Looming Power Blackouts Threaten South Africa’s Economy

South Africa’s capacity to generate electricity is shrinking due to ageing power plants, latest statistics show, and the continent’s most developed economy could face rolling blackouts for years to come. New data released by Statistics South Africa highlight how the beleaguered state power utility Eskom, which generates around 95 percent of the country’s electricity, is unable to meet demand.

Electricity production dropped 1.4 percent from January through November last year compared with the same period in 2013. In November, Eskom had to introduce power cuts across the country to prevent a collapse of the grid after a coal storage silo collapsed.

The outages escalated in December when swathes of the economic hub of Johannesburg were repeatedly plunged into darkness. Eskom, which relies on its ageing coal stations for supply, has warned of a high risk of more “load shedding” until March at least. But analysts predict that the blackouts could continue for two more years until new power plants come on stream.

That would be bad news for South Africa as one of the BRICS group of emerging economies considered to have huge potential, along with Brazil, Russia, India and China. Last year’s outages cost companies millions of dollars in lost production and business and battered South Africa’s already-struggling economy, which was expected to grow by 1.4 percent in 2014.

Growth is forecast to rise to 2.5 percent this year, but that is still well below South Africa’s potential, and the impact of power cuts will be more widespread this year. “This year it’s a different situation. It’s negatively affecting the retail sector, it’s much more across the board and it’s much more immediate,” said Dennis Dykes, chief economist at Nedbank. “Unfortunately it certainly has the potential of hurting growth, anything between half a percent to one percent of GDP,” said Dykes.

“It is a real constraint on the economy.” Senior Eskom spokesman Andrew Etzinger summed up the situation: “The grid is tight, and we are vulnerable.”

“There is a medium risk of load-shedding on the grid at the moment and that will continue until the end of summer (March),” he added. In an effort to help slash usage, Eskom has posted energy conservation tips on its Twitter account.
“Open windows and doors to allow a cool breeze to circulate through the house” instead of turning on the air conditioning, says one tweet.

“Only boil the amount of water in your kettle that you need for the number of cups of tea or coffee you are making,” reads another. The news of more blackouts comes after Eskom said the launch of a new power unit will be delayed until February, one of a series of missed deadlines that has exacerbated the shortfall.

The power company has embarked on massive schemes to build three coal-fired stations which will see the country’s generation and transmission capacity grow by 17,000 megawatts from the current 40,000 MW. South Africa already has one nuclear power station and the government has also announced plans to build eight nuclear reactors worth up to $50 billion to add 9,600 megawatts of generating capacity.

To avoid outages, Eskom has been deferring maintenance on its old fleet of power stations, leading to a vicious cycle of breakdowns. “It’s like when you have a car and you don’t service it, eventually it will fail and this is what is happening,” said energy analyst Chris Yelland.

“You cannot keep the lights on at any cost forever,” he said, predicting that South Africa will experience load shedding for at least the next two years while it waits for new power stations to come on stream and join the grid. “You’ve got to balance the need to keep the lights on with the need to do proper maintenance, which means load shedding,” he said.

AFP