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South Africa: Coal Facts
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Business Day (Johannesburg)
EDITORIAL
21 May 2008
Posted to the web 21 May 2008
Johannesburg
DID we have a power crisis or was it just a coal crisis? That's a key question raised by the report from the National Energy Regulator (Nersa) on its inquiry into the load shedding that began in November and reached crisis proportions in late January. As Nersa notes, Eskom had been having problems since early in 2006 (remember the Cape power crisis) as demand ran ahead of expectations and the supply of power increasingly failed to match it adequately. With the reserve margin at a dangerously narrow 8%-10%, the system was vulnerable to any unplanned outages.
But not that vulnerable. What the Nersa inquiry highlights is the extent to which the rapid run-down in Eskom's coal stocks caused the crisis situation of January 24, when outages and load losses at the power stations got so bad that Eskom had to declare force majeure and SA's mining industry had to shut down. There was much derision at the time at Eskom's "wet coal" explanation. And it wasn't that wet coal wasn't the problem: rather than it would not have been nearly as much of a problem had there been a lot more coal on tap in the first place.
Coal stocks had been shrinking since March 2007. Nersa's report finds that in the six weeks from 20 December to 31 January, coal stocks at the power stations declined by a drastic 2-million tons (from 6-million to 4-million), equivalent to 12 days of coal burn. Instead of the 20-day minimum that Nersa believes should be a licence condition for Eskom, average coal stocks dropped to an average of 12 days at their worst. Even now, after concerted efforts to rebuild the coal stocks, Eskom reports they are still only at an average of just over 17 days.
Eskom rejects allegations that it cut stocks to meet financial targets and ensure executive bonuses. It is clearly angered by Nersa's accusations of "complacency on the side of Eskom management in not replenishing coal stockpiles timeously". It does admit though to a failure of production planning. And it is working hard to rebuild coal stocks.
Much as it may have annoyed Eskom, which accuses Nersa of simply repeating information Eskom had already put out into the public domain, the report is a worthwhile intervention. It may ignore big policy issues but it zeroes in on the operational aspects of power generation and power demand and it should contribute to a better understanding of how the power crisis happened -- and what needs to be done now. It should help to focus the minds of Eskom and the government on the remedial measures that must be put in place to tide Eskom and SA through the next few vulnerable years of power shortage.
Coal is only one aspect. The Nersa report also recommends a centralised high-level government unit with authority to lead the national electricity emergency programme and it makes recommendations on new private sector power producers and comments on the need to balance Eskom's commercial decisions with national security of electricity supply "in order to avoid national crises".
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Some of Nersa's findings are not new and action is already being taken to tackle some of the issues it identifies. But it has raised some crucial questions about shortcomings in Eskom's operational performance. And as the regulator, it has the power to set and enforce targets that could ensure that performance improves.
How do you make a business look good on paper,you use as much stock as possible without replacing it.(that's another prpblem.)
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