Eskom briefing on its 2014/15 Summer Plan

NCOP Public Enterprises and Communication

27 August 2014
Chairperson: Ms E Prins (ANC, Western Cape)
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Meeting Summary

Eskom briefed the Committee on its 2014/15 Summer Plan. An overview of the demand and supply balance indicated constraints between supply and demand, and it was noted that Eskom had for some time been working under very tight circumstances, and would have to continue doing so. There were different reasons for the difficulties in summer and winter, which were outlined, and Eskom indicated that it would have to use additional levers for the summer season 2014/15. These included the use of Open Cycle Gas Turbines (OCGTs) to ensure security of supply, a planned maintenance schedule, which would increase to cover 10% of the generation fleet, but which was based on sustainable generation strategy, and the need to clear incomplete load losses, with only a few flexible outages. Eskom would have to implement certain load reduction mechanisms, but was communicating with the Regulator and was working on communication with the public, and attempting to ensure that any outages would be notified at least one day in advance. During the winter period, Eskom’s plans had been successfully implemented, and partial load losses were reduced. However, there were some challenges in regard to predictable generation fleet performances. The Unplanned Capability Load Factor (UCLF) could not change quickly enough, although this could be addressed by fixing or removing all damaged components in a power station, and there had been major refurbishment of over 30 coal fired generating units. Risks for the summer period included persistent rainfalls, inherent load losses and risk of outage management capability and equality. Eskom had ensured that the problems in 2008, which resulted from wet coal, would not recur and was now also implementing fines for any contractors found to have misused the company’s units and components. Logistical arrangements were in place. Eskom knew that it was not able to calculate availability of energy accurately, because the availability was very flexible, but it had engaged with Mozambique to try to ensure sufficient energy capacity at the plant, and had set up new communication systems with customers. The summer campaign included education to consumers, trying to ensure that energy was used efficiently during the day, engagements with the Regulator, and persuading large users to alter their usage.

The second part of the presentation updated the Committee on the New Build Programmes. New generation capacity and transmission line construction had been part of the programme since 2006. This included the refurbishment (Return to Service) of old gas stations such as Komati, Camden, and Grootvlei. Three power stations were under construction to address base load, namely Medupi in Limpopo, the first coal-generating plant in Africa that used supercritical power generation technology, Kusile in Mpumalanga, and Ingula Pump Storage Scheme in Ladysmith, KwaZulu Natal. The progress of each was highlighted. At both, there had been industrial action, although the experiences at Medupi had been used to try to improve systems at Kusile. At Medupi, the First Unit Synchronisation target date was still December 2014. Additional resources were taken from Kusile power station and mobilised to Unit 6, by the boiler contractor and control and instrumentation contractor, to lessen delays. The first chemical clean injection in Medupi was completed on 19 August 2014. Progress on site had been speeded up. At Kusile, the First Unit Synchronisation targets were the second half of 2015, but this had later been pushed back to January 2016. Alternative plans had been developed for the problematic Control and Instrumentation system , non-performing contractors were identified, and any methods and ratios that did not match Eskom’s requirements were identified and changed. At Ingula, there had been delays because of an accident in which six people died and seven were injured, resulting in the closure of the tunnel. The Department of Mineral Resources was carrying out an inquiry. The poor safety procedures that had led to the accident were being addressed, and new plans for the reopening and work on the shafts were formulated.

The Committee expressed its dissatisfaction at the fact that Members did not receive their documents until one day before the meeting, pointing out that this left insufficient time for them to prepare. Eskom explained that this was because it was only notified of the meeting on the previous Thursday. Members asked for an explanation of numerous acronyms. One Member suggested that the Committee adjourn for a short while to discuss the impact of the late presentation, and, on resumption, the Chairperson explained that Members felt that they would prefer not to ask any questions now, since some of those questions would require answers from the executive. She pointed out that the Minister and Deputy Minister had failed to attend the last three meetings of the Committee, and would now be asked to be present for the questions.

