that part of the problem is related to the supply of coal to the coal-fired power plants. Several other causes have been postulated, including skills shortages and increasing demand for electricity around the country.Eskom was criticised for exporting electricity to neighbouring African states while not having the capacity to meet South Africa's demand. Eskom, however, announced on 20 January 2008 that it had ceased to export power. The government claimed the shortage had caught them by surprise since the South African economy had grown faster than expected; however, their target growth rate of 6% per year was not reached from 1996 to 2004. The average GDP growth rate during this period was 3.1%.
The year 2012 was frequently mentioned as the earliest possible end to the power shortages.
Second period: 2014 – 2015
The Majuba power plant lost its capacity to generate power after a collapse of one of its coal storage silos on 1 November 2014. The Majuba power plant delivered approximately 10% of the country's entire capacity and the collapse halted the delivery of coal to the plant. A second silo developed a major crack on 20 November causing the shut down of the plant again, this after temporary measures were instituted to deliver coal to the plant.On 5 December 2014, Eskom started major stage three load shedding in South Africa after the shut down of two power plants on 4 November due to diesel shortages. It was also reported that the Palmiet and Drakenburg were also experiencing difficulties due to a depletion of water reserve to the Hydro plants. Stage three was the highest degree of load shedding then.
On Thursday 4 November, Eskom fell short of the country's electricity demand of. The power utility has the ability to produce but could only supply due to "planned and unplanned" maintenance. One turbine at Eskom’s Duvha Power Station is still out of commission due to an "unexplained incident" in March 2014. Load shedding was scheduled to resume in February 2015, due to industry start up, after the December holiday period.
Third period: February – March 2019
Another period of load shedding began in February 2019 when Eskom announced level 4 load shedding due to the temporary loss of generating capacity. This necessitated the dropping of 4,000 MW of power consumption from the national grid. In mid-March of that year extensive ongoing power cuts were implemented across the country by Eskom as part of the level 4 load shedding.Fourth period: December 2019 – March 2020
Eskom implemented a further round of load shedding commencing in December 2019. South Africa is currently experiencing its worst energy crisis, when Load Shedding Stage 6 activated for the first time ever in December. Eskom stated that of its total nominal capacity of around 44,000 MW, it was unable to provide around 13,000 MW of total capacity, resulting in the nationwide blackouts.A combination of factors were blamed for the fourth period of load shedding ranging from weather to allegations of sabotage and neglect. Unusually heavy rains in the highveld region of South Africa resulted in wet coal and flooding leading to a number of plants being unable to operate effectively, most notably at Medupi power station. President Ramaphosa stated that an additional reason for the load shedding was the loss of 2,000 MW due to alleged sabotage by an Eskom employee. Eskom chief operations officer, Jan Oberholzer, publicly stated that the primary reason for load shedding was due to a lack of maintenance and neglect over the preceding twelve years resulting in an unpredictable and unreliable system. South African opposition parties criticized the African National Congress and president Ramaphosa for the way in which they handled the crisis. An additional round of load shedding was initiated in March 2020 when the Koeberg Nuclear power station experienced a fault with one of the sea water cooling pumps.
Effect on the economy
In January and February 2008 global platinum and palladium prices hit record highs as mines were first shut down and subsequently restricted in their electricity use. South Africa supplies 85% of the world's platinum and 30% of palladium. Mining companies estimate that hundreds of thousands of ounces of both gold and platinum production will be lost every year until the crisis passes. Estimates on the direct economic impact are not yet available, but given South Africa's reliance on precious metals exports to finance its current account deficit, traders have severely downgraded the currency.Due primarily to the impact on mining companies, economists have downgraded GDP growth forecasts significantly. The current consensus hovers around 4%, with the caveat that growth could reduce by 20 basis points every month under certain circumstances.
Banks and telecommunications companies have generally continued to operate as usual thanks to existing backup systems. Retailers initially reported large losses due to spoiled frozen and chilled foodstuffs, but are rapidly installing generating systems. Many large factories have reported it impossible to carry the capital expense required to keep operations uninterrupted. However, the largest have guaranteed service level agreements with Eskom and have been largely unaffected.
Big companies with international investors have also been affected by the electricity crisis and have had no choice but to announce these effects to the international community, bringing the situation to the attention of potential foreign investors. Load shedding in the first six months of 2015 was estimated to have cost South African businesses R13.72 billion in lost revenue with an additional R716 million spent by businesses on backup generators.
