Minister of Electricity on the Energy Crisis in SA & effect on the Western Cape; Engagement with the Knysna Municipality on Energy Infrastructure plans

Meeting report

The Chairperson welcomed Mr Kgosientsho Ramokgopa, Minister in the Presidency for Electricity, and officials from the Knysna Municipality. He accepted apologies from Ms D Baartman (DA) and Mr P Marais (FF+).

Mr Alberto Marbi, Executive Deputy Mayor and Chairperson: Planning, Economic Development & Tourism Committee, Knysna Municipality, apologised for the Executive Mayor’s absence.

The Chairperson invited Minister Ramokgopa to make the presentation.

Briefing by the Minister of Electricity
Minister Ramokgopa presented on the current status of the energy crisis in South Africa and its effect on the Western Cape in particular. The presentation covered reforms to electricity generation, distribution and transmission.

Generation
The presentation covered the following topics:
- Economic problem statement;
- The Energy Action Plan (EAP);
- An overview of Eskom’s generation performance;
- Kusile Critical Path;
- Accelerating energy projects;
- The Independent Power Producer Programme (IPPP);
- Load reduction interventions; and
- EAP: demand-side interventions.

Distribution
The presentation covered the following topics:
- Global trends;
- Supporting investment in private generation;
- Key challenges in South Africa; and
- Re-imagining the distribution industry.

Transmission
- The transmission landscape;
- Planned infrastructure requirements; and
- The impact of energy infrastructure in driving growth.

See the presentation document for further details.

Discussion
The Chairperson thanked the Minister for the presentation and opened the floor for questions, allowing three questions per Member for this round.

Ms C Murray (DA) said that there was really only one burning question: when will all the work that the Committee saw today actually result in the end of loadshedding? It was not just a question for her, but for the whole province and indeed, the whole country. She noted that Koeberg was still out of commission and asked what was being done there. When would it come back online? What had caused the delays? Should the Western Cape or any other province reach optimal capacity to run its units, would that province then be eligible to come off the grid in its entirety? Or, put differently, would that province then be loadshedding-free should other provinces not have reached sufficient capacity?

Mr A Van der Westhuizen (DA) thanked the Minister for the presentation. He asked whether the Minister could assure the Committee that should both units of Koeberg be taken out of commission simultaneously and for quite a while, that the rest of the grid would be able to feed the Western Cape with no loadshedding – in other words, that the grid capacity would exceed the maximum demand from the Western Cape. He noted that new nuclear still formed part of government's long-term planning. What was the latest on that? Should the country already start doing things like environmental impact assessments and other steps that may eventually speed up such a rollout? In terms of renewables, it was known that renewables had great advantages, but they also had some disadvantages, one being unpredictability, which suggested a need to invest more in emergency power sources like the ones at Ankerlig and Gourikwa. It seemed to him as if the power ships could fulfil that kind of emergency role. However, would it not be better to rather look at private generation of such emergency generating stations? Could the Minister assure the Committee that the maintenance schedules of Ankerlig and Gourikwa, which were now being run perhaps beyond their design capacity, were being followed?

Mr F Christians (ACDP) observed that, according to the presentation, the number one priority outcome was to “fix Eskom”, and he asked for clarity on what exactly this meant. Then, priority outcomes two and three were about enabling private investment and accelerating procurement. Regarding what Ms Murray had asked, if these outcomes were achieved, when would the country have an end to loadshedding? He noted that units at Kusile continued to break down regularly. Could the Minister assure the Committee that all the units were regularly maintained and serviced? Were breakdowns anticipated?

Mr C Dugmore (ANC) thought that it was clear that there was a plan, there was progress, and the whole country was rooting for the success of the Office of the Minister and the work that was being done, but at the same time, the country was definitely not out of the woods yet. His first question related to municipal finances. It was clear that many municipalities sustained themselves by on-selling power from Eskom. Obviously, as one moved to supply energy from other sources, the municipality's income dropped. He observed that no one had been able to tell the Committee clearly what the cost per unit would be when energy was sold to a municipality by a private provider. He was concerned about the financial implications for municipalities and how one provided an incentive for independent power producers who supplied to municipalities while also being able to regulate the costs at the end of the day. His second question related to the Minister’s mandate. One of the big issues was the energy mix, the need for the country to move towards a less carbon-intensive energy future, and the need for a just transition. To what extent was the Minister involved with the issues around a just transition? Was it actually being discussed at the National Economic Development and Labour Council (NEDLAC) yet? Where was it being discussed? Lastly, he observed that South Africa had close to 30 000 schools. If there was a serious effort to install solar panels on school rooftops, the burden on the grid could be reduced, and schools could hopefully become self-sufficient. There would of course, be a downside for municipalities because schools would no longer be paying for energy from the municipality. There were always choices to be made.

