South Africa's power utility Eskom, which uses diesel in its open-cycle gas turbine (OCGT) generators to meet peak demand, may have to start implementing Stage 1 or 2 loadshedding in a scenario of constrained diesel supply, warns financial advisory firm Cresco Project Finance Energy Strategy advisory partner Dominic Goncalves.

About 57% of South Africa’s total refined diesel supply is shipped through the Strait of Hormuz, and only two of five local refineries in South Africa are operational.

During stable periods, Eskom uses only 3% to 10% of the country’s diesel supply, for load-following and system-balancing functions using the country’s four OCGT peaker plants.

However, during periods of high electricity demand or loadshedding, the percentage of the country's diesel supply Eskom uses increases to between 20% and 30%.

This highly volatile demand-swing also has a larger impact, namely that, during times of loadshedding and load curtailment, industrial, commercial, agricultural or residential private consumers also tend to increase diesel demand to power on-site diesel generator sets.

This means that any deterioration in Eskom’s fleet performance over the coming weeks could result in a spike of the national diesel demand of more than 20% to 30%, on an already strained import situation, the firm points out.

Further, 17.7 GW of Eskom’s coal assets are scheduled to be decommissioned by 2035 – about 40% of South Africa’s grid – with insufficient replacement generation planned.

Loadshedding risk is usually triggered once about 15 GW of capacity is offline under the current system operator conditions.

Eskom currently has at least 4.8 GW of headroom prior to reaching what could be considered a low level of loadshedding risk, and its reserve margin is currently stable, Cresco emphasises.

However, South Africa may return to loadshedding in the next three to four years, if Eskom’s decommissioning schedule is followed without adequately replacing these assets with sufficient load-following technologies, such as liquefied natural gas, coal, nuclear, battery energy storage systems (BESS) or grid-forming inverters, it notes.

Cresco’s National Energy Balance model predicts a widening system imbalance where there will be deficits in the early morning and evening hours. This will require increased diesel use by Eskom to follow the load of the renewables fleet, which is currently being installed without enough batteries or grid-forming inverters to provide dispatchability.

This also means that the grid will have an excess of renewable-energy supply at certain times of the day, but a shortage during other times of the day, as well as during periods of cloud cover and low wind.

Meanwhile, Cresco's warning stems from a scenario it modelled in which moderate coal unit trips are combined with diesel OCGT constraints and depleted fast-response reserves.

For example, if three or four 600 MW coal-fired units trip or partially fail, pumped storage hydropower is depleted, there are several days of weak renewable-energy generation that reduce evening-peak margins and Eskom cannot sustain OCGT output owing to diesel unavailability or price shocks, then this could result in a return to loadshedding.

Under this scenario, all fast-response reserves are exhausted simultaneously. The system is unable to provide multiday peak support owing to energy constraints. Loadshedding is therefore triggered by energy depletion, leading to stage 1 or 2 loadshedding.

STRUCTURAL RESILIENCE
“In the near term, loadshedding is unlikely, although possible. However, in the long term, there is a higher probability that loadshedding will return for periods from 2029 onward.

“The Strait of Hormuz crisis has taught us that we can no longer rely 100% on diesel for the future. Any major geopolitical risk or war could fracture supply chains and turn this last line of defence into a difficult-to-obtain fuel source,” says Goncalves.

Renewable energy and batteries, particularly renewable microgrids, are the best long-term structural resilience against fuel shocks.

Additionally, microgrids, typically coupling solar and batteries, are usually deployed on-site and minimise diesel consumption for critical loads.

“By oversizing solar and batteries, microgrids can reduce reliance on diesel by more than 90%. New technologies, such as grid-forming inverters, enable microgrids to provide blackstart and islanding capability, which will facilitate a seamless transition to the solar and grid-powered batteries during grid outages and significantly reduce the need to run diesel generators as back-up,” he notes.

Such microgrids also enable critical-load customers to have a much larger resilience buffer in the face of emergencies, as well as making them less reliant on diesel and leading to smaller required on-site storage facilities, reduced fuel logistics and reduced susceptibility to diesel’s volatile price swings.

Renewable-energy microgrids, therefore, are a hedge against fuel costs, fuel shocks and geopolitical events, and provide on-site energy security during crisis events, Goncalves says.

Being less reliant on imported fuels also enables users to reduce costs and minimise risks.

At a national level, South Africa needs to deploy BESS at scale and thereby reduce fuel needs and diesel reliance during peaking hours.

“The rapid deployment of renewable energy is not being backed by enough batteries and grid-forming technologies to avoid supply-demand imbalances on the grid in the future.”

Specifically, South African commercial, industrial and agricultural businesses that have critical loads should explore on-site microgrids, Cresco advises.

Such an investment would likely pay off during the 20 years of investment ahead, during which South Africa will have some periods of loadshedding and it is unknown whether potential future international wars or conflicts will stifle diesel imports, Goncalves says.