SOUTH AFRICA: SERIOUS POWER DISRUPTIONS IN THE WESTERN CAPE

UNCLAS SECTION 01 OF 03 JOHANNESBURG 000095

SIPDIS

SIPDIS
STATE PASS USAID AND USGS

E.O. 12958: N/A
TAGS: ENRG PGOV ASEC SF
SUBJECT: SOUTH AFRICA: SERIOUS POWER DISRUPTIONS IN THE WESTERN CAPE

REF: A) CAPETOWN 73, B)CAPETOWN 77, C) PRETORIA 618

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1. SUMMARY: (U) Recent power outages in the Western Cape have
resulted in major financial losses in the retail and tourism
industries, with the Cape Chamber of Commerce predicting losses
in the millions. Further outages and/or rolling blackouts are
likely until Unit 1 of the Koeberg nuclear power station is
brought back on line - potentially in May 2006. Until then,
state-owned electric utility Eskom will scramble to provide
sufficient power to keep Cape homes and businesses functioning.
Eskom and the Department of Public Enterprises are accelerating
plans to build new power plants and recommission previously
mothballed power stations to prevent further damage to business
and South Africa's investment prospects. Minister for Minerals
and Energy Lindiwe Hendriks said on March 9 that logistical
problems would not affect electricity provided to South Africa's
neighbors.


2. (U) On the political side, just one day before the March 1
elections, Minister of Public Enterprises Alec Erwin said that
the police and National Intelligence Agency (NIA) were
investigating the damage at Koeberg, since the "the bolt that
caused the generator's destruction did not get there by
accident." Erwin added the NIA was ready to bring criminal
charges against individuals and that they were also looking at
other power outages which could have been caused by sabotage.
Opposition politicians from the Democratic Alliance (DA) said
that Erwin's allegation amounted to an abuse of political power.
After substantial media and political furor, Erwin said on
March 3 (two days after the ruling African National Congress
(ANC) finished behind the Democratic Alliance (DA) in Cape Town
elections) that references to sabotage had been media spin, and
that he had not used the term sabotage. END SUMMARY

What Happened
--------------


3. (U) Since mid-November 2005, starting with the time when
Koeberg's Unit 1 was first taken down for scheduled refueling,
maintenance and modifications - leaving only Unit 2 in
operation, the entire Western Cape province has been plagued by
regular power outages. According to Eskom spokesman, Fanie
Zulu, these were initially of short duration and due to
generation, transmission and distribution network breakdowns and
overloads. The immediate causes were identified as natural and
technical events that coalesced to produce the blackouts. These
events included excess power through the lines, flashovers
caused by mist and ash-dust coatings on insulators and
sub-stations caused by the spate of bush fires in vulnerable
areas.


4. (U) Since mid-December, the Western Cape has been dependent
on the 900 MW of electricity supplied by Unit 2 and some 2,200
MW transferred from coal-fired power stations in Mpumulanga. On
January 19, Eskom's CEO Thulani Gcabashe announced that on
Christmas Day, while in the process of being returned to
service, Unit 1 generator set was damaged by a large loose bolt
that had somehow gotten into the set. Together with unrelated
network faults, these set in motion a series of rolling
blackouts throughout the province.


5. (U) Gcabashe stated that Unit 1 was likely to remain down for
between three and nine months while Eskom made repairs or found
a replacement generator. A spokesman for Koeberg said that
security on maintenance, supervision and materials accounting
had been strictly applied and that an investigation into how the
bolt got into the generator was in progress. Sabotage and
malicious intent were not ruled out.


6. (U) Since February, Unit 2 has twice responded to system
disturbances and insufficient power from Mpumulanga by removing
itself from the system in controlled (programmed) shutdowns.
These caused havoc to Cape Town's (and the region's) electricity
supply. The Cape Chamber of Business estimated that damage to
the economy was in excess of $100 million, and that Eskom's
reputation as a reliable energy provider was severely dented.
Eskom board chairman Valli Moosa said it would take some time to
get Unit 2 back to full capacity and that Eskom could currently
only supply about 2,200 MW.