Ms A Cassiem (EFF) asked the Minister to explain exactly what the technical problems at Kusile and Medupi were. She asked the Minister to give more information on what “enabling private investment” meant. Was the expansion of independent power producers not going to have a negative impact on Eskom’s revenue, as those with means would now be using other energy sources? How would the process of replacing electric geysers with solar power geysers assist Eskom on the issue of load power use, by residents, specifically and especially in winter, because some of these geysers operated dually, that is, either with electricity from the grid or with solar power? This meant that during winter, when there was less sunlight, most households would switch their geysers to the electric mode and the usage of electricity would not be reduced. Did the Minister agree that geyser replacement would only be effective during hot months?

Responses
The Minister started by saying that when government said it was fixing Eskom, it really meant that it was addressing the two issues he had referred to in the presentation: the energy availability factor and the efficiency of Eskom’s 84 generators. What were the typical interventions the Office of the Minister was making? As a result of the R254bn fiscal relief given to Eskom by National Treasury, it was able to invest a significant amount of money into maintenance. The trendline he had shown the Committee earlier confirmed that once they returned the units they had taken out on planned maintenance, they remained under load for most hours and generated close to their design capacity. Of course, there were also cases where a unit failed and unplanned maintenance was required. When talking about fixing Eskom, it was about focusing largely on the generating units. Of course, there were issues of leadership and there were issues of corruption. There was work that the Office of the Minister was doing with the State Security Agency (SSA), the police, and the Hawks. Over 1000 investigations, over 100 arrests, and some prominent convictions were reported in the mainstream media. That was also an area that was receiving attention. Cleaning those bad elements that had been undermining government’s ability to respond to the energy challenge was key to stability at Eskom. Minister of Public Enterprises Mr Pravin Gordhan was also finalising the appointment of the CEO. There was harmony between workers and general managers on the “factory floor”, at the station level. Eskom had introduced incentive bonuses, and one could see a renewed energy among Eskom employees.

As to the question about when loadshedding would end, he said that Eskom would be bringing Unit 2 at Kusile on stream, which would contribute 800MW, by the end of November. By the third week of December, it was going to bring Kusile Unit 5 online, and then by April 2024, Medupi Unit 4 would come back online, contributing another 800MW. Then, about 150MW was coming in by the end of November from the renewable Risk Mitigation Power Producer Procurement Programme. The three scattered projects were coming on stream and they were now being finalised. He recalled that Eskom had gone out to procure power from neighbouring countries. Mozambique had made 100MW available immediately and then 600MW would be made available in a period of six months. All told, by May 2024 Eskom would have added an additional 3000MW onto the grid, and there was also government's work on the demand side. Between July 2022 and 2023, government had doubled the capacity of rooftop solar from 2000MW to 4000MW. There was renewed momentum to accelerate the rollout. He anticipated that in a year's time, rooftop solar capacity would be sitting at about 7000MW.

He agreed with Members that no country's economy was powered by renewables alone. Every country relied on gas, hydro, coal, or nuclear energy for its base load. Renewables provided an intermittent and variable energy supply that depended on the weather. The Integrated Resource Plan (IRP) 2023 talked comprehensively about the energy mix. It talked about the anticipated demand and identified the generation sources. It then also talked to the cost of those fuel sources and arrived at an energy mix. Coal, nuclear and gas were going to be part of the mix. The exact proportions would be decided through public consultation. So, the Member was absolutely correct. Nuclear, gas, and coal were a big part of the energy mix in South Africa, as they were across the globe.