Meeting report

Eskom Summer Plan for 2014/15: Briefing
Mr Collin Matjila, Acting Chief Executive Officer, Eskom, presented the Eskom Summer Plan 2014/15, which set out the attempts to achieve a balance between the demand and supply of electricity, particularly for the coming summer season. Giving a broad overview, he noted that South Africa has been running to a very a tight system for many years and Eskom would continue to utilise this system until “new generation capacity” was brought forward. The ability to match supply with demand was stretched in both winter and summer seasons, and there was a requirement for additional levers, including Open Cycle Gas Turbines (OCGTs) which ensured security of supply, the maintenance schedule that was set to be increased from 9.46% generation fleet to over 10% for the summer season, based on the sustainable generation strategy, and the need to clear incomplete load losses, with few flexible outages. Eskom needs required more shut downs and longer outages, because three stations needed refurbishment and were to be shut down. When the maintenance fleet was taken out, this reduced the energy availability. Therefore, it was vital for Eskom to manage the load, as well as implement certain load reduction mechanisms through applicable procedures.

The winter plan had produced the expected outcomes. On the one hand, the system was handled well, and the plan also dealt with the opportunity for maintenance. During winter 2014, Eskom had achieved reduced partial load losses, from in excess of 3500MW to 1500MW. It had connected 538MW of renewables from Independent Power Producers (IPP), and brought the total to 1000MW. The extended STIPP and Aggreko contracts had also delivered. Nonetheless, there remained a challenge on predictable generation fleet performances. He explained that this was due to the inability of UCLF to change quickly (although this could be reduced by fixing or removing all damaged components in a power station), and the fact that 32 out of 87 coal-fired generating units required major “surgery” and four were in a critical state.

According to the Table Mountain profile graph, summer posed different challenges. The Planned Capability Load Factor (PCLF) showed significant growth in comparison to the winter months, and there would be constraint demands from 6 am to 10pm. This was because most plants were taken out of commission to do maintenance during summer, depending on the number of units needed for maintenance purposes.

The slide on Base Case Assumptions highlighted a number of assumptions used in determining the actual summer power system outlook. The assumptions were, amongst others, that:
- Eskom’s sales forecasts were based on a 1.3 % average growth during the summer period
- generation plant availability would be at 75.5% for the 2014/15 financial year
- there would not be additional renewable IPPs during the summer period
- OCGT usage was limited to the approved Corporate Plan budget
- should load shedding occur, Eskom would not allow the system to progress beyond stage 1 (1200MW) at any given time, because of its difficult management.

The projected systems outlook indicated that the system remained tight, and Mr Matjila reminded Members that this was due to the planned maintenance. He tabled a slide that was colour-coded (see attached presentation) to show the shortfalls at any given state as a result of higher planned maintenance work, and said that in these cases, the degree of tightness depended on the performance of UCLF and the available capacity.

Mr Matjila noted that Eskom was aware of several summer risks which would increase variability owing to various reasons, which included:
- increased full and partial load losses
- below minimum coal stock days at Arnot, Kriel UG, Majuba and Tutuka
- risk of outage management capability and equality where outages took longer than planned due to high post outage UCLF
- continuous heavy rain; and unreliable availability of supply from HCB.

He noted that heavy fines would be imposed on contractors who failed to abide by the contractual obligations, including not returning the units and components taken out of their stations in good condition. There was also an inherent and reputational risk of load shedding, in addition to the economic impact of this. Eskom had taken precautionary measures to ensure that there would not be a recurrence of the 2008 load shedding, which had resulted from strong wet coal, since specific logistical arrangements had been considered to minimise the impact of consistent and persistent rainfall and its impact on coal.

Another challenge related to Eskom’s inability to calculate available energy because of the unreliable availability. There had been ongoing engagements with counterparts in Mozambique, to ensure sufficient engineering capability on standby at the plant for future unanticipated circumstances. Communication systems had been put in place to ensure predictability and to alert consumers of possible load reduction in their respective areas.

