Rating agency Fitch Ratings says Eskom’s load shedding is expected to continue in the near future, despite recent procurement initiatives the utility has launched.
In a notice released on Monday (April 26), Fitch said the blackout should be addressed in the medium term through Eskom’s plan to improve the performance of its power plants, thereby reducing the consumption of expensive open-cycle gas turbines (OCGTs) and improve profit margin.
“Short-term delays in the implementation of the plan or an increase in unplanned losses would increase the load shedding for the customers and the costs for Eskom and put the stand-alone credit profile under further pressure,” he said.
Fitch added that Eskom’s generating capacity plan was “finely balanced”.
It found that the competitive utility plans to shut down 3,340 MW of generation capacity and bring 3,200 MW of new gross capacity online by fiscal year ending March 2025 (FY 25), which could be delayed.
“The new capacities essentially include the remaining units in the Kusile and Medupi power plants, the completion of which has been significantly delayed due to work and technical problems. Eskom has put two units online in Kusile since March 2020, which corresponds to a gross capacity of around 1,600 MW. “
According to Fitch, Eskom’s available capacity is currently around 4,000 MW below the peak demand of around 34,000 MW and well below the nominal capacity of around 45,000 MW.
This shortage is the result of a gradual increase in unplanned capacity loss – now about 10,000 MW – and a recent increase in planned capacity loss, it said.
“The unplanned loss of capacity that is distributed among the power plants is due to the high average age (more than 37 years) of the base load generation fleet, which requires maintenance and extensive retrofitting. Operation of power plants to meet increased demand; and declining coal quality, which affects plant performance. “
Fitch said it viewed the announcement made by the South African Ministry of Natural Resources and Energy on March 18, 2021 to procure 2,000 MW of emergency power as positive but insufficient.
“Although we plan to connect this capacity to the grid by August 2022, we believe it could be delayed by the time it takes to build. The technologies under the eight preferred offerings include solar photovoltaics (PV), wind, liquefied natural gas and embedded battery storage.
“The government has also started procurement of 2,600 MW under Bid Window 5 of the independent procurement program for renewable power generators, which ends on August 4, 2021 and has Eskom as the only buyer. We expect that around 1,600 MW will be drawn from wind and 1,000 MW from solar PV. “
Fitch added that the recent spike in planned capacity loss is due to Eskom taking the opportunity to increase reliability during pandemic lockouts, which lowered energy requirements.
“Planned maintenance, measured by the planned capacity loss factor, rose to around 12% since the beginning of the year (YTD) – or 5,500 MW – compared to 9% in 2020.
“However, the gradual easing of the lockdowns from September 2020 to February 2021 increased demand and lowered the Energy Availability Factor (EAF) to 65% since the beginning of the year.”
Eskom aims for an EAF of at least 70%. A lower EAF requires increased use of open-cycle gas turbines and, if it is below 65%, load shedding to protect the integrity of the national grid.
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