Small business owners in South Africa said that load shedding was the number one challenge that they faced in Q1 of 2019. In a small business sentiment report of 3984 small business owners 44% said that they had been severely affected by load shedding with 85% stating that it had reduced their revenue. 40% of small businesses lost revenue of 20% or more during the load shedding period. 20% of owners say that if load shedding were to continue at similar levels to Q1 of 2019, they will have to consider reducing their staffing levels or closing their business.
Crisis management
As of February 2008 blackouts were temporarily halted due to reduced demand and maintenance stabilization. This drop in demand was caused by many of the country's mines shutting down or slowing to help alleviate the burden. However, regularly scheduled mandatory load shedding started in April 2008, to allow maintenance periods of power generators, and recovery of coal stockpiles before the winter, when electricity usage is expected to surge.Expanding generating capacity will see an estimated spend of R280 billion over the next five years, with around 20 000 megawatts of additional capacity due to be online by 2025. However, neither short nor long term funding has yet been secured and the downgrading of Eskom's credit rating has ignited speculation of a capital injection by the government.
On 11 December 2014 it was announced that President Jacob Zuma had assigned Deputy President Cyril Ramaphosa to oversee the turnaround of three state owned companies namely "Eskom, the South African Airways, and the South African Post Office", all of which were in dire straits.
On 15 January 2015 Eskom's then CEO Tshediso Matona admitted that Eskom's policy to "Keep the Lights on" meant that power station maintenance was neglected for years, and that South Africans will have to get used to electricity blackouts for the next four to five years.
In December 2015 an agreement between Eskom and Areva to replace steam generators at the Koeberg nuclear plant was judged "unlawful", by the Supreme Court of Appeal, bringing the utility company’s tender process into question.
In late 2016, Standard & Poor’s Global Ratings downgraded Eskom’s credit rating further into subinvestment cutting its long-term credit rating to BB - two levels below the investment threshold.
In 2016, Matshela Koko, former head of generation for Eskom, was named as acting CEO.
In 2016 Eskom stated it intended to pursue a nuclear solution to current energy woes. According to projections from late 2016, the use of nuclear power would provide over 1000GW of power by 2050. In preparation, the company launched a training program for 100 technicians, engineers and artisans to certify them as nuclear operators. In January 2018 Eskom's acting Chief Financial Officer stated that the company could not afford a new build, following a 34% drop in interim profits due to declining sales and increasing financing costs. The government stated it would proceed with the plan but more slowly.
The National Energy Regulator of South Africa denied an application by Eskom to increase electricity tariffs by a future 19.9% for the financial year 2018/19. The regulator instead granted a 5.2% increase and gave a list of reasons for the refusal to grant higher tariffs that the South African newspaper Business Day stated painted "a picture of inefficiency, inaccurate forecasting and cost overruns" at the power utility. Part of the refusal was the finding that Eskom had an additional 6,000 employees that were not needed, costing the company R3.8 billion annually.
On 28 March 2018 Moody's Investors Service downgraded Eskom's credit rating to B2 from B1 stating that it was concerned with "the lack of any tangible financial support for the company in the February state budget".
Load-shedding
As of December 2019, Eskom have published 8 stages of load shedding, each stage representing the removal of 1000 MW demand by controlled shut down on sections of the supply grid based on a predetermined schedule. Schedules may vary by location. Stage 6 was implemented the first time on 9 December 2019.| Stage | Energy load removed from the national grid | Typical Impact | Percentage of grid users without power |
| Stage 1 | 1000 MW | customers disconnected 2-4h at a time, totaling 6h over 4 days | ~6% without power |
| Stage 2 | 2000 MW | customers disconnected 2-4h at a time, totaling 12h over 4 days | ~12.5% without power |
| Stage 3 | 3000 MW | customers disconnected 2-4h at a time, totaling 18h over 4 days | ~19% without power |
| Stage 4 | 4000 MW | customers disconnected 2-4h at a time, totaling 24h over 4 days | ~25% without power |
| Stage 5 | 5000 MW | customers disconnected 2-4h at a time, totaling 30h over 4 days | ~31% without power |
| Stage 6 | 6000 MW | customers disconnected 2-4h at a time, totaling 36h over 4 days | ~37% without power |
| Stage 7 | 7000 MW | customers disconnected 2-4h at a time, totaling 42h over 4 days | ~44% without power |
| Stage 8 | 8000 MW | customers disconnected 2-4h at a time, totaling 48h over 4 days | ~50% without power |
Typically after the 2h or 4h disconnect period there is be an additional 30 min added to allow for switching on, those 30 min's are not counted in the totals as mentioned above, and other problems do arise during switch on that can cause an actual fault blackout in the area beyond the scheduled time.