There were other options also put in place to close the supply gap. Eskom was seeking to close on an additional 500MW from the CSP, and some of the renewable energy plants had operated fully since the beginning of 2014, which would address the shortfalls in capacity. Eskom knew of the need to constrain diesel usage to power the oxygen plants. If energy reductions were needed, this would happen between 6am and 10pm. A summer campaign to communicate with consumers was initiated, to inform and educate them on energy preservation, in a different way to winter, trying to ensure that customers switched off where possible during the day. It was also trying to get high energy users to shift consumption from day to the evening to ensure sufficient power during the course of the day, when the system will be tight. Certain levels were put in place to increase the capacity, given the increased consciousness of the rehabilitation and maintenance. There had been constructive engagements with the regulator to ensure that the reduction on methodology for summer would be within appropriate protocols. The cooperation with the regulator should yield positive outcomes, as well as enabling Eskom to warn consumers at least one day in advance of any problems relating to energy consumption. Communication strategies already being used included cell phone texts and direct communication. This campaign would be in the best interests of the country, and the company integrity would be protected. Eskom noted that managed load reduction costs were far less than the costs of a nationwide power failure with lengthy impacts. All available levels would be used, including OCGTs and other significant measures to guarantee efficiency, and a positive attitude towards electrical components usage would be fostered, to try to instil a collective effort to ensure available supply.  through a collective effort by the country.

Mr Matjila conclude by summarising the main points, which were:
- Constraining the OCGT diesel usage to budget could result in an inability to meet the demand throughout the remainder of the 2015 financial year.
- Low risk of load shedding could be attained if targets were reached
- Any load shedding was most likely to occur between 06h00 and 22h00
- The current protocol NRS048-9 did not allow for planned load reductions, because of financial problems, and so alternative protocols and legislative frameworks were being developed.
- Additional renewable sources provided an opportunity to displace OCGT use throughout the day.
- It was preferable to run OCGTs than perform scheduled load reductions.

Mr Dan Marokane, Acting Group Executive: Group Capital, Eskom, presented the second section of the Summer Plan for 2014/15. This covered the New-Build Programme Update within Eskom Holdings SOC Limited. The new generation capacity and transmission line constructions indicated build activities that had formed part of the programme since 2006. These involved the rehabilitation of old gas stations, presently under construction, that were referred to as Return-to-service (RTS) station. Three of the RTS gas stations (Komati, Camden and Grootvlei) had been completed and officially opened, and these three together contributed a total of 3700MW.

The second part of the build programme (base load) involved new programmes, such as the Nuclear New Build Programme (NNBP), Biomass, Majuba Underground Coal Gasification Demo Plant (UCG); and Primary Energy projects which focused on building more railway lines and road rehabilitation in the coal areas in the Mpumalanga Province. Medupi (4764MW) in Limpopo and Kusile (4800MW) in Mpumalanga and Ingula in Ladysmith were still under construction. Medupi was the first coal-generating plant in Africa that used supercritical power generation technology.

There were other peaking and renewable projects that were also under way, including the Open Cycle Gas Turbine Conversion Project (conversion of Ankerlig and Gourikwa OCGT power plants to a Combined Cycle Gas Turbine) in Mossel Bay and Ankerlig, and the Ingula Pump Storage Scheme (1332MW) in Ladysmith. The refurbishment in Mpumalanga involved an already developed refurbishment and air quality project with refurbishments such as Matla, Kriel and Duvha. The Arnot capacity increase (300MW), the Grootvlei Fabric Filter (FFP); as well as Kriel Retrofit were under construction. The intention of these programmes was refurbish the life of the existing units, because this was more affordable than building completely new units. Eskom had erected a number of transmission lines across South Africa for grid strengthening projects which were in development, and other projects including Central, 765Kv, Northern and Cape which were under construction. These were intended to strengthen the capability of power distribution to different locations across the country.

A pictorial view of the Medupi power station project was given, and once all units had been completed, they would constitute a 6-pack, each one worth 800MW of power generation capacity (see attached presentation).

