Eskom Briefing

Parliament’s Committee on Energy

16 September 2014.

99 days and counting down…

UNIT 6

Source: Eskom 2

Complete

Current milestone in progress

Current focus area

Target

1. Statutory

hydro

15/05

2. Boiler

chemical

cleaning

21/08

3. Turbine on

barring

30/08

4. Draught

group test run

19/09

Actual start

07/09

5. First Oil Fire

29/09

6. Boiler blow

through

06/10

7. Steam to Set

(Turn on

Steam)

01/12

8. 1st

Sync

24/12

Text

Milestone achieved date

*

*

*

*

• ~ 17.4GW of new capacity (6 137MW installed and commissioned) • ~ 9 756 km of new transmission network (5 629.9km installed) • ~ 42 470 MVA of new transmission strengthening (27 655MVA installed)

3

New Generation Capacity and Transmission Lines Leading and partnering to keep the lights on

Un

der

co

nstr

ucti

on

In

dev

elo

pm

en

t

Return-to-service

(RTS) Base load

Peaking and

renewable

Mpumalanga

refurbishment Transmission

• None • Nuclear New Build Programme

• Next Coal (Coal 3) • Biomass • Majuba Underground Coal

Gasification Demo Plant (UCG)

• Primary Energy projects (Road and Rail)

• Pilot Concentrated Solar Power (100 MW)

• Open Cycle Gas Turbine Conversion Project – conversion of Ankerlig and Gourikwa OCGT power plants to a Combined Cycle Gas Turbine (CCGT)

• Photovoltaic (own use)

• Refurbishment and air quality projects

• >60 Grid strengthening projects

• Komati (1 000 MW) • Camden (1 520 MW) • Grootvlei (1 180 MW)

RTS projects complete

• Medupi (4 764 MW) • Kusile (4 800 MW)

• Ankerlig (1 338.3MW) • Gourikwa (746 MW) • Ingula (1 332 MW) • Sere (100 MW) • Acacia relocation • Solar PV installations:

MWP, Lethabo, Kendal (1.62 MW)

• Arnot capacity increase (300 MW)

• Matla refurbishment • Kriel refurbishment • Duvha refurbishment • Grootvlei Fabric Filter

Plant (FFP) • Kriel Retrofit

• 765kV projects • Central projects • Northern projects • Cape projects

Medupi is the first coal-generating plant in Africa to use supercritical power generation technology

3 700 MW 9 564 MW 3 517.92 MW 300 MW 9 756 km

1. Date moved out after the accident at Ingula end October 2013

Synchronisation of the first units are expected as follows:

• Medupi in the second half of 2014

• Kusile in the first half of 2016

• Ingula in the second half of 20151

Medupi Power Station Project Description: Supercritical, coal-fired power station Location: Lephalale, Limpopo Capacity: 4,764MW (6 x 794MW)

4

The First Chemical Clean Injection

completed – 19 Aug 2014

▪ Boiler Chemical Clean on Unit 6 was completed ahead of schedule on 21 August

2014.

▪ First Fires are targeted for September 2014

▪ First Unit (Unit 6) Synchronization is targeted for December 2014

▪ Coal has been received on the Coal Stockyard

▪ Other activities continue to support the First Unit synchronization date.

▪ Construction progress in critical areas was hindered due to the industrial action of July

2014, with labour attendance of 40% - 70% during the period

▪ The workforce is back on site

▪ Through risk mitigation plans and re-assignment of available resources, the target for

First Unit (Unit 6) synchronization remains December 2014

▪ Additional resources have been mobilised to Unit 6 by both the boiler contractor and

control and instrumentation (C&I) contractor to mitigate any resource-driven delays

▪ Similarly, additional shifts have been introduced 24 hours a day, 7 days a week to

accelerate progress on site

▪ Eskom is working with contractors to resolve any issues which could affect the

schedule.

Industrial

Action Impact

First Unit

Synch

Mitigation to

achieve First

Synch in Dec

2014

5

Medupi: Executive Summary

Kusile Power Station Project Description: Supercritical, coal-fired power station Location: Witbank, Mpumalanga Capacity: 4,800MW (6 x 800MW)

6

▪ The boiler contractor improved boiler construction progress from 0.48%/week (March

2014) to 0.74%/week

▪ Further improvement by the boiler contractor is required to achieve the target date and

Eskom is addressing this

▪ Eskom continues to work with the control and instrumentation (C&I) contractor to ensure the

contractor supports the target synchronization date

▪ Eskom has also implemented additional measures to mitigate schedule risk associated to C&I.

