BN@10: Jan Oberholzer delivers a masterclass on how to get Eskom – and the SA economy – back on track

In the second part of his contribution to the BizNews@10 event, former Eskom COO Jan Oberholzer answered questions from delegates, focusing on the electricity utility’s future, emphasising the necessity for organisational transformation. He advocated for a diversified approach, including a coalition with private sector energy suppliers. Oberholzer believes older power stations can be opened to independent power producers, also that the system requires substantial investment in transmission infrastructure. He also pointed to the critical role of storage solutions and addressed concerns about Eskom’s ageing assets and the potential increase in electricity tariffs. – Alec Hogg

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Edited transcript of the interaction between Jan Oberholzer and the audience at BizNews@10

BizNews Community member: When the coalition parties come in next year, how long do you think it would take for a better restoration of power if some elements of Eskom are privatised?

Jan Oberholzer: That’s a good question. We need to examine Eskom as it stands today. Regarding the generation component, the future Eskom generation will not be the sole provider of electrons to meet the demand, as it was in the past. In my view, Eskom will become one of the companies supplying electricity to the country. The transmission needs to be organised as soon as possible. Currently, what’s outstanding is a trading licence and an import-export licence. So, I cannot tell you exactly how long it will take should a coalition come into place. But I believe we must continue on this path, understanding the demand, the capacity, and the training on offer. We also need to understand the independent power producers that must come online to meet the demand. While it’s difficult for me to comment politically, I believe we know what to do, and the private sector will play a crucial role in providing sustainable and reliable power.

Alec Hogg: Just a follow-up on that. Kendal has been a big success since privatisation, generating a lot of electricity for Johannesburg. Is there a possibility that some of those power stations will be privatised like the old mines? Loucas Pourloulis made a lot of money from old gold mines where the mining houses couldn’t….

Jan Oberholzer: Many old power stations will reach the end of life, and I believe it’s an ideal opportunity to put them on the market for independent power producers to bid on. Since there is ready infrastructure, including substations and grid connections, it’s an ideal opportunity, absolutely.

Alec Hogg: I think Geordin Hill-Lewis is trying to do something with the old Athlone power station on the way to the airport…..

BizNews Community member: You know, yesterday I was at a seminar that presented a financial graph highlighting the excess electricity compared to GDP growth. Some successful countries have leveraged this excess electricity. Independent power producers may exceed Eskom’s capacity generation in the next 2 to 3 years. The question I wanted to ask, though, was whether our transmission network has sufficient capacity to cater to that? And, using your analogy, are we going to add new cars without having a freeway to run?

Jan Oberholzer: A very good question. No, we don’t have enough capacity. When I was at Eskom, we looked ahead over the next 15 years and found that about 20 gigawatts of the 42 gigawatts base-load capacity would come to the end of life. In terms of a hybrid solution, we would need to connect 50,000 megawatts. We estimated that we would need to spend about a trillion rand to put 50 gigawatts on the grid. Importantly, we would have to build 14,000 kilometres of transmission lines where the wind blows and the sun shines, where there’s currently no infrastructure or grid. Additionally, some large substations and another 7,500 kilometres of distribution line would need to be built. Your point about considering not only additional capacity but also the transmission of electrons to load centres is well taken, and we have formed a workstream to focus on this component.

Read more: BN@10: Eskomite no more, Jan Oberholzer shines a light on the future of load-shedding

Alec Hogg: Also part of your crystal ball.

Jan Oberholzer: Oh yeah, absolutely.

BizNews Community member: You made it clear we need a hybrid solution, and Andre is pro-renewable and against nuclear. You’ve noted that renewables produce when nature allows, not necessarily when needed. We often discuss transmission, but what about storage? Pumped storage seems easy to build in mountainous areas like Cape Town, given the existing reservoirs and machinery. Should Eskom focus on storage rather than fixing existing infrastructure and let the private sector solve generation?

Jan Oberholzer: Storage is vital, whether through batteries or pumped storage. Eskom’s system operator also needs pumped storage to ensure regulating and instantaneous reserves. When a problem arises on the network, pumped storage offers immediate power to support integrity. I agree with the need for additional storage, including batteries to store wind or solar power when not immediately needed. Regarding letting the private sector fix Eskom, I have my views. When we shut down a power station due to age, I’d rather see the private sector take over these assets and generate electricity. Eskom must also fix what they have and invest in making the coal-fired fleet perform as well as possible. I envision focusing on five or six power stations to ensure reliable and predictable energy availability. As trading becomes more critical in our country, generators will have to offer availability at a specific price. If the system is unreliable and cannot produce, penalties will be incurred. So, Eskom must continue to invest in a positive and acceptable energy availability effect.

