Power supply interruptions of the scale seen during the reporting
year have been unprecedented in South Africa. Meeting an
increasing national demand for electricity with a much-diminished
reserve margin has undoubtedly been Eskom’s biggest challenge
for this past financial year.
The convergence of a diminished reserve margin, increased
unplanned generation plant outages as well as coal supply and
quality constraints forced Eskom into an undesirable position
of having to interrupt the supply of electricity nationally.
Between October 2007 and February 2008, emergency load
shedding was implemented. In order to avoid a potential
overall nationwide blackout, a national electricity emergency
was declared on 24 January 2008.
Load shedding activities undertaken during this period – and
at any other period – have been a source of distress and
discontent to most South Africans, causing major disruption
to all sectors of the economy. As the national utility, we have
used every available opportunity to explain the underlying
reasons, improve how load shedding is managed, and minimise
its impact on the nation. While the explanation would have
resonated with some, the inconvenience is, however, deeply
While our current focus is understandably on responding to the
demand for electricity we continue to ensure that overall good
practices are in place and that we do not take our attention off
our triple bottom line. We are determined to make a positive
difference through our continued support for the United Nations
Global Compact. As a signatory to the compact, the world’s
largest voluntary corporate responsibility initiative, we commit
to show leadership in the compact’s 10 principles around labour
standards, the environment and anti-corruption.
Diminishing reserve margin
Since taking office as chief executive on 1 May 2007, my team and
I have dedicated a significant amount of leadership time reflecting
on the challenges at hand and aligning all the resources of the
organisation towards a solution. The fundamental and underlying
problem is that the power system has an inadequate reserve
margin which is at an all time low of around 8%. This does not
compare well to our aspiration of 15%.
Since 1994, the demand for electricity has grown by
about 50% on the back of robust economic growth. This
welcomed growth has all but exhausted Eskom’s surplus
electricity generation capacity. To us at Eskom, this has been
one indicator that we watched closely and with a sense of
trepidation. Monitoring the diminishing reserve margin has
been an integral part of Eskom’s operations, as it is a proxy
for the long-term adequacy of the power system, including
the short-term security of supply. In the absence of any
investment in new generation capacity, misalignment between
the demand and the available supply emerged and therefore the 2007 crunch was inevitable. The Cabinet decision
of 2004 marked an important milestone where Eskom
could start investing in new generation capacity.
Increasing Eskom’s reserve margin to adequate levels is
central to the organisation’s ability to ensure that power
supply is not impacted by technical events upstream in
the supply chain. A healthy reserve margin is necessary
to create a window for planned maintenance and a
cushion to manage unplanned maintenance. In this
way conventional and inevitable technical problems are
absorbed within the system and do not degenerate to a
national crisis. This margin is further required to optimise
the cost of running the power system. With such an
inadequate reserve, Eskom has very little choice but to
run all the available power stations irrespective of the
cost of running them.
Despite the low reserve margin, Eskom has commenced
issuing quotations to potential customers who apply for
new connections or upgrades above 100kVA. However,
the period that it will take before a customer applying
for a connection above 100kVA receives energy will
depend on the rate at which space is created on the
electrical system and the rate at which applications for
new capacity are received.
The challenge of operating a power system that has a low
reserve margin should not be underestimated. It is serious,
deep, material and will take a few years to resolve. Our
response to this challenge has to be comprehensive, with
interventions on both the demand and the supply side.
In response to this challenge Eskom, in partnership with the
South African government and major stakeholders, has already
made significant progress in rolling out the national recovery
plan. We successfully stabilised the power system after the
extreme events of January and February 2008, coal stockpiles
have significantly increased with the target of an average
of 20-system days reached, and undertaken the required
maintenance in anticipation of the winter peak season.
With the contribution of our key industrial customers and the
broader South African public, we are well on track to successfully
implement a power conservation programme.