▪ Priority areas were defined for 2014 in order to support the First Unit (Unit 1)synchronization

target date

▪ Stringent tracking process and recovery plans have been established by Eskom, together

with contractors, to recover the schedule, where required, and achieve synchronization by

January 2016

▪ A commercial strategy has been defined to increase contractors’ resources and improve their

performance

▪ In addition to the protected strikes from Metal and Engineering contractors, Eskom

experienced unprotected industrial action from Civil contractors during July 2014

▪ Disciplinary action, against Civil contractors whose workers caused disruptions, has been

taken

▪ Resources were transferred to Project Medupi in order to support Medupi’s recovery plan

▪ The workforce is back on site

Industrial

Action Impact

First Unit

Synch

Productivity

Challenges

7

Kusile: Executive Summary

Current Target Schedule/Forecast

8

Key Challenges – Medupi and Kusile

9/18/2014 9

Item Description Resolution

Welding

Defects

- Inadequate and/or failed Weld Procedure

Qualification Records (WPQRs) and Post Weld

Heat Treatment (PWHT) on the boilers

- Welds for which there was no evidence of PWHT

- Misalignment of the Super-Heater that resulted in

design changes

- Defective and sub-standard welds needed to be re-treated

or redone

- Contractors had to revisit and correct their quality data

books to ensure compliant and adequate quality control.

- All boiler repair work has since been completed.

Control and

Instrumentati

on (C&I)

- The contractor was not able to meet some of its

contractual requirements relating to C&I

- This posed a risk to both Projects Medupi and

Kusile and could have delayed the projects

further

- Eskom has worked- and continues to work with the

contractor to resolve identified issues within the required

timelines.

- However, an alternative supplier was contracted on the

Boiler Protection System (BPS) component for the 1st two

units of Medupi and an Early Works Order (EWO) has

been placed in parallel to the current C&I work to further

mitigate schedule delays

Safety

Performance

- Poor safety performance on sites - Eskom and its contractors have implemented safety

interventions, appointed additional resources, removed

non-performing resources and changed work methods

- Safety performance and behaviour has improved

significantly

- Eskom and its contractors will continue with efforts to

further improve performance

To mitigate the schedule risk relating to Control and Instrumentation (C&I), an Early Works Order (EWO) has been placed in parallel to the current C&I contractor work at both Projects Kusile and Medupi

10

▪ Work in the two Inclined High Pressure Shafts (IHPS) was placed on hold after the

6 fatalities in October 2013

▪ A plan has been established to re-initiate work on the shafts

▪ Approval has been received to remove equipment and start equipping the shafts (in

progress)

▪ The enquiry by the Department of Mineral Resources, relating to the fatal incident of

October 2013 is underway at site

▪ First Unit Synchronization (Unit 3) is targeted for September 2015

▪ Two critical areas to support the First Unit Synchronization target date have been

identified: i) The completion of Upstream Waterways and ii) The completion of

Downstream Waterways as well as Surge Chambers

▪ Measures in place to mitigate schedule risk include: i) Dedicated teams to fast

track review for re-equipping and restarting the work in the Inclined High Pressure

Shafts (IHPS).

▪ Re-evaluate the remaining durations for the work in the waterways.

First Unit

Sync

October 2013

Fatalities

Update

11

Ingula: Executive summary

Ingula: Overall Project Progress

12

Re-baseline due to ERA

revision

Forecasted

COD for U1 of

June 2016

Transmission Projects

13

Transmission: On target to meet the Shareholder Compact of Lines Built

14

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15

Plan 26.7 68.7 110.1 126.1 145.1 171.6 180.7 202.2 208.7 230 272 315.1

Actual 26.8 85 127.4 132.6

YE Proj 315 315 315 315 315 315 315 315 315 315 315 315

0

50

100

150

200

250

300

350 Transmission / Power Delivery Projects: T-line (Kms)

Technical Achievements – inception to date (as @ 31-July 2014):

5,629.9 km installed

27,655 MVA installed

Transmission: On target to meet the Shareholder Compact of MVA installed

15

90 MVA achieved year to date against a year to date target of

90 MVA.

Kusile HV yard

(45MVA) No 1

Planned date: May 14

Actual date: May 14

Kusile HV yard

(45MVA) No 2

Planned date: Jul 14

Actual date: May 14

Sterrekus

(2000MVA)

Planned date: March

2015

▪ The development, deployment and adoption of internationally benchmarked

project management methodologies, processes and systems

▪ The establishment of a suitably capacitated contract management capability due to

the complexity and extent of contractor claims

▪ Additional owner’s oversight to manage fabrication and installation quality issues of

international contractors

▪ Additional owner’s supervisory requirements for local contractors

▪ The establishment of suitable levels of monitoring, oversight and assurance across

the Build Programme

▪ Ensuring an adequate project pipeline to prevent the loss of skills and capabilities

and to build on the existing capabilities through continuous improvement

▪ Engaging with the international asset creation community to share experiences and

lessons

Lessons

Learnt

16

Key Lessons Learnt – Build Programme

Summer Plan 2014/15

Overview

• The system outlook shows that the system will remain tight going forward and additional levers are required including OCGTs to ensure security of supply.