Electricity in the Western Cape
--------------

7. (U) The heart of the problem is that Cape Town lies some
1,500 km from the major electricity supply center in Mpumulanga
Province and that its demand for power exceeds available local
supply. The Western Cape has no natural energy resources and
before 1984, when the Koeberg nuclear plant went on line, most
of its electricity (and coal) was imported from Mpumulanga. The
long transmission line and rail route made electricity expensive
and the distance at times created line instability resulting in

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power outages in Cape Town. The Koeberg nuclear power plant was
built to remedy most of these short-comings. It came online in
1984 and is South Africa's only nuclear station. The plant
consists of two French-designed 920 MW reactors that have
operated safely and efficiently for more than 20 years.


8. (U) The Western Cape's daily demand for electricity averages
about 3,700 MW, and peaks at around 5,100 MW in summer to 5,650
MW in winter. Supply is dependent on Koeberg's two reactor
units which together supply a base load of 1,800 MW. This is
supplemented by the transfer of 2,000 to 3,000 MW (depending on
the season and time of day) of power from plants in Mpumulanga.
Transmission takes place over a 1,500 km, 400 kV line with a
capacity of 3,500 MW - a secure load of about 2,900 MW. Peaking
or emergency power of some 1,500 MW is also available from two
oil-fired gas turbine and two pump storage stations and two
hydro plants.


9. (U) With the full 1,800 MW from Koeberg the Western Cape
needs to import a maximum of about 2,100 MW in summer and 2,500
in winter, both comfortably within the transmission line
capacity. However, with one unit down imports become 3,000 and
3,400 MW, respectively, which stretches the technical limits of
transmission. With both units out, the required imports for
winter and summer (3,900 and 4,300 MW) exceed line capacity.

Areas of Concern
--------------

10. (U) The problem with reactor 1 being out of order is
compounded by the fact that reactor 2 is running low on fuel and
needs to be shut down for about 60 days for refueling and
maintenance. Eskom said that it will stretch Unit 2's reactor
fuel cycle by running it at below capacity, hoping repairs to
Unit 1 generator would be completed before reactor 2 runs out of
fuel. Nevertheless, Eskom estimates that the shortfall in
supply to the Cape during the coming winter could be about 300
MW, which will have to be catered for by scheduled supply side
(load-shedding) and demand side (efficiency) management.

Fallout
--------------

11. (U) In the late February run up to the provincial elections,
opposition political parties used the power problems in the
Western Cape (the only hotly contested province) to attack the
ANC-lead government. Caught with little defense, Minister Erwin
said that the National Intelligence Agency was investigating the
damage at Koeberg and was expected to bring criminal charges
shortly. Erwin was widely quoted as saying that "the bolt that
caused the generator's destruction did not get there by
accident." Minister for Minerals and Energy Lindiwe Hendricks
made similar innuendos, saying that "the events (i.e. the power
outages) curiously coincide with an important process in the
democratic calendar of the country" and that "other forces are
at play here."


12. (U) DA leader Tony Leon characterized the comments - made by
Erwin at a press conference in Cape Town on February 28 - as
another example of the government's abuse of power, and ascribed
the Koeberg damage to "negligence." By March 3, Erwin denied
reports that he said the reactor was sabotaged. He said there
was no evidence of a significant organized sabotage campaign,
but that it was not an accident but an act of human
instrumentality - "no one just dropped the bolt". The
accusations and counter-accusations continue in the media and
parliament.


13. (U) Concerns also revolve around the impact that the power
failures are having on the local economy and on investor
confidence in Eskom's long-nurtured image as a low-cost,
reliable supplier of quality electricity to South Africa's
resource and manufacturing industries. Questions concern
Eskom's ability to deliver sufficient power for the country's
economic expansion plans that include 6% GDP growth by 2010, and
the soon-to-be-legislated Beneficiation Bill that aims to add
value to the 70% of raw materials currently exported. Both are
heavily energy-dependent. Mooted expansions in the resource
industry include: BHP-Billiton's Mozal and Hillside aluminum
plants in Maputo, Mozambique and KwaZulu-Natal, respectively;
Alcan's potential new aluminum plant in the Eastern Cape; and
major expansions in the platinum mining and ferro-alloy
industries. Failure by Eskom to ensure reliable and sufficient
quantities of energy could severely impact these and other
high-energy project plans.


