Next big thing: Private investment in SA electricity transmission

The Minister of Electricity Kgosientsho Ramokgopa hopes to announce “within the next week or so” a plan to finance new transmission lines, which will allow private investment, while Eskom retains ownership of the grid.

This may unlock further new generation projects to alleviate the country’s electricity crisis which has resulted in record levels of load shedding in 2023 with equally ominous forecasts for 2024.

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At his first briefing for the new year on Tuesday, Ramokgopa explained the additional powers granted to him in terms of a recently signed Memorandum of Understanding with his cabinet colleague, Minister of Public Enterprises Pravin Gordhan, “to better clarify their respective responsibilities in respect to Eskom and the resolution of the electricity crisis”.

According to a statement issued by the Presidency on 5 January Ramokgopa now has, among others, the following powers:

• Ensure that matters dealing with transmission are dealt with, including the issuing of the Requests for Proposals and/or Requests for Information for financing of new transmission lines.
• Developing and agreeing on financing models and options for transmission together with National Treasury and the Presidency.

Ramokgopa said on Tuesday that a lot of work has already been done in this regard. The transmission finance plan was submitted to cabinet late last year but was referred back to him to have “one or two things adjusted”.

This has been done and he promised to unveil the plan at his next engagement with the media, expected to occur within the next two weeks.

Eskom is responsible for the Transmission Development Plan which provides for 14 000km of new lines in the next decade and new corridors were identified in conjunction with the Eskom team, Ramokgopa said.

He however believes this plan must be expedited to complete the work in five to seven years. The 1 400 km Eskom plans to construct in the next three years, must be increased to 6 000km, he said.

Private sector support

Because of Eskom’s weak balance sheet, it is however necessary to “tap into private sector liquidity”, without relinquishing Eskom’s ownership of the grid.

He said National Treasury has agreed to the finance options that he will announce and emphasised that it cannot expose the sovereign and won’t rely on sovereign guarantees.

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Without going into detail, Ramokgopa indicated that there will be a “dedicated body” that will enter into the finance contracts. “The thinking is now that we ensure that we get a dedicated body that gets to contract, so that your ability to contract on transmission is not caught up in bureaucracy.”

He added that there is too much bureaucracy, which prevents government from being agile in the rapidly changing electricity supply market.

He explained the urgent need for transmission development using the analogy for building cars in the absence of roads for them to drive on. The cars (new generation capacity) are now in the parking lot and “we are building the new roads”.

On the same day (Tuesday), Eskom announced the long-awaited appointment of the board of the new National Transmission Company of South Africa (NTCSA), which is a crucial building block in the establishment of the NTCSA as a subsidiary of Eskom in the road to unbundling its generation, transmission and distribution functions.

The utility said the unbundling is the key aspect of Eskom’s turnaround plan envisaged in the department of public enterprises’ “Roadmap for Eskom in a reformed electricity supply industry”.

“Transmission is first of the Eskom’s three divisions to achieve legal separation, with the NTCSA already registered and received approval for the requisite licenses from the National Energy Regulator of South Africa (Nersa). The appointment of the board completes another critical milestone in the operationalisation of NTCSA,” Eskom said.

The board will be led by Priscillah Mabelane, the executive vice president of the energy business for Sasol.