• Maintenance is set to increase from 9.46% to 10% based on the sustainable generation strategy and on the need to clear partial load losses, with few flexible outages

• May have to cater for higher maintenance in December including half station shutdowns for 3 of our stations.

• Taking the Generation strategy and predicted challenges into account there will be risks to the system and an effective Demand Reduction Protocol must be in place to manage risks should they materialise.

2014/09/18 18

Winter 2014

• The winter plan has yielded the desired results thus far. We had a better handle on the system while on the other hand managed to deal with some opportunity maintenance

• During winter we also managed to achieve the following:

• Reduced Partial Load Losses from an excess of 3500MW to 1500MW

• Connected 538MW renewables IPP winter 2014, bringing the total to 1000MW.

• Total PV installed: 460 MW

• Total Wind installed: 430 MW

• Extended STIPP and Aggreko contracts and they have delivered

• Predictable generation fleet performance still a challenge:

• UCLF cannot change quickly and can only be reduced by removing/repairing each and every damaged component in a power station

• Out of 87 coal fired generating units 32 that require major ‘surgery’ and 4 are in a critical condition

• We are confident inroads are being made to arrest UCLF.

19

Summer

• Summer poses a different challenge as the profile looks flat and our planned maintenance (PCLF) increases significantly compared to Winter

2014/09/18 21

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Summer points to note

• Table Mountain profile

• Constrained all day incl. from 6am - 10pm

• Air-conditioning, geysers & pool pumps primarily

impact demand

• Commercial, agricultural & residential customers

can make the biggest difference

Constrained all day

Base Case Assumptions

• The following assumptions were used to determine the summer power system

outlook

• Eskom’s sales forecast based on a1.3% average growth over this period.

• Best estimate of generation plant availability of 75.5% for the 2014/15

Financial Year.

• No additional renewable IPPs in this period

• OCGT use is limited to the approved Corporate Plan budget

• Contracted supply levers (STIPPs and Cross Border) are generating at an

average of 600MW

• Maintain current levels of demand levers

• While Medupi unit 06 will synchronise this year, full power will only be

available in winter 2015

• In the event of load shedding we will not allow the system to go beyond

Stage1 (routine load shedding as it is incredibly disruptive and difficult to

manage) 22

Projected System Outlook

• With the maintenance that needs to be done, the system will remain tight

• The degree of tightness will depend on the UCLF performance as well as the available capacity

• For a 6000MW UCLF the system will most likely operate in Purple, excluding OCGTs

• Purple: 3000 -4000MW short of meeting demand and reserves . All available resources required most of the day throughout the week ILS will be required during peak periods, high risk that their contract time will be reached.

• For a 6500MW UCLF the system will most likely operate in Purple and Brown, excluding OCGTs

• Brown: > 4000MW short of meeting demand and reserves, rotating manual shedding probable.

• For a 8000MW UCLF the system will most likely operate in Brown, excluding OCGTs

24

Summer Risks

Variability increases due to the following risks:

• Increased full and partial load losses:

• High vacuum load losses, especially at Matimba: ( >1000MW).

• Deteriorating coal quality impacting on plants ability to reach full load.

• Wet coal

• Below minimum coal stock days at Arnot, Kriel UG, Majuba and Tutuka

• Outage management capability and quality

• Increased outage durations due to scope creep or outage slip

• High post outage UCLF

• Insufficient diesel levels to run OCGTs and fuel oil levels

• Continuous heavy rain

• Unreliable availability of supply from HCB

Reputational risks of continual load shedding

25

Options to Close the Gap Supply

Lever Operational

Capacity (MW)

Potential

Capacity (MW)

Additional Cost

(R’m)

Comments

STIPPs 300 1643 Expires in March 2015. Extend by 2years

Aggreko 108 - Expires in March 2016

Sasol 200 2310 Available for summer

Tshwane 90 513 Available for summer

City Power 220 1052 Expires in March 2015. Extend by 2years

EDM 80 1421 Available for summer

Barges 42 266 Available for winter 2015

ZPC 47 569 Available for winter 2015

WEPS 50 -

REIPP 700 1200 - Additional 500MW from CSP,PV and Wind

in summer

TOTAL 7774

Coal Stock Days Improvement 900

TOTAL 8674

26

Conclusions

• Constraining the OCGT diesel usage to budget could result in an inability to meet the

demand throughout the remainder of FY15. If target EAF is met then low risk of load

shedding – but this cannot be ruled out due to daily variability

• If load is shed during summer it is likely to be from 06h00 until 22h00 and as per

published schedules

• To avoid load shedding - costs to mitigate depend on EAF achieved

• Opportunities to reduce outage duration and improve post outage UCLF exist.

