Andrew Etzinger: Eskom is ready for winter

South Africans have just spent the last weekend, collectively complaining about the icy weather. Winter has certainly arrived, and although the cold-front is set to abate by the end of the week, it has raised many concerns about Eskom's ability to deliver power steadily throughout winter, without any dreaded load-shedding. Our energy sector is no stranger to being stymied by prolonged black-outs, but it seems that Eskom is optimistic about this winter's steady power-supply. Andrew Etzinger, Senior GM at Eskom, gives his insights into the current ability of Eskom to deliver its services without halt, and expands upon the game-changing future of renewable energy and fracking in the sector. – LF

ALEC HOGG: As the cold gets more intense, more electricity will be used. We put our heaters on, don't we? Andrew Etzinger is Senior General Manager of Eskom. He joins us here, to tell us about whether we need to worry about the cold front. Are we going to be able to switch our heaters on and know that they'll work?

ANDREW ETZINGER: Alec, it is freezing. I don't know about cold, but it is absolutely freezing and that does put a lot of extra pressure on the grid. As you say, we're putting on heaters and it gets dark earlier as well, so there's a lot more lighting, but that's normal for this time of year. We forget that it gets cold every year; certainly, from Eskom's side we are well prepared. The worst-case scenario would be a cold front over the whole country that sits for a couple of days and, if that were during the week, we would be in trouble, in the early evening. However, on weekends we are absolutely fine. The natural demand is lower during that time because business that runs from Monday to Friday is, of course, off-line, so this particular cold front we are not too worried about, but a lot could happen this winter still.

ALEC HOGG: All right but it was interesting; you had an update yesterday and it seemed to be a lot more positive than we've had for a while, i.e. is that just because you've got a new team at the top, who might be a little more optimistic?

ANDREW ETZINGER: I think a lot, ironically, has to do with the fact that keeping the lights on in winter is easier than in summer. Summer is the time when you face the rolling blackouts. If you remember, March this year, as well as in 2008. It was always in summer and that's because the demand for electricity is steady. If you have a problem, it lasts the whole day. Winter is different. If you have a problem, it's for an hour or two, maximum. It's not that high, disruptive scenario. Early in the evening, not that disruptive, to 8:00 to 17:00 business as well, so I think that has a lot to do with it. We can cope with short spikes in demand. Coming summer, I think that would be a bit different but obviously, the mind is focused on winter. It is our highest time, but we are well prepared.

GUGULETHU MFUPHI:  What was interesting is that you mention that you are well prepared as Eskom, but weekends aren't that difficult. Weekdays are but more importantly, what happens to the industrial players in the industry? Might they have to turn their lights off, in order for Alec and I to benefit at home?

ALEC HOGG: Or keep warm.

GUGULETHU MFUPHI:  Exactly.

ANDREW ETZINGER: It's been a very contentious issue. Of course, we have, over the last nine months or so, put industry on notice that we are having a bad time and that they have been required to reduce power by ten-percent, so industry has been hit, if I can call it that way, a couple of times in the last couple of months. Their plea is to say 'please spread the pain. We understand Eskom's predicament but please, let's be fair to everyone'. Of course, the industry pushes production very hard over weekends and very hard during the early hours of the morning as well, when it is during our off-peak time. Hence, industry, as far as possible, takes advantage of the tariff structure, which pushes demand out of our peak times, and they really are very responsive and very supportive of Eskom's position. When we do ask them to support us, they definitely do.

ALEC HOGG: We were talking to Fred Hochberg a bit earlier, from the Exim Bank about the untold, good news story, and it came out in your presentation yesterday that renewable energy is now starting to kick in.

ANDREW ETZINGER: It really is. It is absolutely fantastic. In fact, 600 megawatts, which is the size of a massive generator on our grid – a total of 600 megawatts – already on the bars, and already producing power on the system.

GUGULETHU MFUPHI:  Can I just interject there?

ANDREW ETZINGER: Yes.

GUGULETHU MFUPHI:  600 megawatts, how many homes can that light up?

ANDREW ETZINGER: 600 – that would be about one-hundred-and-fifty thousand homes.

ALEC HOGG: So a town the size of?

ANDREW ETZINGER: Welkom, supplied by renewable. Those 600 megawatts grows to two-and-a-half thousand megawatts within the next two years. This year alone, with the great story of Medupi coming on line, even Medupi will be dwarfed by the amount of renewables coming on line this year, so it is a big shift in the landscape of South Africa.

ALEC HOGG: What happened to Coal 3? We heard that some guy, remember we were having an interview here and we were talking about Medupi and Kusile, and then the next thing it was Coal 3. What's Coal 3?

