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Power shortage: 2007 - 2015

In the later months of 2007 South Africa started experiencing widespread rolling blackouts as supply fell behind demand, threatening to destabilize the national grid. With a reserve margin estimated at 8% or below, such "load shedding" is implemented whenever generating units are taken offline for maintenance, repairs or re-fueling (in the case of nuclear units).

Eskom and various parliamentarians attributed these rolling-blackouts to insufficient generation capacity. According to their claims, the solution is the construction of additional power stations and generators. These, they said, will take time to construct and commission. 2012 was frequently mentioned as the earliest possible end to the power shortages.

Investigative television show Carte Blanche reported that part of the problem is related to the supply of coal to the coal-fired power plants. Several other causes have been postulated, including skills shortages and increasing demand for electricity around the country.

It appears that the steps that Eskom took to maintain some of its plants, increase coal stock piles and improve plant performance had led to them suspending load shedding from May 2008 onwards.

Load shedding was reintroduced in early November 2014. The Majuba power plant lost its capacity to generate power after a collapse of one of its coal storage silos on 1 November 2014. The Majuba power plant delivered approximately 10% of the country's entire capacity and the collapse halted the delivery of coal to the plant. A second Silo developed a major crack on 20 November causing the shut down of the plant again. This after temporary measures were instated to deliver coal to the plant.

On December 5, 2014, Eskom started major stage three load shedding in South Africa after the shut down of two power plants on November 4 (of said year) due to diesel shortages. It was also reported that the Palmiet and Drakenburg are also experiencing difficulties due to a depletion of water reserve to the Hydro plants. Stage three is the highest degree of load shedding.

On Thursday 4 November, Eskom fell 4,000 megawatts (5,400,000 hp) short of the electricity country's demand of 28,000 megawatts (38,000,000 hp). The power utility has the ability to produce 45,583 megawatts (61,128,000 hp) but could only supply 24,000 megawatts (32,000,000 hp) due to “planned and unplanned” maintenance. One turbine at Eskom’s Duvha Power Station is still out of commission due to an "unexplained incident" in March 2014.

Load shedding is scheduled to resume in February 2015, due to industry start up, after the December holiday period.

Effect on the economy

In January and February 2008 global platinum and palladium prices hit record highs as mines were first shut down and subsequently restricted in their electricity use. South Africa supplies 85% of the world's platinum and 30% of palladium. Mining companies estimate that hundreds of thousands of ounces of both gold and platinum production will be lost every year until the crisis passes. Estimates on the direct economic impact are not yet available, but given South Africa's reliance on precious metals exports to finance its current account deficit, traders have severely downgraded the currency.

Due primarily to the impact on mining companies, economists have downgraded GDP growth forecasts significantly. The current consensus hovers around 4% (well short of the 6% government target), with the caveat that growth could reduce by 20 basis points every month under certain circumstances.

Banks and telecommunications companies have generally continued to operate as usual thanks to existing backup systems. Retailers initially reported large losses due to spoiled frozen and chilled foodstuffs, but are rapidly installing generating systems. Many large factories have reported it impossible to carry the capital expense required to keep operations uninterrupted. However, the largest (including aluminum smelters that can be effectively destroyed by outages of longer than four hours) have guaranteed service level agreements with Eskom and have been largely unaffected.

Big companies with international investors have also been affected by the electricity crisis and have had no choice but to announce these effects to the international community, bringing the situation to the attention of potential foreign investors.

Crisis management

As of February 2008 blackouts were temporarily halted due to reduced demand and maintenance stabilization. This drop in demand was caused by many of the country's mines shutting down or slowing to help alleviate the burden. However, regularly scheduled mandatory load shedding started in April 2008, to allow maintenance periods of power generators, and recovery of coal stockpiles before the winter, when electricity usage is expected to surge.

Expanding generating capacity will see an estimated spend of R300 billion over the next five years, with around 20 000 megawatts of additional capacity due to be online by 2025. However, neither short nor long term funding has yet been secured and the downgrading of Eskom's credit rating has ignited speculation of a capital injection by the government.

On December 11, 2014 it was announced that President Jacob Zuma had assigned Deputy President Cyril Ramaphosa to oversee the turnaround of three state owned companies namely Eskom, the South African Airways, and the South African Post Office”, all of which were in dire straits.

On January 15, 2015 Eskom's then CEO Tshediso Matona admitted that Eskom's policy to "Keep the Lights on" meant that power station maintenance was neglected for years, and that South Africans will have to get used to electricity blackouts for the next four to five years.

Controversy

This entire situation is surrounded by controversy. Decision makers and leaders both in Eskom and in the government predicted in the late 1990s that Eskom would run out of power reserves by 2007 unless action was taken to prevent it.

There is also criticism that Eskom exports electricity to neighbouring African states when it doesn't have the capacity to meet South Africa's demand. Eskom, however, announced on 20 January 2008 that it had ceased to export power.

The government claims that the shortage caught them by surprise since the South African economy grew faster than expected. However, their target growth rate of 6% per year was not reached from 1996 to 2004. The average GDP growth rate during this period was 3.1%.

In 1998 Eskom acquired a minority stake in alternative energy technology company Amazing Amanzi Systems (Pty) Ltd with the vision of incorporating it into its joint venture with Royal Dutch shell as part of the Shell Solar Homes project. and

Controversy erupted at the cancellation of the Shell Solar Project and the roll-out of free and or subsidized kerosene water heaters and stoves due to political pressure.

USERS/Subscribers

Eskom has 16,789,974 subscribers in South Africa, so it is the largest electricity utility in South Africa. And 1/3 (one-third) of the population of South Africa are subscribers of Eskom.