Eskom’s R29 billion diesel bill unsustainable

Eskom is running out of money to purchase diesel to run its open-cycle gas turbines (OCGTs) to soften the blow of load-shedding.

This comes as the utility has used R20 billion of the budgeted R29 billion for the current financial year ending in March 2024. 

The utility has been relying on its OCGTs to reduce the stages of load-shedding implemented, as they are some of its most reliable power stations. 

However, the diesel used to power them is costly, making them more expensive to run than a traditional coal power station. 

Eskom’s OCGTs were also never designed to be run for consistently long periods, as they are peaking stations – used to provide bursts of power to meet demand on short notice. 

The utility’s management and board chair made a presentation this week to Parliament’s Portfolio Committee on Public Enterprises regarding the financial health of Eskom. 

Acting CEO Calib Cassim said that Eskom expects to spend R29 billion on its OCGTs in the current financial year. 

Last week, it was reported that the utility had already spent R20 billion on diesel – leaving R9 billion to spend for the last four months of the financial year. 

Eskom’s significant spending on diesel has negatively impacted its financial position alongside declining revenue. 

Its demand for diesel has been so great that PetroSA has enlisted the use of tankers to store diesel as the country does not have enough onshore storage facilities. 

“As there is limited storage, PetroSA has taken a process of using floating tankers to ensure that product is readily available as and when required according to forecasts as agreed with Eskom,” the state-owned oil company said in a letter to stakeholders dated 18 October.

There were four tankers designated to deliver diesel to PetroSA “to supply key customers” and one carrying gasoline, it said.   

According to ship-tracking data compiled by Bloomberg, as many as six ships were being used. 

In the 2023 financial year, diesel production sources accounted for 19% of Eskom’s total cost but only 2% of total production.

“Use of diesel is necessary but unsustainable,” Cassim said. 

“Although diesel spending is still unacceptably high, it is in line with expectations and still driven by the shortfall in supply by renewable and short-term IPPs, as much as by Eskom’s own poor generating plant performance.”

In 2023, the cost to run Eskom’s OCGTs skyrocketed to R21.46 billion from R10.10 billion in 2022.

These OCGTs produced 3,018 GWh in 2023 compared to 1,826 GWh the previous year.

Eskom said it had to rely on diesel this much in 2023 due to supply constraints at its coal plants.

Frequent breakdowns impacted its coal plants, “requiring higher use of diesel and fuel oil for unit start-up procedures and combustion support”.