He acknowledged that there were downsides to accelerating the rollout of renewables. Firstly, the people who were the first ones to find alternative sources of power were the “good payers”: big retailers, industry, and the like, who were big ratepayers to municipalities. Yet municipalities needed the income they derived from electricity surcharges to pay for other social needs in the municipality. A lot of municipalities were likely going to face short-term cashflow problems. This would require government’s attention. That was why government was talking to the South Africa Local Government Association (SALGA). He did not have the solution at his fingertips, but he could say that the wheeling framework was going to allow municipalities to charge for electricity transmission, even when the power was produced by a private generator. This charge would have to be cost-reflective. The sustainability of municipalities was an ongoing conversation that government was having.

On Koeberg, he indicated that he would be receiving a comprehensive report. When he visited, some of the issues that required attention were around contract management on Eskom’s side, the contractor, disputes that could have huge financial impacts, and worker satisfaction. All of these things had resulted in delays of about four months or so. According to the latest update he had received, Eskom would try and synchronise Unit 1 by that evening. However, if there were issues, the issues would be fixed and it would then try again. He said that his Office would be able to provide more details. He said that Eskom had not anticipated that it would have a situation where two of the units had to be taken offline. Therefore, the delays in restarting Unit 1 necessitated pushing the decommissioning of Unit 2 back. Even in the extremely unlikely case that both units went down, Eskom could still provide power to the Western Cape because the electricity grid was a single integrated network. So the province would not be “penalised”, for lack of a better word, due to Eskom and the Office of the Minister’s ineptitude.

On rooftop solar, he said that Eskom and the Office of the Minister were working with the South African Property Owners Association (SAPOA), for example, who said its members had 1 million square meters of available rooftop space. If rooftop solar solutions were installed on 50% of that roof surface, it would generate about 8000MW. As the Member had mentioned, schools were another potential site for solar installations. Schools operated during the day when the sun was at its highest intensity, and Eskom would get the full benefit. The upside of rooftop solar was, of course, the extra capacity, while the downside was that municipalities would lose out on revenue. There was a conversation going on about how to avoid such unintended consequences.

Minister Ramokgopa said that he might have missed some of the questions and undertook to respond to them in writing.

The Chairperson observed that the Minister had not answered a question about the technical aspects of the breakdowns at Kusile and Medupi, one about private investment, one about nuclear and environmental impact assessments, one about grid capacity and demand, and one about the just energy transition.

Minister Ramokgopa said that Eskom had analysed the root cause at Kusile and Medupi. He would receive that report by some time the following week. There were no major issues at Kusile. The only issue was related to the flue gas desulphurisation unit which did not perform as designed. It deposited slurry on the chimney's walls, which compromised its structural integrity. As a result, Eskom had to discontinue Units 1, 2 and 3. As he spoke, Units 1 and 3 were back on stream and producing power, and Unit 2 would come on stream by the end of the month.

On the issue of nuclear power, Eskom had already identified a particular site and done an Environmental Impact Assessment (EIA) study there. As and when a new nuclear build was approved (which depended on the Integrated Resource Plan (IRP)), that site would be a prime candidate. So, all of the preparatory studies were either ongoing or at an advanced stage. Thus, it was subject to what the IRP said in relation to the role and place of nuclear. However, he knew that the preliminary thought there was that nuclear still had a future role to play, which was why Eskom and the Office of the Minister were extending the life of Koeberg and were still considering additional nuclear capacity as the most efficient, cleanest, and safest of energy sources.

On investment by the private sector, he said delays on the part of government in providing approval for licenses and payments had been a disincentive for the private sector. Government had truncated that process. As he had said, the accelerated investment by the private sector would have affected municipalities’ financial sustainability, so there would be a need to rethink how best to sustain municipalities and rethink their grant dispensation.

Follow-up questions
Ms Murray said she was still not 100% clear on when the end of loadshedding would come. She understood there would be more capacity brought online in May. However, she was not clear if that meant that it was really the end of loadshedding. She also noted the remarks concerning the modifications that still needed to be made along the way.

