Big spike in Eskom diesel usage

Eskom’s diesel usage spiked towards the end of September as the unexpected shutdown of Koeberg Unit 1 and a cold snap combined to push the utility to use its open-cycle gas turbines (OCGTs). 

The power utility’s improved performance in recent months has largely negated the need for OCGTs to meet peak demand. 

These stations are designed as peaking power plants, intended for short periods of time when demand outstrips Eskom’s supply. 

However, in recent years, they have been used more consistently to stave off higher load-shedding stages, resulting in skyrocketing Eskom’s diesel expenditure. 

Over the past five financial years, Eskom has spent R64.8 billion on diesel for these stations, including R23.4 billion in the 2023 financial year alone. 

With the utility’s dramatically improved performance in 2024, it has greatly reduced its reliance on diesel to keep the lights on.

In the period from 1 April to 22 August 2024, Eskom’s diesel expenditure was R3.59 billion – 75% less than the same period last year. 

This translates into R10.6 billion in savings for the utility, which can be allocated to maintenance or expanding its generation capacity. 

Despite projecting a continued decline in diesel expenditure, Eskom has ramped up the use of its OCGTs over the past month. 

This largely resulted from Koeberg Unit 1’s shutdown on 11 September. The unit, which provides 920 MW of power, was shut down due to a fault, while Unit 2 was offline for maintenance. 

“The unit was shut down to restore redundancy of the steam pressure relief system in line with the operating technical specifications,” Eskom said. 

OCGTs contributed 271.1 GWh of electricity during the first three weeks of September, compared with 211.6 GWh in July and August 2024.

If Eskom’s average daily consumption in the month continued at the current trend, it could use about 369 GWh of OCGTs in September 2024, the same consumption as in September 2023.

That will also be the utility’s highest OCGT consumption since April 2024.

The graph below shows this increase in OCGT usage, tracking the weekly load factor of these plants during Eskom’s current financial year. 

Using diesel to produce electricity is extremely expensive in comparison to other methods, such as burning coal or renewables.

This increased cost to produce electricity significantly impacts Eskom’s financial performance, resulting in a widening revenue shortfall over the past few financial years. 

The consumer bears the ultimate cost as South Africa’s electricity prices are based on the premise that the tariffs Eskom charges must be cost-reflective. 

As the costs of operating the utility rise, regardless of the reason, the price increases almost in lockstep. 

This effectively means the South African consumer is paying for Eskom’s historic mismanagement as they pay the elevated tariffs charged as a result of increased costs. 

Due to Eskom’s increased operating costs, not all of which are related to producing electricity, it has asked Nersa for substantial price hikes in the coming years. 

Eskom is applying for total revenues of R446 billion for FY2026, R495 billion for FY2027, and R537 billion for FY2028.

The proposed average price increases for Eskom direct customers are 36.15% for the financial year from 1 April 2025 to 31 March 2026.

The power utility wants to increase prices by 11.81% from 1 April 2026 to 31 March 2027 and 9.10% from 1 April 2027 to 31 March 2028.

These increases are also significantly above the headline inflation rate in South Africa of 4.4% and the Reserve Bank’s target range of 3% to 6%. 

With electricity being a universal input into the economy, it is likely these increases will drive inflation upwards and may even prevent interest rates from coming down to pre-pandemic levels in the coming years.