• Post outage UCLF <10%

27

Conclusions cont’d

• Current protocols, NRS048-9, do not allow for planned load reductions due to financial

constraints.

• An alternative protocols and legislative framework is being developed

• To avoid or limit planned or scheduled load reductions could require additional use for

OCGT.

• Additional REIPPs provide an opportunity to displace the use of OCGT during the day

• Considering a country perspective, it is preferable to run OCGTs than to perform planned

or scheduled load reductions over an extended period

28

Key issues to connect IPPS

“Driving world class generation performance, with Zero Harm”

Key Issues

1. Ability to secure a sustainable competitive PPA price for the technology (15 to 20 years)

2. Funding model

3. Knowledge of South Africa (Environment, Labour, Legal, Construction etc.)

4. Proximity and Availability of appropriate infrastructure (Power Lines, Roads etc.)

5. Compliance with Grid Code Requirements

6. The hidden cost of “Storage and Back-up being borne by Eskom not the IPP!

2014/09/18 30

“Driving world class generation performance, with Zero Harm”

Performance of Renewable IPPs (REIPPs)

• Makes a contribution in Summer

• Creates a Problem in Winter

• The cost of “Storage and Back-up being borne by Eskom not the IPP!

2014/09/18 31

Achievements and challenges

Major achievements • Grid Access Unit (GAU)established to facilitate grid

connection of IPPs

• GAU has facilitated Self Build procedures at Tx and Dx that IPPs can use for them to build network saving time and cost and hand over network build to Eskom on completion.

• The Single Buyer Office has been ringfenced (as part of the SMO) within the Tx division

• Renewable Energy Technical Evaluation Committee comprising of Eskom, NERSA and AMEU engineers has been established and is now on track certifying IPPs for grid code compliance

• Presence of IPPs is assisting with improving efficiencies in Eskom, projects are being connected on time.

• Eskom and IPP associations have build good relationships that assist with further process improvement

• Eskom GAU, SBO and DoE have weekly project progress meetings

Major challenges DoE programme fast paced and requires additional

resources ; > 1000 applications processed over the entire DoE REIPPP to date.

MYPD3 revenue shortfall and resultant capital reprioritization process delays Bid 1 & 2 strengthen projects thus impacting connection timelines.

MYPD3 capital reprioritization means Eskom will not have funds for strengthening projects beyond Bid 3

Some Munics require skills and infrastructure assistance; Nelson Mandela Bay Munic did well with grid connection and required little Eskom intervention; Makana munic requires major assistance and problems may result in IPP not complying with grid code and therefore unable to reach full commercial operation

Some IPP struggling with grid code compliance and therefore not achieving Commercial Operation status within planned timeframe

Low hanging fruit exhausted and strengthening of network is required for more IPP connections (cost and time to connect is impacted).Policy now essential for strategic investment to unlock the Tx corridors.

System Impact not factored into plans – need for back up and minimum generation concerns will become reality as renewables increase

32

Flash Report

33

IPP/ Generator

Programme

National Comment

No. of

projects MW

DoE RE

IPP PP and

other IPP

PP

Bid 1 28 1,436

26 projects grid connected and 19 reached full CO with a total of

863.68 MW (Source: Single Buyer Office) in full CO and one in early

operating stage (80MW)

Bid 2 19 1,054 7 projects grid connected and 3 in full COD (54.4 MW as per SBO)

Bid 3 21 1,475

Issuing Budget quotations-13 BQs issued as of 26 August 2014. 6

Outstanding. Two are connecting in Munics.

Bid 3.5 3 300

Preferred bidders to be announced in 2014 for 200MW allocation-- all

in NC

Bid 4 216 15,740

214 Applications received. 152 CE fees paid and applicable for issue

of CEL; 151 CELs were issued by 15 August 2014, bid submission for

IPPs was 18 August 2014;

1-5 MW 78 350

Preselected bidders, some in municipality (at least 68 confirmed for

Eskom)

DoE Cogen 4 739 Received in anticipation of DoE Coal programme

DoE Base

Load 2 740 Received in anticipation of DoE Cogen programme

DoE

Peakers 2 1,200

At execution in EC and KZN both connecting at Tx level which with

scheduled grid connection dates of Dec 2014 and May 2015

respectively and scheduled for commercial operation in August and

March 2016.

Flash Report (cont)

34

IPP/ Generator Programme

National Comment

No. of

projects MW

IDM SOP - micro generation 9 1,319 Connecting to Eskom

Eskom

Various incl (Sere;

Upington CSP; Wind

500; etc.) 4 700 Excludes smaller PV projects e.g. MWP; Ilanga

Other

Wheeling; self

generation; PV roof

tops 119 6,070

Illegal

small

generation

connectio

ns 16 ?

16 identified mainly through reversed meter readings. Could

be more connections that have not been identified. SMG

SteerCom advised all illegal connections to be

disconnected.

Thank you