ANDREW ETZINGER: Coal 3 is the euphemism for the station beyond Kusile, exactly as you say. From Eskom's point of view, we've done a lot of work on our site selection and technology selection, but we parked that for the time being until such time a decision is made by the Department of Energy on the way forward. Is it going to be Coal 3? Is it going to be nuclear? Is it going to be more renewables? Is it going to be importation?

ALEC HOGG: Is it going to be gas? Surely, shale gas…

ANDREW ETZINGER: Or gas, yes, absolutely.

ALEC HOGG: We've seen what's happened in the US. The coal-fired power stations have gone out of business.

ANDREW ETZINGER: Yes.

ALEC HOGG: Isn't this a little concerning to you, maybe that, we aren't getting as aggressive, in trying to exploit the gas reserves, which we surely have?

ANDREW ETZINGER: For us it would be a very big play, as far as Eskom is concerned. Base-load, gas-fired generation, would be a game changer for South Africa. Indigenous gas, Rand priced gas – absolutely, so from Eskom's point of view, we are very excited. Of course, we are mindful of the environmental impacts and we understand that there's a big fracas about that, so we don't want to actually involve ourselves in promoting it. We would have to wait for the process and the feasibilities studies from Government to run its course, but certainly the Minister of Public Enterprises and her entourage yesterday – clearly expressing a preference for gas and certainly, the Government support for it if it is viable. Proven up in the quantities that have been predicted – very important as well. Is the gas actually there? We'll take advantage.

ALEC HOGG: Is there a game changer? Explain, maybe, how it could change the game. Could we see if fracking or if all of the gas that we believe is in the Karoo actually exists, could we see electricity prices reducing in years to come?

ANDREW ETZINGER: Yes, I think there's a gap in the South African electricity mix and, of course, we have coal, which is in abundance. It's been cheap but it's been environmentally detrimental. On the other extreme, we have the renewables, which are coming on line but are expensive and that middle road, which in other countries is filled by hydro reserves or gas reserves – we don't have them. We're a dry country and up until now, we've been a country devoid of gas opportunities as well so the opportunity is to have the best of both worlds. It is to have an environmentally benign technology, but at a decent price as well, so that would definitely be a game changer.

ALEC HOGG: So we could see prices coming down.

ANDREW ETZINGER: All of that depends, of course, on the negotiation between Eskom and the State (or whatever it is) and the supplier of gas. Gas is notoriously entrepreneurial in the private sector, so we'll have to work very hard to make sure that we do get those benefits coming through. However, just looking at Sasol, who are very hard business people; it's not a big discount.

ALEC HOGG: Well, the United States electricity prices have gone down sharply because of gas prices. Why shouldn't it be the same in South Africa?

ANDREW ETZINGER: Quite so.

ALEC HOGG: Let's hope that it works out in that way.

GUGULETHU MFUPHI:  Indeed, we certainly hope so, but there's an interesting picture that we're going to bring onto the screen now, where the former Minister of Public Enterprises, Malusi Gigaba, had comments on the organisation and Medupi as well, mentioning that necessary penalties will be at hand, should any delays be experienced, heads will roll. Maybe it's a bit too late for that now, because the former Eskom Chief Executive has already left, but good to see nonetheless, that Medupi will be coming onboard, a little bit later on, at the end of this year. Can that be cast in stone, Andrew?

ANDREW ETZINGER: Construction is going very well at the moment. In fact, for the last year or so, it's gone very well. We are already, in the last couple of months. Each of the components at the power station is basically in working order and currently being tested. What we now need to do is to integrate them and to test the whole system. The boiler, which is the most critical part of a power station – you'll remember the welding was a bit shoddy here and there and that caused a bit of a delay – all the welds have been redone. We have tested the boiler. The integrity is there, mechanically and with a hydrostatic test as it's called, has been done so that boiler is good to go. The rest of the components are really add-on with coal delivery systems, ash handling, all of that, so it is very exciting. In a couple of months' time, the first power will be coming through.

ALEC HOGG: When should we have come on, at Medupi?

ANDREW ETZINGER: About 13 months ago, and if you remember, it was three reasons: it was a labour strike. That has been addressed. It was the boiler and, specifically, Hitachi's welding. All the welds had to be taken out and had to be redone and then, on the instrumentation side – the Alstom contract – we brought Siemens on board to actually fix the work that couldn't be done. All three of those are in hand, and we are heading for the finish line.

ALEC HOGG: Well, thanks Andrew. We don't always do it on time. We aren't always the fastest, but at least we do muddle through in our economy, don't we?

GUGULETHU MFUPHI:  We do muddle through but hopefully the waters will get a little bit clearer, will pick up speed.

ALEC HOGG: Of course, we will.

GUGULETHU MFUPHI:  And start running in the long run