1. Introduction
Electricity is generated by various power stations and transported through transmissions and distribution powerlines to reach end-users [
1]. According to the South African Energy supply report [
2], the South African Energy supply is made up of the following energy sources: 65% coal, 11% renewable energy and waste, 18% crude oil, 3% gas, 2% nuclear energy, and 1% geothermal. According to the report, Eskom (Electricity Supply Commission) is the South African government’s utility company that supplies electricity across South Africa and the Southern African Development Community (SADC) region, which generates, transmits, and distributes electricity. The report also indicates that Eskom operates and owns 27 power stations, with approximately 45 GW of total nominal capacity. Eskom’s generating capacity mix consists of coal power stations, nuclear, diesel-powered open cycle gas turbines (OCGTs), pumped storage schemes, hydro-electrics, and wind farms. Eskom owns and operates two diesel-powered open cycle gas turbine (OCGT) peaking power stations, namely, Ankerlig and Gourikwa, with a capacity of 1323 MW and 735 MW, respectively. These two OCGT peaking power stations are intended to be used during peaking periods, morning (05:00–08:00) and evening (17:00–20:00), to supply power to the grid, and also during emergencies [
3].
Independent power producers (IPPs) also own and operate two diesel-powered open cycle gas turbine (OCGT) power stations, namely, the Dedisa and Avon peaking power stations, with a capacity of 335 MW and 670 MW, respectively. These IPPs’ OCGT peaking power stations sell electricity to Eskom, and they are also intended to provide power to the grid during peaking periods and also for emergencies [
4]. Kim et al. [
5] points out that OCGTs are utilised as peaking power plants that run only during peak hours and emergency periods since the capital expenditure cost of OCGTs is the cheapest, but the variable (fuel) cost is the most expensive among conventional plants. The national regulator, National Energy Regulation of South Africa (NERSA), classifies OCGTs as emergency reserves, thus limiting the volumes of GWh generated by these peaking stations due to the high diesel costs [
6,
7].
Eskom’s coal generating units have experienced the worst chronic breakdowns over the past two years. Consequently, Eskom reverted to frequently rolling out country-wide rotational load shedding as a last resort in order to preserve the integrity of the interconnected power system [
8,
9]. Additionally, the continued trend of poor power generation spurred the over-utilisation of the emergency reserves, such as diesel-powered OCGTs (including the IPPs’ OCGTs), using them as baseload or mid-merit generators in order to minimize or to avoid country-wide rotational load shedding. The annual load factor for Eskom’s and the IPPs’ OCGTs far surpasses the regulatory approved volumes, thus attracting significant costs between the 2018–2019 to 2020–2021 financial years [
5,
10,
11]. Thus, this study seeks to assess Eskom’s open cycle gas turbine (OCGT) utilisation between 2018 and 2021 to analyse its sustainability dimensions.
Over the past three financial years (FY2018–2019 to FY2020–2021), Eskom’s coal generation has experienced chronic breakdowns at both old and new coal power stations [
9,
12,
13]. Lack of quality maintenance, an ageing coal fleet, prolonged heavy rains, historical plant operation, critical maintenance deferral due to funds, design flaws at Medupi and Kusile, and allegations of sabotage are some of the suggested reasons behind the worsening generating performance [
9,
13]. The high number of unplanned breakdowns at coal generation plants has necessitated Eskom to continuously over-utilize the emergency reserves, such as their OCGTs (including the IPPs’ OCGTs), using them as baseload or mid-merit generators in order to minimize or avoid country-wide rotational load shedding [
9,
12,
13].
NERSA [
6] classifies OCGTs (including IPPs DOE Peaker) as emergency reserves, and they are supposed to be operated during peak periods (morning and evening) at a 1% load factor, approximately 88 h per annum, in order to respond to unforeseen events as well to curtail over-utilisation and inefficiencies [
14]. The over-utilisation of OCGTs directly and substantially impacts electricity consumer tariffs and Eskom’s financial performance. Consequently, Eskom spent ZAR 25.9 bn on OCGTs over the past three financial years (FY2018–2019 to FY2020–2021) [
8,
9,
13].
Figure 1 shows a sharp increase in Eskom’s OCGT costs (excluding the IPPs’ OCGTs) from ZAR 320 m in FY2017–2018 to ZAR 3.74 bn in FY2018–2019 (>1100% increase). Eskom will likely face a tough hurdle in recovering these additional OCGT costs, which will worsen their precarious financial position, thus impeding their sustainability goals. It is financially and environmentally unsustainable to use emergency reserves (OCGTs) to compensate for the deterioration of coal generation plants. Short-term decisions on OCGTs will likely have a negative impact on Eskom’s long-term sustainability.
