A Must Read: Chance of grid collapse has increased, says Nedbank economist.

Published in news24 on 3 April 2023

 

South Africa tinkered on the brink of a total blackout in February, say local economists, and they think that reduced load shedding in the past few weeks is bad news.

The country went through unprecedented days of Stage 6 load shedding in February and appeared to hit Stage 7, even though there was no formal announcement from Eskom.

Nedbank chief economist Nicky Weimar said that looking closely at the numbers of available load and demand around that time, SA was on the verge of a total blackout. Nedbank has been running scenarios of total grid failure, and after the February incident, Weimar now believes that it is more likely a reality.

“We need to get business, in general, to become prepared if that happens. So, we’ve all been roped into this operational risk to say if the power goes out, how will we as banks continue to keep the lights on, keep people’s money safe, make sure that lending continues,” she said.

Weimar said other industries are also implementing contingency plans, especially food producers, after the February scare.

Independent political and economic analyst, JP Landman, said he is worried about the way Eskom has been generous with power in the past week.

“A week ago, I would have given you a different answer because as long as we have load shedding, the chances of a blackout are minimal,” he said.

Because the higher the stages of load shedding, when Eskom’s system is constrained, the lower the chances of a grid collapse, Landman said if SA needs to stomach Stage 10 or 15, Eskom should be transparent and do that instead of masking the problem.

On the other hand, Eskom’s explanation for reduced load shedding in mid-March was that its energy availability factor has improved after six of its coal-fired power stations achieved an energy availability factor of 70%, a milestone last accomplished on 8 May 2022.

But Landman suspects that the load shedding schedule is manipulated at Eskom, as the utility’s operating reserve margin has been deteriorating. The reserve margin gauges the difference between the peak demand and Eskom’s nominal capacity.

Before it announced the improved energy availability factor, Eskom’s operating reserve margin was in the negative territory for most of February and up to 11 March. Meanwhile, the company acknowledges that an acceptable reserve margin is 15%.

In the last weekly system update published by Eskom for 13 to 19 March, its operating reserve margin only reached 15% on one day. Eskom hasn’t published weekly system updates since.

“I don’t like the fact that we don’t have as much load shedding as we used to because the purpose of load shedding is to avoid a blackout. If you have less load shedding, you increase that risk. And this reserve margin story for me is a bit disturbing,” he said.

Weimar questioned if the reduced load shedding was a strategy to show that the new electricity minister was doing something. She’s concerned that SA is sailing too close to the edge.

“Because it almost happened, and the grid is set to shut down automatically when the drawdown on the grid exceeds the supply to a certain margin, you’ve got to avoid that sort of situation,” said Weimar.

Weimar said SA will continue to have “a very fragile economy” this year because of the strain load shedding is putting on top of broadening inflation and rising interest rates. She said more and more businesses are reporting disruptions in sales, which is reducing overall economic activity, even with the increased installation of backup power and solar systems.

While Nedbank’s forecasts a 0.4% economic growth for 2023 Weimar said with a very small change in the assumptions used in Nedbank’s model, the bank can move down to 0.1% or -0.1%.

Landman believes that despite the promises that load shedding will be a thing of the past within a year to 18 months, he doesn’t see it ending before the end of 2024. But by the time SA gets to the other end, he believes that the country’s energy system will have changed significantly, and Eskom won’t survive in its current format.

“It will change completely in the next seven to ten years. And that the energy revolution is, to some extent, driven by load shedding. People are so gatvol of load shedding,” said Landman.

For more information:
NEASA Media Department
media@neasa.co.za