14. (U) A number of countries in the region import electricity
from SA. The potential squeeze on Eskom's generation capacity
over the next few years, which was highlighted by the on-going
blackouts in the Western Cape, has mobilized these countries
into examining their energy vulnerabilities should SA reduce or

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stop electricity exports.


15. (U) Speaking at a regional hydropower conference, Minister
for Minerals and Energy Lindiwe Hendriks said on March 9 that
South Africa was not running out of power and that its internal
problems should not affect supply to its neighbors. Hendricks
said that South Africa would not decide to cut down on its power
supply agreements with Eskom's customers because of internal
issues.

Remedial Actions
--------------

16. (U) Eskom executives and the Ministers of Public Enterprises
and of Minerals and Energy have stated categorically that Eskom
can and will be in the position to generate and deliver the
power needs of the South African industry, given the huge
amounts of capital that was budgeted for energy generation and
infrastructure expansion over the next five to twenty years,
amounting to some $20 billion. Eskom claims that the Western
Cape problems are unique, due to its location, lack of own
energy resources, and the rapid expansion of demand for energy
which is significantly beyond original estimates.


17. (U) Thulani Gcabashe, Eskom's CEO said that Eskom was
fast-tracking plans to build a combined cycle gas turbine
generator in the Western Cape with a base load of between 1,800
and 2,200 MW and that the board would make an investment
decision in a couple of months. Eskom also recently started
building two peak-load oil-fired gas turbine generators, which
would add 1,050 MW to the grid, and come on stream by April

2007. Similarly, the Department of Minerals and Energy has a
tender out for two 500 MW Open Cycle Gas Turbine plants to be
built in the region, but these will only be operational by about

2008.


18. (U) In the medium to longer term other options become
available to the Western Cape, including the first unit of a
pebble bed reactor (165 MW),power from the proposed natural
gas-fired turbine plant in Namibia (using gas from the Kudu
gasfield),and a similar 400 MW unit on the Cape west coast
using natural gas from Forest Oil's Ibhubesi gas field. The
possibility of building a second conventional nuclear plant on
the Koeberg site was also mention by Erwin.


19. (U) Gcabashe and Erwin have agreed on the process for
getting Unit 1 back on line. The sequence would be to: borrow a
200 ton rotor and stator bars from Electriciti de France and
have the parts brought by barge to South Africa, probably within
a month; synchronize Unit 1 with the power grid in the middle of
May; refuel and service Unit 2 starting in the third week of May
- there will be a week's overlap between starting of Unit 1 and
the shutdown of Unit 2; run Unit 2 at decreasing power output
over the next three months until stopped for refueling and
maintenance towards the end of May; supply the electricity needs
of the Western Cape from Mpumulanga. During peak periods there
could be a shortfall of some 300 MW, but Eskom is convinced that
some 400 MW can be saved through demand-side and supply-side
management innovations.


20. (U) COMMENT: Eskom has stated on numerous occasions that the
generation side of electricity supply is well under control (if
somewhat tight under peak load conditions) and that the problem
lies with a poorly maintained, old and out-of-date distribution
infrastructure. Most supply disruptions have resulted from
equipment or line faults and are seldom due to insufficient
generation capacity. In addition, a number of transmission
lines need upgrading to meet the ever increasing demand for
power from an expanding economy and rapidly growing population
base - some 70% of South Africans now have access to
electricity, up from about 35% fifteen years ago.


21. (U) Much of the blame rests with some 284 municipalities
that buy bulk electricity from Eskom and distribute to
rate-payers over their owned networks. About 50% of
municipalities have neither the skills nor resources to maintain
their infrastructure. To make matters worse, electricity
revenues are used to cross-subsidize other services and not to
maintain and renew equipment and systems. As a consequence the
SAG and Eskom developed the concept of regional electricity
distributors (REDs) to overcome these problems. Six REDs were
to be established with pooled resources to cover the country and
ensure stable, reliable and affordable electricity distribution.
The first mini-RED (the Cape Town Metro Area) went into
operation on July 1 last year. Unfortunately, legal and
constitutional issues must be resolved before the next RED can
be implemented. An announcement on how to proceed is due this
month. END COMMENT.
COFFMAN