South Africa: Playing catch-up
ESKOM has significantly increased capital expenditure (capex) in new generating capacity amid regular blackouts and concerns that rampant domestic demand will outstrip supply this year. The state-owned utility agreed in February to raise capex from R97bn ($13bn) to R150bn, enabling work to begin on a new nuclear power plant and a coal-fired power station.
Rapid economic growth in the Eastern and Western Cape provinces is putting pressure on the over-stretched transmission grid. Eskom says its decision to boost spending was "driven substantially by a change in the electricity demand growth assumption from 2.3% a year to 4.0% a year between 2010 and 2014". The increased investment will add 22 gigawatts (GW) of generating capacity by 2017, on top of Eskom's existing 36 GW of capacity. A number of projects, including two new gas-turbines in the Western Cape, will be fast-tracked or expanded.
The Eskom board approved in January a plan to double the capacity of the proposed $3.5bn Project Alpha – initially planned as a three-unit, 2.25 GW base-load coal-fired station – by accelerating the development of Project Charlie, which will comprise a further three 750 megawatt (MW) units and will raise the overall capacity of the country's first new coal-fired station in more than 20 years to 4.5 GW. The Eskom board also sanctioned a plan to add an additional 1 GW of capacity to the Atlantis, open-cycle gas-turbine power plant in the Western Cape, where the first 1 GW of capacity is nearing commissioning.
But there are concerns that South Africa may have acted too late, given the tight global supplier market. The government stands accused of having failed to predict a big increase in domestic demand that was sparked by the country's post-apartheid electrification programme in rural communities. Annual peak demand has grown on average by just over 3.6% a year since 2000.
The country is now hastily trying to make amends for past underinvestment in power infrastructure. Large capex budgets have been set aside for new generating capacity and Eskom is looking to ensure plants will be commissioned on time, but the tight competition for power equipment and engineering resources means it will face a tough challenge in ramping up output.
Eskom has solicited bids for the construction of new generating capacity from the main providers, such as Siemens, Alstom and Hitachi, but these groups have full orderbooks in other emerging markets. The country is also sounding out the Chinese over the possible supply of equipment for plants.
Private-sector providers are starting to make inroads. Last year, the UK's IPSA, an independent power supplier, was asked to double the capacity of its planned Coega power plant at Port Elizabeth to 1.6 GW. IPSA is also building the country's first independent power project, at Newcastle in KwaZulu Natal.
Nuclear expansion is starting to look an increasingly feasible – if expensive – option to meet the country's electricity needs. Nuclear Energy Corporation of South Africa forecasts strong growth in the country's nuclear capacity from 1.8 GW now, to 15 GW by 2025 and about 25 GW – some 30% of electricity supply – by 2030. Eskom operates a 1.8 GW nuclear station at Koeberg, near Cape Town.
The public enterprises minister, Alec Erwin, told a nuclear energy conference in London in March that the government was "giving serious consideration to another large nuclear plant". The new station, likely to be situated close to the Koeberg plant, would have a capacity of up to 3.6 GW.