The executive summary on Medupi power station indicated the impact of the industrial action. Progress of construction in critical areas was delayed by the industrial action of July 2014, and labour attendance fell between 40% and 70% during that period. The workforce was now back on site. Through risk mitigation plans and re-assignment of available resources, the First Unit (6) synchronisation was still targeted for December 2014. The First Unit synchronisation showed that Boiler Chemical Clean was ongoing and its target for completion was end of August 2014. First fires were targeted for September 2014 and coal had been received on the coal stockyard. Other activities supported the First Unit synchronisation date. Mitigation activities specified that additional resources were being mobilised to Unit 6 by the boiler contractor and control and instrumentation (C&I) contractor, to address any resource-driven delays. Additional shifts were introduced on a 24/7 basis to speed up progress on site. Eskom worked with contractors on resolving issues that may have affected the schedule and increased productivity on site. The first chemical clean injection in Medupi was completed on 19 August 2014.

Mr Marokane stated that Kusile power project station was a replica of the Medupi power station. The targets of the First Unit Synchronisation after June 2015 were well in progress. He highlighted that the key issues were to ensure that school fees were paid, to avoid a repeat of similar occurrences to Kusile, and to develop an alternative plan for the Control and Instrumentation (C&I) computerised system that controlled the plant’s operation, which had been a challenge with Medupi. At Kusile, a parallel process plan was developed, which allowed for secondary plans to come into play when there were problems. Decisions were to be based on the progress made on site. Overall workforce productivity under the supervision of contractors appeared to be different from what Eskom required to maintain the project’s schedules, and so construction methods and supervision ratios were altered. Under-performing contractors were changed at Kusile, because their underperformance impacted significantly on the company’s resources.

The executive summary on Kusile power station first noted that Eskom experienced unprotected industrial action from civil contractors during July 2014, but disciplinary action was taken against civil contractors whose workers caused disruptions. Resources were then transferred to Medupi power station to support the recovery plan. The workforce was now back on site. The First Unit Synchronisation priority areas were defined for 2014, and the target date for synchronising was December 2015, but this had been moved recently to January 2016. A commercial strategy was defined to increase contractors’ resources and improve their performance. The productivity challenges included that the boiler contractor improved boiler construction progress from 0.48% per week in March 2014 to 0.68% per week now. Additional improvements by the boiler contractor would still be required to achieve the target date of December 2015, which were being addressed. Eskom continued to collaborate with the control and instrumentation (C&I) contractor in ensuring that the contractor supported the December 2015 synchronisation date. Eskom had implemented additional measures to mitigate the schedule risk associated to C&I.

A summary was also given for Ingula Pump Storage Scheme in Ladysmith. Here, the First Unit Synchronisation (Unit 3) was targeted for October 2015. There had been two critical areas identified which supported the First Unit Synchronization target date – namely, the completion of upstream waterways and the completion of downstream waterways and surge chambers. The Ingula pump storage scheme encountered six fatalities and seven injuries in October 2013, which resulted from the accident in one of tunnels that connected the upper mountain reservoir in the Free State to a lower reservoir in KwaZulu Natal. The tunnels were shut down, and work in the two Inclined High Pressure Shafts (IHPS) was placed on hold after the accident. A plan to re-initiate work on the shafts was later established and approval to remove the equipment and start equipping the shafts had been made. Dedicated teams had been staffed to fast track the reviews, in preparing the re-start of work on the IHPS. The Department of Mineral Resources (DMR) was carrying out an inquiry into the incident. The First Synchronisation of Unit 3 was scheduled for October 2015 and Unit 4 in December 2015. Civil works for mining activities were scheduled for completion by the end of the year. First Synchronisations for Units 2 and 1 had been scheduled for mid-March 2016 (Unit 2) and mid-May 2016 (Unit 1). Commercial operations for all units (1, 2, 3 and 4) were scheduled to run between January 2016 (Unit 4) until August 2016 (Unit 1). The overall project S-curve graph for work in progress at Ingula showed a sharp increase toward the end due to the nature of the structural work between the rocks on the mountain.

Mr Marokane showed a pictorial view of an example of a transmission project, and emphasised that such projects were the “backbone of the capacity to distribute power to different customers”. He drew an analogy with road networks, saying that transmission networks were akin to freeways, and distribution networks to smaller roads connecting towns. Eskom had commissioned one of the transmission sites in the Eastern Cape, with particular reference to the Mthatha areas. It would also commission similar sites in Limpopo, North West and Western Cape provinces.