Ms N Nkondlo (ANC) noted that there was a cost associated with adding alternative energy sources like household rooftop solar. Particularly if one thinks about ordinary working-class households or the unemployed. Had a competitive price analysis been done at a national level? The majority of people, if they were to get a gas stove, for instance, or have solar panels installed on their roof, it was still very expensive. There were also cost issues relating to tariffs. For example, there was a situation in the City of Cape Town where the municipality had added to the tariff set by the National Energy Regulator of South Africa (NERSA) and justified it on the grounds that it needed to claw back costs. How were costs being managed in regulations? Secondly, she wanted to know what private investments had been made into battery storage. Could the Minister share details about particular projects in particular provinces? How many of these battery storage solutions were there? How would the investment in the Western Cape actually contribute to ending?

Minister Ramokgopa said that he could not give the Committee an absolute answer as to when loadshedding was going to end. He had said that in October, for the first time since 2021, Eskom had reached 30 000MW of available capacity. Bringing Kusile Units 2 and 5 back online would add 1600MW, and in early 2024 another 800MW would be added from Medupi, which would bring the available capacity up to 32 400MW. The average peak consumption in summer was around 27 000MW. Thus, in theory, there would not need to be any loadshedding until around May 2024. The winter peak consumption was around 34 000MW. By this time, Eskom wanted to add 3000-4000MW by then. Gas was one option, and he would push aggressively to get it. In short, loadshedding would end when available capacity exceeded peak demand in winter. Eskom was going to get a significant amount of relief, which was why he as the Minister and Eskom were working very hard with Minister of Mineral Resources and Energy, Mr Gwede Mantashe, to ensure they could get gas. Of course, the situation would also be helped by the aggressive interventions Eskom and the Office of the Minister were making on the demand side. However, again, once the country got to a situation where the electricity supply was stable, it would attract greater investment, which would in turn require more power. So, government needed to ensure that the growth of available capacity led to economic growth, because these numbers he had just shared with the Committee did not accommodate a South Africa that was growing.

On the issue of costs, he said that the IRP answered three questions: the projected demand, how the demand would be met, and how much it would cost. That was why now, as he spoke to the Committee, it was highly unlikely that the IRP would mention green hydrogen, for instance, because it was still prohibitively expensive. On the battery storage projects, he thought it was about 40MW or so that had been rolled out in the Western Cape, which equated to about four hours of supply. Eskom did this project; it was not done by anyone from outside. He did not have the cost on hand but could provide it. The intention was that Eskom and the Office of the Minister rolled these projects out across the country because they made it possible to use variable solar PV and wind energy to approximate base load. The limitation of battery storage was the size. For the kind of scale that was desired, Eskom really had significant amounts of real estate. However, technology was evolving and developing and he was sure that it would get to a state in which energy could be stored for longer and in less space. In writing, he would tell the Committee how many of these storage sites the Office of the Minister wanted to roll out across the country.

Ms Cassiem asked what other systems the Minister was seeking from other Brazil, Russia, India, China, and South Africa (BRICS) partners, other than the deal with Chinese entities. BRICS should have been South Africa’s first point of call, not just China but also Russia, which had massive experience in electricity generation transmission and distribution. Had the Minister made contact with other BRICS partners? She also asked how much was owed to Eskom by municipalities in total, and what was the impact of this debt on Eskom’s ability to do maintenance and build infrastructure. Lastly, was the Minister aware of any ongoing investigations at Eskom concerning corruption, mismanagement, and maladministration, and if so, what stage were these investigations at? Had any arrests or suspects been appearing in court?

Mr Van der Westhuizen repeated his question about Eskom’s emergency and peak power stations, Ankerlig and Gourikwa. As South Africa moved towards getting a greater percentage of its electricity generation from renewables, should government not be investing in more of these emergency and peak capacity generators? Should government not have invested in such power stations on South African soil, rather than renting power ships to come and augment the country’s generating capacity? Secondly, given the growing number of industries and households that provided or generated electricity, was it feasible that they could get credit not only on their electricity bill but on their municipal accounts as a whole? He envisioned swapping electricity that one fed back into the municipal grid for services such as refuse removal or water. A lot of people currently do not feed power back into the grid, even though they have excess supply, because the municipalities are either not geared or the cost of feeding it back makes it uneconomical.