BizNews Community member: So what would your thoughts be just on the price of electricity in the next few years to us as consumers? And second question, maybe just you’ve looked at the electricity call. It wasn’t being serviced as well as it should have been. Are there any other infrastructure that you think, and maybe we can’t see so well, that’s in serious need of servicing? I just came back from an area that had no water for two weeks, and, you know, we can’t see it so well. So the problem can just someday be that.

Jan Oberholzer: I’m concerned about Eskom’s transmission infrastructure. When I rejoined Eskom five years ago, the transmission performance was in a nosedive. You must understand, if you have load shedding the way it is now, you have load shedding for 2 or 4 hours, which is painful, but at least there’s still power. If you lose a big transmission line, you’ve got millions of people without power for days, maybe weeks. So the investment in refurbishing, strengthening, and replacing specifically the old protection systems on the transmission system didn’t receive the attention because of finance, and that was a huge concern. And to me, we have given it a lot of attention in my time, and the performance has improved. But you only have so much money available to do what you need to do. So that’s a concern to me, although it is getting a lot of attention. I just trust that we will be, Eskom will be in a position that they will be over the hump before it’s too late by replacing and doing the strengthening and refurbishing. For me, that’s a concern. On the distribution side, there’s also concern because the assets are old. On average, they are more than 40 years old. And again, if you maintain it well, it’s not an issue, but it’s when you haven’t maintained and haven’t invested what you were supposed to, that you might pick up some challenges. So that still remains a challenge in my head. But Eskom is giving the necessary attention, and I’m comfortable with it. Your first question was about the price? I thought you were not going to ask that.

BizNews Community member: I don’t know……..

Jan Oberholzer: You know, there was a time that Eskom had the lowest electricity in the world. But unfortunately, time has moved on for various reasons. When I was in Eskom and part of the leadership, we believed at the time that our tariff is not cost reflective. What it’s costing us to generate, transmit, and distribute is not cost reflective. And this gap has just gone quite wide. But Eskom is also very sensitive to what an increase in the tariff is doing to the economy of the country, and that affects all of us. So Eskom will continue to ask for some tariff increases. I still believe that Eskom, in order to become more cost reflective, will ask for tariff increases. What the magnitude is going to be, unfortunately, I don’t know.

Alec Hogg: Yeah, it’s a scary story. I mean, as taxpayers, we put R500 billion into Eskom, and a lot of it was stolen. But that’s a while different discussion…..

BizNews Community member: In my view, there are probably three areas that we look at in terms of the operation of Eskom: the strategy, like what are we doing and what do we need to do; the capacity, like do we have the people, the resources, the budgets to do it; and then the capability or the willingness to fix those issues. So the question is, in your view, which one of those three areas is Eskom failing in predominantly, and then who’s accountable for it? Why is that person not being held accountable? And I’m saying the person and not the parliament.

Jan Oberholzer: In my view, there are five big issues. What happened between the time that we were number one in the world to where we are now? I believe there are five issues, the one being, in my view, the most important one: human capital. You can have all the qualifications, but if you don’t show respect, a piece of mechanical equipment isn’t going to respond well, and who is actually looking after that? It’s human beings. So I believe that’s a challenge. Finance is another significant issue. Maintenance is another one. We need to make sure that we continue to maintain the assets. Then the fourth one is additional capacity, and then the fifth one is corruption and criminality. Those are the five issues, in my view, that need to take centre stage. My point is, the first one, the human capital, is where we need to focus. Now, who do you hold accountable? A lot of people. I believe it’s a bit more complex and rest with who owns this business…..

If you understand that, then you know the challenges. Because Eskom also needs to implement the objectives of the owner (ie the SA government), which makes it very challenging. You know, a guy like Andre de Ruyter and myself, we worked closely together, and I have a lot of respect for him. I haven’t read his book because people ask me, “Why haven’t you read the book?” I say, “Why do I need to read the book if I was part of it?” But, and this is why I believe someone said it’s in the book, when he arrived that first day, I invited him into my office. I invited him to sit, and I made him some coffee. The coffee machine used to belong to (ex-Eskom CEO) Brian Dames, a previous colleague. I told Andre – I didn’t apply for the job. I don’t want your job because, in my view, it’s a political job. So I’ll just leave it at that.

Alec Hogg: It’s been such a pleasure to talk with you again, Jan. Thank you.

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