Mr Marokane summarised the key issues around the projects. Kusile and Medupi power stations had technical welding difficulties, but Eskom continued to deal with the welding “backlog”, had a full understanding of the problem and how it was to be handled at both power stations. To resolve the issues, defective and sub-standard welds needed to be fixed or redone, contractors had to revisit and made corrections to the data, and all boiler repair work had been completed. In relation to control and instrumentation (C&I), the contractor was not able to meet some of its contractual requirements which related to C&I operations, which could have led to delays in Medupi and Kusile projects. An alternative supplier was contracted on the Boiler Protection System (BPS) component for the first two units of Medupi. An Early Works Order (EWO) had been placed in parallel to C&I work in mitigating schedule delays. Eskom had to remain vigilant, and it was enhancing quality assurance in minimising the on-site reworks and unforeseen delays. Safety maintenance remained a focal point in the company. There had been poor safety performance on sites, particularly with the Ingula Pump Storage Scheme. Eskom, together with its contractors, had since the accident implemented safety interventions, appointed additional resources, removed contractors who had underperformed and changed methods and ratios. Further efforts by Eskom and contractors to improve safety performance included additional safety supervision and inspections on the sites.

Mr Matjila apologised for the fact that the document had arrived late, but explained that Eskom had been invited to give the presentation only on Thursday 21 August, and had worked on the document until Monday 25 August, and had not been able to re-schedule the meeting.

A Member asked if Mr Matjila was saying that Eskom had wanted to postpone this meeting.

Mr Matjila repeated that Eskom was only made aware of the scheduled meeting on Thursday 21 August 2014, and had explored the possibility of perhaps joining this presentation to another Portfolio Committee meeting already planned, but that had not been possible. The delay in informing Eskom meant that the document did not arrive with this Committee before Monday.

Mr M Rayi (ANC, Eastern Cape) suggested that the Committee accept the presentation, but recommended that the Committee discuss the matter after the meeting.

Mr A Singh (ANC, KwaZulu Natal) asked who was responsible for sending out invitations, as this may help the Committee to ensure that this did not happen again.

Mr C Smit (DA, Limpopo) supported Mr Rayi’s suggestion.

The Chairperson asked what some of the acronyms meant.

Mr Matjila replied that OCGT was the combined gas plant that Eskom used for peaking purposes, which was fired by diesel. The acronym stood for “ Open Cycle Gas turbines”, which were generators that were fired by diesel. He also clarified that EAF stood for Energy Availability Factor which measured power plant availability in addition to energy losses that were not under the control of plant management. UCLF referred to Unplanned Capability Load Factor, and PCLF (the opposite of UCLF) referred to Planned Capability Load Factor, where Eskom consciously took out units for plant maintenance. The three terms he used in the presentation were used to indicate the state of Eskom’s generation capacity.

The Chairperson noted that she had questions to ask about Medupi and Kusile.

Mr Rayi reminded the Chairperson that the Committee had agreed to excuse the delegates for a few minutes while the Committee discussed a way forward.

The Chairperson briefly adjourned the meeting. On resumption, she informed Eskom that the Members had decided not to proceed with the questions at this meeting. She noted that the Committee had been disappointed that the Minister apparently was not taking the NCOP Committee meetings seriously, with neither the Minister nor Deputy Minister attending, or apologising for their failure to attend, the three previous presentations to this Committee. She pointed out that certain questions would not be able to be answered by the Eskom delegates, since the Executive would have to respond, as the accountable individual.

The Chairperson also said that those Members who had attended the plenary on Tuesday 26 August had only received their documents on Wednesday 26 August, clearly not in sufficient time to go through the documents in detail. She reiterated that Members preferred not to pose any further questions now, but to wait until the Minister or Deputy Minister was present.

Mr Smit commented on the importance of Eskom dispatching the documents well in time to allow for proper preparations by Members, and to avoid wasting money.

The meeting was adjourned.

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