A Review of the Nigerian Energy Industry

More power project delays, electricity supply crunch looms in South Africa

ERERA Power lines03 August 2013, Johannesburg – The announcement by South Africa’s national utility Eskom that the first unit of its disaster-prone 4,764 megawatts, MW, Medupi coal power plant is now unlikely to be commissioned until the latter half of 2014 means the country could face 700MW gap in its 2014 electricity supply balance.

The plant’s first unit was initially expected to begin operating in April 2012. Eskom is blaming its contractors; consumers in South Africa and the region will again be concerned that they could lose out if power has to be rationed in Africa’s largest economy.

South Africa traditionally produced a power surplus and exported to its neighbours, but the balance started to swing from surplus into deficit in the mid 2000s and in 2008, the country suffered dramatic blackouts that underlined the under-invested electricity supply industry’s capacity to damage the economy.

The government and industry have few doubts about the extent of the problem. Public enterprises minister Malusi Nkanyezi Gigaba pulled no punches in April when he stressed the government’s commitment to bringing the first 800MW of power from Medupi Unit 6 of online by end-year.

Gigaba told reporters that “failure to meet these deadlines will result in tough penalties being imposed on any party responsible for such delay”.

Barely three months later it seems the minister and Eskom have admitted defeat, while project costs have spiralled – to over $14bn.

The innocuously titled Eskom Update on its New Build Programme delivered another blow to South Africa at a time when fears about declining mining output – an industry in which electricity can account for as much as 32% of total costs – and poor macroeconomic performance are weighing on investors’ minds.

In its update Eskom said the December target for commissioning Unit 6 was “unlikely to be met”. A “more realistic” target was H2 2014. However, full commissioning was still expected in 2017.

– African Arguments

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