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Probing the Financial Sustainability of Eskom’s Open Cycle Gas Turbines (OCGTs) Utilisation (2018–2021)

Author

Listed:
  • Wandisile Pram

    (Department of Geography, Environmental Management and Energy Studies, University of Johannesburg, Auckland Park Campus, Johannesburg 2006, South Africa)

  • Njabulo Kambule

    (Department of Geography, Environmental Management and Energy Studies, University of Johannesburg, Auckland Park Campus, Johannesburg 2006, South Africa)

  • Omoseni Adepoju

    (Department of Management and Accounting, Faculty of Management and Social Sciences, Lead City University Ibadan, Ibadan 200255, Nigeria)

Abstract

Contributing to achieving sustainability in South Africa’s energy sector, this study probes financial sustainability and its relationship to the environmental sustainability of Eskom. This is because, over the past three financial years (FY2018–2019 to FY2020–2021) of Eskom’s generating plants’ performance, the energy availability factor (EAF) has taken a deep dive, reaching an extremely low generation availability year-end performance of 64.2%, translating to approximately an average of 29,800 MW available generation capacity out of a nominal generation capacity of 46,466 MW in FY2020–2021. Therefore, the study employed a quantitative research methodology, where the relevant financial records were analysed, and the necessary energy calculations made using descriptive analysis in Microsoft Excel. The findings show that the volumes (GWh) produced by the OCGTs during this period far exceed the regulatory approved volumes, thus attracting substantial costs, amounting to ZAR 25.9 bn instead of ZAR 8.9 bn, that could have been spent on the OCGTs if the level of efficiency achieved in FY2016–2017 and FY2017–2018 was maintained. The analysis also revealed that the OCGTs’ long-term financial and environmental sustainability could be achieved through switching from diesel to natural gas, thus resulting in lower fuel costs and lower emissions. 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). Finally, in order to attain financial and environmental sustainability, it is recommended that both Eskom’s and the independent power producers’ (IPPs) OCGTs must switch fuel from diesel to natural gas and be run at a 10% load factor, allowing the OCGTs to be run as mid-merit generators.

Suggested Citation

  • Wandisile Pram & Njabulo Kambule & Omoseni Adepoju, 2022. "Probing the Financial Sustainability of Eskom’s Open Cycle Gas Turbines (OCGTs) Utilisation (2018–2021)," Sustainability, MDPI, vol. 14(16), pages 1-16, August.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:16:p:9987-:d:886625
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    References listed on IDEAS

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    1. Gregory, Julian, 2020. "Governance, scale, scope: A review of six South African electricity generation infrastructure megaprojects," Utilities Policy, Elsevier, vol. 66(C).
    2. Fernández, Mauricio & Muñoz, Francisco D. & Moreno, Rodrigo, 2020. "Analysis of imperfect competition in natural gas supply contracts for electric power generation: A closed-loop approach," Energy Economics, Elsevier, vol. 87(C).
    3. Kim, Eun-Hwan & Park, Yong-Gi & Roh, Jae Hyung, 2019. "Competitiveness of open-cycle gas turbine and its potential in the future Korean electricity market with high renewable energy mix," Energy Policy, Elsevier, vol. 129(C), pages 1056-1069.
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