Moody’s Investor Service yesterday cast a dim eye on South Africa’s electricity crisis and, though acknowledging current efforts in improving efficiency, was pessimistic of stability on the grid in the short term as funding, mismanagement and lack of technical skills were still prevalent.
In an report on South Africa’s electricity market titled, “Load shedding will continue as the system remains under severe pressure”, Moody’s said assuming that the planned growth in new capacity and Eskom's efforts to improve operations materialise, the levels and intensity of load shedding should start to reduce next year.
Joanna Fic, the senior vice-president at Moody’s EMEA Infrastructure Finance team, said, “Still, there are risks to execution.”
Moody noted Eskom’s poor operational performance was reflected in the deteriorating energy availability factor (EAF), which in the financial year to March 2022 stood at 62%, but dropped to 57% in the year ended March 2023.
With increasing unplanned outages and the resulting higher stages of load shedding, the average EAF declined further to around 53% in the first two months of financial year (FC) 2024.
Eskom aims to improve its EAF to 65% by March 2024 and 70% by March 2025 through an intensified focus on recovering performance at the six worst-performing stations (Duvha, Kusile, Kendal, Majuba, Matla and Tutuka), which contribute more than 50% of the unplanned load losses, while sustaining the performance at the stations that have shown reliable performance.
“Eskom is taking steps to recover at least 6 GW of capacity in units that are on long-term outage (Kusile units 1-3 and 4, Koeberg and Medupi unit 4). These targets are ambitious, given the difficulties that the company faces and its track record... Overall, only 51% of outage dates were met, which was an improvement on the FY 2021, when this ratio stood at 40%, but still significantly below the target of 80%,” Fic noted.
Moody’s said new capacity would ease system pressure. However, construction of new power plants had been subject to delays and growth in renewables and embedded generation had been slow. Between 2020-22, around 2GW of new renewable capacity was built and connected to the grid.
According to data from Independent Power Producers’ Office, none of the capacity awarded in bid windows 5 and 6 was operational as yet, with most projects not having reached financial close.
However, Eskom anticipated that this capacity would come online in 2024 and 2025, respectively.
The reported noted that Eskom’s role as provider of around 87% of the country’s energy supply was fraught with problems.
“The power stations’ performance is also affected by a lack of proper maintenance and very high historical load utilisation, but also coal supply issues, mismanagement, lack of skills, corruption, sabotage, and acts of theft and vandalism,” it said.
It said load shedding had been a significant contributor to the decline in South Africa’s electricity consumption, which in 2022 was some 11% lower than in 2011, when it reached 240 TWh. Industrial and mining sectors had reported the biggest decline in electricity consumption.
Looking ahead, “Moody’s expects more capacity to be added in the next few years following a change to the licensing regime and other initiatives to enable and accelerate private investment in generation capacity,” Fic said.
Moody’s noted measures to establish South Africa’s National Energy Crisis Committee, to coordinate the government’s response and ensure implementation of the Energy Action Plan published in July last year and the appointment in March of a Minister of Electricity and in May transferred certain powers and functions to the Ministry as provided under the Electricity Regulation Act. In addition, an Energy Safety and Security Priority Committee was established to address Eskom-related crime, with the number of people arrested on suspicion of criminal activity in the company having risen in recent weeks.
The establishment of the National Transmission Company of South Africa (NTCSA) would enable an independent market to start trading. This could happen as soon as late this year, although NTCSA is yet to be licensed by the National Energy Regulator of South Africa.
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