Minister Ramokgopa said that municipalities collectively owed about R64bn, and the debt continued to grow each year. During 2023-24 to date, as of July, it had grown by another R4.5bn. It was a significant number, which was why, working with National Treasury and SALGA, municipalities were trying to flesh out a response on how best they could address the situation. On the issues of international assistance, the only reason why the China relationship had been made public was because the negotiations were at an advanced stage. South Africa was engaging with all of the BRICS countries and beyond, and all of them had expressed interest and in one area or the other of the energy ecosystem. Once South Africa received those, then government could make them public.

South Africa was also engaging with Western countries, including the United Kingdom, France, the United States of America, and the Netherlands, some of which South Africa was working with very closely on the green hydrogen plan – especially the Netherlands, which was helping South Africa significantly on that plan. As was known, the big Western countries were among the international partners who had made USD12.5bn available for investment on the transmission side. On the back of these investment pledges, the country would be able to generate an investment plan on what projects could benefit from this funding source. The Chinese New Development Bank had also made available USD3bn for purposes of investing in transmission. Government was going to make the process transparent.

On the issue of corruption, he said he was supported by the National Energy Crisis Committee (NECC), and at a technical level, there was Eskom’s Workstream 6 which was composed of the Special Investigating Unit (SIU) and also the South African Police Services (SAPS). He confirmed that there had been over 1 000 investigations, over 100 arrests, and around 30 successful prosecutions. Just the other day, an investigation led by the South African Revenue Services (SARS) was able to undermine the efforts of a very significant coal cartel. Members must have seen the prominent case of collusion between Eskom employees and the truck drivers transporting coal, where they were defrauding Eskom by accounting for coal that was not delivered.

Minister Ramokgopa apologised for missing Mr Van der Westhuizen’s question. By definition, peaking plants like Ankerlig and Gourikwa were meant to be used when there was an unexpected spike in demand. They were designed to be under load about 12% of the time and they used diesel, which was very expensive. However, as a result of South Africa’s energy situation, Eskom has been running these units beyond their design capacity. This had two unintended consequences: higher energy production costs, and increased maintenance costs and early retirement for the peaking plants. The Karpowership contract had been shortened from 20 to three years. Although this would mean a slightly higher tariff, it was still cheaper than using the diesel turbines for baseload and was therefore worth considering. It would also expose the country to risk in the form of fluctuations in gas prices and currency values.

He thought the idea of enabling municipal customers to feed their power back into the grid in exchange for credit for municipal services in general, not just electricity, was a very creative idea, and he thanked Mr van der Westhuizen for bringing it up. He would ask his officials to follow up with the Committee secretariat so that the idea could be pursued further, as it seemed like something that could be pursued.

The Chairperson asked Members to submit any other questions in writing and asked the Minister to respond to these questions in writing. The Committee appreciated the engagement and the presentation and wished the Minister a speedy recovery after his shoulder operation.

Minister Ramokgopa thanked the Committee and said that he really valued its contributions.

Briefing by Knysna Municipality on its Energy Efficiency Status
Mr Grant MacDonald, Director: Technical Services, and Acting Director: Infrastructure, Knysna Municipality, presented the municipality’s current status regarding energy and the projected plans for the 2023/24 Energy Infrastructure allocations including the Emergency Funding allocated to assist municipalities. He discussed the spending of the R2.4m emergency grant relief fund, which had been spent on emergency power at various sewage pump stations and municipal offices. He also discussed the municipality’s completed and approved electrification projects, with an emphasis on connecting informal settlements and energy efficiency.

Challenges experienced in the municipality included ageing electrical infrastructure, vandalism, rapidly increasing development under power lines, expanding informal settlements, electricity theft via illegal connections, unfavourable weather conditions, fires in informal settlements, public protest actions, and project funding constraints.

Looking forward, the municipality embarked on a feasibility study for a waste-to-energy plant which would help to address two problems plaguing the municipality, namely refuse collection and disposal, and electricity generation. The estimated cost was R29m and it would be funded by private investors. The municipality had also conducted feasibility studies for a renewable energy plant. The estimated cost, including the design and construction of substation extensions, construction of distribution lines, and design and construction of the plant itself, was R285m, some of which would be sourced from government. Further projects included upgrading the Bongani Substation and linking up with the Khayalethu Substation, the Light Efficiency Project and the Token Identifier (TID) Rollover, which would upgrade prepaid electricity meters to a new token standard. 

