Medupi’s delays threaten to stifle the economy

December 2nd, 2013, Published in Articles: Energize

by Roger Lilley, editor

Recent events indicate that Eskom should concentrate on generating power and leave new build projects to professional project managers.

The Medupi power station is two years late for a number of reasons, a major contributor being the boiler protection software which is part of the plant’s control and instrumentation system, and which keeps failing Eskom’s acceptance tests, but which should have been handed over to the utility in December 2012. As a result, the country has insufficient electrical generation capacity. This became blatantly evident recently when one or more of the utility’s 600 MW generators at its Duvha power station in Mpumalanga tripped, and a 900 MW unit at Koeberg power station was down for refuelling, resulting in the utility losing its reserve margin completely and declaring an emergency. Under these conditions the utility has the authority to impose “involuntary load reductions” on heavy industry, which it did. The Energy Intensive User Group, which represents heavy industry in South Africa, has voiced its displeasure at Eskom’s call on the industry to reduce its electricity usage by 10% because, had the Medupi Power Station been completed on time this call would not have been necessary.

Eskom’s response to questions concerning the status of the Medupi power station confirms that it is the software that is delaying the project, but offers no new information. “As previously indicated”, its spokesman said, “Eskom has engaged the market to ensure that it has a suitable contingency plan available to replace the current boiler protection software should Alstom not meet any of the relevant contractual milestones. This has been done to mitigate the schedule risks associated with the current boiler protection system so as to ensure delivery of Medupi Unit 6 in the second half 2014”. Eskom has promised that a public update will be given at its next interim results announcement, scheduled for 5 December 2013.

The utility has decided not to extend the deadline any further and is in the process of cancelling the contract with Alstom. It is unknown whether penalties will be imposed on the vendor in line with the minister of public enterprises, Malusi Gigaba’s warning in April, or how much further the Medupi project will be delayed, or what this delay will cost. Each delay increases the costs dramatically as was evidenced in July this year when the cost of the project leapt from R91-billion to R105-billion. Can it be assumed that this cancellation represents the head that would roll for the failure of the project to meet its December 2013 deadline, or are more to follow?

In the meantime, Eskom has almost a third of its generation capacity off-line for maintenance, including one of Koeberg’s 900 MW nuclear generators which is being inspected and refuelled. This unit is due to be back on line towards the end of December 2013, but Eskom has not indicated when the balance of the power will become available. With capacity already dramatically reduced, losing the Duvha generator forced the utility to resort to the use of expensive gas turbines to meet the country’s demand for electricity. Although the Duvha generator has been restored, the gas turbines are still used for peak demand when needed.

In addition to the delays already experienced on the new build programme, a new concern has now appeared: safety at the construction sites. On 31 October 2013 six workers were killed and many more seriously injured when a construction platform collapsed in a tunnel at Eskom’s Ingula pumped storage scheme power station which is being built in KwaZulu-Natal, resulting in a short-term stoppage of construction at all of Eskom’s sites. The cause of this accident is being investigated by the Department of Mineral Resources and a report is yet to be released. South Africa van ill-afford any further delays and it is hoped that a plan has been implemented to address safety concerns across Eskom’s new build programme.

There is a direct relationship between generated power and economic benefit, and the loss of generation capacity has a negative impact on the economy. As Davin Chown, the chairperson of the South African Photovoltaic Industry Association (SAPVIA), says in his “Lead Editorial” comment in this issue (page 3), “More MW means more investment, more manufacturing, more jobs, and more income to struggling families”. It also means more revenue for the government through PAYE contributions and VAT, as well as fewer state-dependants.

Although some of the country’s renewable energy independent power producers (REIPPP) projects will come online soon, they are insufficient to make up the shortfall caused by the delay in getting power from Medupi. The Energy Intensive User Group’s frustration is perfectly understandable – for as heavy industry cuts back on its demand, it becomes less efficient and its productivity falls with all of the attendant implications including the potential loss of income and, ultimately, the shedding, not just of power demand, but of jobs too. It affects more than just business, though. Every facet of life depends on a reliable and plentiful supply of electricity, including agriculture, communications, education, healthcare, leisure pursuits, transportation systems, tourism, as well as water and sewage systems.

The whole country looks to Eskom as the national utility for a reliable supply of electricity. That should be its focus. The new build programme should be run by professional project managers.

Send your comments to: energize@ee.co.za

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