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Viewing cable 08PRETORIA1751, ESKOM AVOIDS LOAD-SHEDDING - FOR NOW

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Reference ID Created Released Classification Origin
08PRETORIA1751 2008-08-08 12:03 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Pretoria
VZCZCXRO6537
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSA #1751/01 2211203
ZNR UUUUU ZZH
R 081203Z AUG 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 5345
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0828
RUEHRL/AMEMBASSY BERLIN 0634
RUEHBY/AMEMBASSY CANBERRA 0704
RUEHLO/AMEMBASSY LONDON 1574
RUEHMO/AMEMBASSY MOSCOW 0832
RUEHOT/AMEMBASSY OTTAWA 0670
RUEHFR/AMEMBASSY PARIS 1411
UNCLAS SECTION 01 OF 02 PRETORIA 001751 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, ISN, EEB/ESC AND CBA 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER 
 
E.O. 12958: N/A 
TAGS: ENRG EMIN EPET SENV BEXP AMGT SF
SUBJECT: ESKOM AVOIDS LOAD-SHEDDING - FOR NOW 
 
REF: PRETORIA 1288 AND PREVIOUS 
 
1.  (SBU) SUMMARY: South African state power utility Eskom has 
managed to avoid load-shedding this Southern Hemisphere winter, but 
still faces short and long-term shortfalls in power generation and 
distribution capacity.  The power crisis - which reached its height 
with significant mine closures in January this year - is not over, 
but rationing to big users and mild weather have kept supply ahead 
of demand.  Johannesburg's municipal City Power has taken steps to 
increase its independent power reserve, but its claim to be 
"load-shedding-proof" is overly optimistic.  Its Kelvin Power 
Station provides the bulk of its power cushion, but an Embassy team 
visit found the plant antiquated and in need of refurbishing.  End 
Summary. 
 
---------------------------- 
Chronic Power Woes Unchanged 
---------------------------- 
 
2.  (SBU) State power supplier Eskom has threatened, but not had to 
resort to load-shedding this winter.  However, the utility still 
faces multiple challenges: 
- Shortfall in capacity vis a vis demand until 2013 when new 
coal-fired plants start to come on line; 
- A razor-thin reserve margin of around six-eight per cent; 
- Persistent and vexing skills shortages; 
- Difficulties in procuring and transporting coal; and 
- Underinvestment and uncertainties in distribution. 
 
 
3.  (SBU) Two weeks ago, Eskom had to shut down three generating 
units (totaling 2,154 MW, over five percent of its capacity) and 
barely avoided a return to load-shedding.  Coal-fired units at 
Majuba and Duvha and one of the units at Koeberg nuclear station 
went down.  The coal-fired units were quickly put back on line, but 
the Koeberg unit remains off-line for repairs.  Stories of Eskom's 
skills gap are legion.  Recently an Eskom grid planner told 
Information Officer that his office had not been able to retain or 
recruit qualified personnel.  Eskom has been struggling to procure 
and transport coal.  On August 7, Eskom took its 1500 coal trucks 
off the battered roads of Mpumalanga and Limpopo to highlight safety 
concerns in light of sixteen fatalities last month.  Eskom has 
brought in two miners, Anglo-Gold Ashanti's ex-CEO Bobby Godsell and 
ex-Kumba iron miner Ras Myburgh, to provide sorely needed leadership 
as chairman and coal guru, respectively.  The utility has 
successfully imposed a ten per cent consumption reduction on big 
industrials and mines, and they appear to have broadly adapted to 
this forced rationing of the biggest customers.  Eskom has also 
benefited from a mild winter, its normal peak demand season. 
 
-------------------------------- 
Nuclear Power Expansion on Track 
-------------------------------- 
 
4.  (SBU) In the longer term, Eskom aims to bring on line up to 
20,000 MW of nuclear power by 2028.  Westinghouse and Areva of 
France are bidding on the first tranche of 3,000 MW and the full 
fleet.  Eskom is expected to make a decision at the end of 
September.  Embassy is working with FCS and the SAG to organize an 
ASME standards conference October 7-8 to facilitate localization and 
globalization of the South African nuclear power supplier industry, 
Qglobalization of the South African nuclear power supplier industry, 
to indirectly support Westinghouse's bid. 
 
--------------------------------------------- - 
Johannesburg City Power - Load-Shedding-Proof? 
--------------------------------------------- - 
 
 
5.  (SBU) Johannesburg municipal power supplier City Power and a 
city councilor assured consumers on July 29 that load shedding was a 
thing of the past, because the municipal utility had enough 
electricity even if Eskom requested a cut in supply.  City Power 
asserted that it had at least 500 MW in reserves out of its 3,200 MW 
requirement, because of the Kelvin Power Plant, plans to refurbish 
inactive gas turbines, new pricing incentives to mitigate demand, 
and plans to install smart meters and solar water heaters. 
 
 
PRETORIA 00001751  002 OF 002 
 
 
6.  (SBU) In an August 7 tour of Johannesburg's Kelvin Power Plant, 
General Manager Stephen Meyer told a team from the Embassy economic, 
TDA, and FCS sections that Eskom's power and skills situation is 
still "extremely tight" and the grid is subject to volatility and 
spikes in voltage.  He described the lack of load-shedding as 
offering the "illusion of okay," noting the system is still based on 
wasteful use premised on cheap electricity (even after the 
regulator-approved increase of 27 percent, bitterly contested by the 
labor federation COSATU in its wide work stoppage on August 6). 
Meyer said South Africa still has the second cheapest electricity in 
the world, and as a result it remains "extraordinarily wasteful and 
inefficient".  This has to change. 
 
7.  (SBU) Meyer said Kelvin Power Plant provides about 150-300 MW of 
cushion to City Power, which compensates the plant's owner based on 
capacity to provide electricity, rather than actual electricity 
delivered.  The twin plants at Kelvin have a theoretical or 
historical capacity of 600 MW, but the plant is antiquated and has 
experienced under-investment from previous owners, including 
American AES, which participated in the 2003 privatization.  Meyer 
represents UK-based Aldwych International, which led an investor 
group which took over Kelvin in 2007, after banks took over the 
asset from Globeleq, which followed in the heels of AES.  Moreover, 
City Power has technical limitations in the capacity of their 
distribution systems to off-take from Kelvin.  Meyer's staff showed 
the Embassy team the 1950's-vintage (1930's technology) Plant A 
which combusts coal on "chain grate feeders" and the 1960's-vintage 
Plant B which more efficiently combusts pulverized coal. 
 
8.  (SBU) COMMENT: The lack of load-shedding and decrease in 
jaw-boning to reduce demand give consumers the illusion that the 
power crisis is over.  Eskom has been lucky with a mild winter and 
unplanned maintenance (barely) staying within the thin reserve 
margin (also reflecting that last summer's planned maintenance was 
productive).  When planned maintenance kicks in again later this 
calendar year, the system may again be subjected to planned and 
unplanned brown-outs.  Eskom's financial and credit wherewithal for 
expansion is based on gaining electricity rate increases that is 
protested vigorously by labor and business. 
 
 
9.  (SBU) COMMENT continued: Kelvin Power Plant in Johannesburg is a 
unique example of an independent power producer (IPP), but it is a 
"one-off" as an old facility developed by the municipality to 
provide a power reserve, then subjected to a series of private 
owners with differing approaches to investment and maintenance. 
Kelvin is nevertheless the largest non-Eskom power producer in South 
Africa, which is emblematic of Eskom's success in resisting IPP's 
gaining a foothold in the country. 
 
BOST