See attached for further detail

Discussion
Mr Christians observed that ageing electrical infrastructure was one of the municipality’s challenges and asked whether it had balanced the need to repair or upgrade ageing infrastructure with the need to undertake new electrification projects. Secondly, what action was the municipality taking regarding the theft of electricity via illegal connections? Lastly, he noticed that the number of new informal connections was quite high – much higher than the formal connections. Did the municipality at least get revenue from informal connections?

The Chairperson asked about the TID Rollover. He noted that the municipality had only done 10% of the necessary upgrades so far. The tender would be awarded in 100 days, which meant they had about 200 days to update 90% of the prepaid meters. Would they have enough time?

Responses
Mr MacDonald said that, when it came to balancing upgrade and repair against new connections, one had to remember that the inhabitants of Knysna obviously had the basic right to receive electricity. The municipality tried to incorporate energy efficiency systems into new connections from the start. The balance that the Member had asked about was that the municipality had upgraded a large amount of old infrastructure. The municipality took a phased-in approach to strike the balance that the Member asked about. He admitted that dealing with illegal connections was a challenge. Previously, the municipality had a tender in place, but it had lapsed, so nowadays, the ward councillors or ward committees are assisting the municipality in removing illegal connections – not only electricity but also illegal water connections. The municipality did collect revenue from informal connections. However, The scale was probably not what it should be, and the municipality was making a concerted effort to increase it. It had recently embarked on a campaign where citizens or organisations with large unpaid bills were issued with a warning or disconnected. A specific plan was laid out to complete the TID Rollover in time, including a training plan for bringing in extra resources.

Mr Ombali Sebola, Municipal Manager, Knysna Municipality, added that the municipality’s investigations had found that the illegal connections were mostly in the informal settlements. Smart meters would help limit illegal connections, but the municipality will start disconnecting lines if the trend continues. He noted that the communities were happy that the municipality had been doing the Integrated Development Programme (IDP) Roadshows as they had been waiting for them. One thing that the municipality was doing to increase revenue was to subpoena high debtors to the municipality. The problem was that the municipality’s accounts had been disputed, and once ratepayers disputed their accounts, they stopped paying. To solve the problem, the municipality called the debtors in and sat down with them, and he thought the municipality was seeing positives. He recalled some two months ago that, someone had come in and just paid R4.5m on the spot. The municipality was now also taking one item to counsel as someone was willing to pay the municipality close to R1m. Another thing that the municipality had realised was that it had been too far from its communities, residents, and taxpayers. So it was also in the process of closing this gap.

The Chairperson thanked the municipality for the very detailed and interesting presentation and their attendance. He excused them from the meeting.

Mr Dugmore observed that it made a big difference when the Committee had, as it had today, the Deputy Mayor and the relevant officials, rather than just one official.

The Chairperson agreed.

Mr Sebola said it was well known that the Western Cape, especially the Garden Route, was prone to disasters. When a disaster struck, the Municipalities had to respond immediately with whatever money they had, including electricity collections. This had a knock-on effect on the whole budget. He had made the same point in a meeting with ratepayers and it had even gotten to a point where the ratepayers had offered to use their own money to patch the potholes on one road that had been a thorny issue for years.

The Chairperson recommended that Mr Sebola write to the Committee Procedural Officer, Ms Cloete, and outline the municipality’s challenges. Then, the Committee could refer it to the relevant Standing Committee or department. As part of the Committee’s oversight role, it would ask how the relevant government department was assisting the municipality in this regard.

Committee resolutions/actions
The Chairperson asked if Members wanted to propose any resolutions or actions emanating from the presentation.

Members did not propose any resolutions or actions.

The Chairperson announced that the Committee would hopefully adopt a report on its work early in 2024. Also, Professor Chetty from Nelson Mandela Metropolitan University (NMMU) would probably be able to brief the Committee on its efforts in energy cooperatives and community collaborations early in 2024. He thanked Members for their engagement and thanked the sign language interpreters who would have interpreted the whole meeting.

The meeting was adjourned.