Consequently, the South African energy supply sector contributed 78.1% to gross national GHG emissions in 2015 [
16]. The integration of low emission technologies into existing generation plants and electricity planning is essential to achieve climate mitigation objectives. The electricity sector is the largest subsector for mitigation; thus, in line with global trends, the rapid decarbonisation of grid-connected electricity is identified as the key mitigation option worldwide [
17,
18].
Therefore, this research aims to assess Eskom’s open cycle gas turbine (OCGT) utilisation between 2018 and 2021 via a financial sustainability dimension. The objectives are as follows:
2. Methodology
A quantitative approach was used for this study. All data pertaining to the OCGT utilisation for this study was attained through Eskom’s online (publicly available) data [
13]. The data portal provides hourly energy produced by each OCGT peaking power station; furthermore, the data portal allows dataset downloads for a period of 5 years. The previous years outside the study period will form the basis for comparison to the current study period.
In evaluating the financial impact of OCGT (over) utilisation on Eskom’s finances, we have used audited Eskom financial reports and integrated reports for the financial years 2018, 2019, 2020, and 2021. The data, stored in Microsoft Excel 2016, were analysed using descriptive statistics, tables, charts, etc.
In attaining the role of OCGT over-utilisation on long-term grid security and sustainability (2022–2030), a comparative analysis by Mutsau (2018) of international natural gas prices against the South African natural gas energy price (2012–2016) was used as input data to conduct a comparative analysis between diesel and naturally powered OCGTs.
Table 1 contains the descriptive analysis of the average natural gas energy prices for the European Union and South Africa extracted from NERSA. The diesel energy prices used in this study are the six-year average wholesale price (2015–2020) [
19], taking into account wholesale discounts and tax rebates for electricity generation. Eskom’s and the IPPs’ OCGT diesel costs range from ZAR 3.50/L to ZAR 4.10/L less than wholesale prices [
14].
The South African Carbon Tax Act provides information to calculate the future carbon tax savings on OCGT fuel conversion from diesel to gas to drive long-term Eskom operational and financial sustainability [
21,
22].
The analysis of the financial impact evaluation of the OCGTs was largely quantitative. It was achieved using a spreadsheet (table), using the OCGT costs over the study period to gain a better understanding of how diesel-powered OCGTs affect Eskom’s finances. The spreadsheet analysis of Eskom’s operating cost structure will be developed to better understand the impact of OCGT costs on Eskom’s finances, thereby assisting in unpacking the impact of OCGT costs on Eskom’s revenue, profitability, and tariffs using data from financial years 2015–2016 to 2020–2021, and compared with other previous financial years where the level of operational efficiency in terms of adhering to the regulatory allowed volumes (GWh) was relatively good. The second aspect will be to show how OCGT (over) utilisation impacts tariffs by contributing to the primary energy cost. This was done in a spreadsheet using tables.
According to Notton et al. [
23], solar and wind energy sources are naturally time-varying on scales from minutes and hours up to seasons. Consequently, the integration of such intermittent renewable energy systems into the grid presents some new challenges in managing a reliable and safe energy supply; therefore, ‘backup’ energy from other sources, such as OCGTs, will be required to preserve the integrity of the grid, depending on the penetration levels of renewable sources.
The South African electricity supply industry has approximately 5900 MW installed capacity from renewable sources [
24]. The Integrated Resource Plan (IRP) indicates an additional capacity of approximately 20,000 MW from solar and wind technologies allocated in the IRP2019, while 10,500 MW of coal generation capacity will be decommissioned by 2030 [
16]. The above factors and the deterioration in performance from the Eskom generating fleet will necessitate the diesel-powered OCGTs to be run at higher load factors to fully utilise all supply-side generation plants to meet the demand. The high operational costs from diesel-powered OCGTs will put a serious strain on Eskom’s finances, in accordance with the regulations from NERSA. Lastly, Eskom’s carbon tax exemption comes to an end by 2022; therefore, other fuel sources with low carbon emissions need to be considered in order to drive financial efficiencies.
In ascertaining the role of OCGT over-utilisation on long-term grid security and sustainability, feasibility studies on the conversion of OCGTs to be powered by natural gas at higher load factors were conducted. The issues considered regarding fuel conversion includes the following:
In realising the potential financial benefits envisaged in the conversion to natural gas running at a load factor of 10%, the following financial analysis will be conducted:
- (i)
Operational costs from diesel at different prices vs. natural gas at different gas prices;
- (ii)
Calculate the potential savings of moving from diesel to natural gas;
- (iii)
Calculate the carbon tax savings from reducing emissions by switching to natural gas.
Eskom’s OCGTs
Ankerlig: 1323 MW (147 MW × 9 units)
Gourikwa: 735 (147 MW × 5 units)
IPPs’ OCGTs
Avon: 670 MW (167.5 MW × 4 units)
Dedisa: 335 MW (167.5 MW × 2 units)
The emission factors for diesel and natural gas will be taken from in the IPCC 2006 guidelines for national greenhouse gas inventories, Volume 2: Energy, Chapter 2: Stationary Combustion: “default emission factors for stationary combustion in the energy industries (kg of greenhouse gas per TJ on a Net Calorific Basis)” [
25].
Diesel: 74,100 kg CO2/TJ
Natural gas: 56,100 kg CO2/TJ
The carbon tax rate per ton of CO
2 equivalent for fuel combustion (electricity generation) has increased from ZAR 120/t CO
2 to ZAR 127/t CO
2 for 2020 [
21,
22]. Thus, the 2020 rate of ZAR 127/t CO
2 will be used as the carbon tax rate to calculate the annual carbon tax. The carbon tax will be calculated on real rand; thus, the 20-year carbon tax for different fuel excludes inflation.
4. Conclusions and Recommendations
The utilisation of Eskom’s and IPPs’ open cycle gas turbines between 2019 and 2021 was assessed in this study. The study has found that OCGT usage, volumes produced (GWh), and the associated costs have tremendously increased from previous financial years (2016–2017 and 2017–2018), with Eskom’s and the IPPs’ volumes increasing approximately ten and seven times, respectively. The increased utilisation has attracted substantial costs, totalling ZAR 25.9 bn, for the study period. These findings are consistent with Clark et al. [
28] and Silinga et al. [
3] about the exorbitant costs of diesel-powered OCGTs. The OCGT volumes (GWh) and associated operational costs far exceed the regulatory approved levels for each financial year under study.
The OCGTs’ over-utilisation was triggered by the sharp decline in EAF for the study period (extremely low availability). The material decline in EAF was largely impacted by a surge in unplanned outages, which reached an alarming state, culminating in country-wide rotational load shedding being implemented to preserve the integrity of the interconnected power system, when there was insufficient generating capacity to meet demands.
The increase in OCGT costs pushed up the primary energy costs, thus contributing 8% to primary energy costs for each financial year under study, translating to 3.87 c/kWh of the set standard average tariff of 86.35 c/kWh for 2018/19, and to 4.47 c/kWh of the set standard average tariff of 106.80 c/kWh for FY2019/2020. For the study period, it is evident that OCGTs were utilised. The NERSA-allowed OCGT costs from FY2018–2019 to FY2020–2021 amounted to ZAR 10.5 bn and the actual costs due to extensive use of the OCGTs amounted to ZAR 25.9 bn. The actual OCGT expenditure far exceeds the regulatory approved costs of ZAR 15.4 bn.
Lastly, the study has found that long-term financial and environmental sustainability can be achieved for OCGTs by switching from diesel to natural gas. Further, potential savings of approximately ZAR 27 bn (excluding capital expenditure) at a 10% load factor can be realised over a ten-year period when the natural gas price is sitting at ZAR 85/GJ (minimum). Clark et al. [
28], Fernández [
10], and Moniz et al. [
29] contend that OCGTs fuelled by natural gas, especially when operated outside peaking periods, have proven to be the most cost-effective option as compared to diesel. Additionally, the total OCGT annual CO
2 emissions reduction at a 10% load factor is 24%; thus, one-year and twenty-year carbon tax savings amounts to ZAR 61.3 m and ZAR 1.3 bn, respectively. Fernández [
10] also maintains that natural gas emits less CO
2 per unit than other fossil fuels and with the lowest carbon intensity. Therefore, gas turbines powered by natural gas have lower operational costs and lower emissions than gas turbines powered by diesel. The fuel switching from diesel does not only offer savings in fuel costs and carbon tax but is a viable solution for addressing the environmental challenges through fostering sustainable low carbon development. Powering OCGTs with natural gas will assist South Africa’s efforts to stabilise greenhouse emissions between 2025 and 2035, as envisaged in the nationally determined contributions [
32].
In light of these findings, the growing penetration by renewable energy technologies envisaged in the IRP2019 [
16], coupled with significant generation capacity from coal generating units to be decommissioned, raises grid security and reliability risks. This situation necessitates OCGTs to be run for a longer period to support the power system under periods of low PV and wind availability [
23]. It is recommended that both Eskom’s and the IPPs’ OCGTs switch fuel from diesel to natural gas and run at a 10% load factor, allowing the OCGTs to run as mid-merit generators. Work done on existing OCGTs will provide a foundation for an additional 3000 MW (OCGT/CCGT) allocated in the IRP2019, also to use natural gas.