Private sector seen as key to unblocking transition-enabling grid capacity

24th March 2023

By: Cameron Mackay

Creamer Media Senior Online Writer


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The lack of transmission infrastructure public funding for grid strengthening and expansion has emerged as a binding constraint on connecting much-needed private generation and on South Africa’s transitioning to a more reliable and cleaner electricity sector.

Thus, there are growing calls for not only the separation of the National Transmission Company South Africa from generation- focused Eskom but also private-sector participation in the funding, building and operation of parts of the grid to accelerate the development of the infrastructure needed to end loadshedding and facilitate the energy transition.

A report published in February by the International Energy Agency indicates that, last year, electricity consumption in South Africa fell by nearly 4%. This was due to the declining availability of State-owned power utility Eskom’s ageing coal fleet, as well as delays in constructing and commissioning new generation projects.

These delays have resulted in unprecedented amounts of loadshedding, with more than 8 TWh (or 5% of forecast yearly demand) being reduced through loadshedding last year.

Further, loadshedding was implemented for 205 days in 2022, an almost threefold increase from 75 days in 2021.

Growing Generation Momentum

The report notes that recent regulatory changes have provided an opportunity to expand energy generation and mitigate loadshedding.

Such changes include the removal of licensing requirements for private energy projects while still having to adhere to the requirements for registration with the National Energy Regular of South Africa (Nersa).

This measure “builds upon the earlier relaxation of licensing requirements, which raised the licence exemption threshold from 1 MW to 100 MW in June 2021”, according to the report

The change in the licence exemption threshold has led to announcements from major industrial consumers that they will power their operations using a range of renewable technologies.

Another change was to nearly double the allocated capacity for procurement in the latest renewable-energy auction (referred to as Bid Window 6 of the Renewable Energy Independent Power Producer Procurement Programme, or REIPPPP) from 2 600 MW to 4 200 MW.

However, this generation momentum is being hamstrung by transmission constraints and a lack of clear rules on how to prioritise projects that should secure access to electricity.

While Bid Window 6 was concluded in December, only five solar photovoltaic (PV) projects were selected – for a total capacity of 860 MW – a disappointing outcome, given the expanded allocation and dire need for new generation.

None of the wind power projects that participated in the bid window were selected, owing to a lack of grid capacity and the absence of grid queuing rules. These rules enable private project developers to seize the grid capacity that was available when the wind projects were initially submitted under the public procurement programme.

For this reason, South African Wind Energy Association (SAWEA) CEO Niveshen Govender argues that expanding the grid has become urgent, as the lack of transmission and substation infrastructure “has left vital projects on the sidelines”.

The wind energy sector currently has shovel-ready projects that could be delivering about 10 TWh of electricity a year within the next 24 to 36 months, which have been “stranded, despite intensifying loadshedding”, he laments.

“SAWEA is calling for these grid constraints to be alleviated as soon as possible to allow for forward planning by industry, government and utility providers, as the development of viable projects in grid-constrained regions is now on hold.”

South African Photovoltaic Industry Association (SAPVIA) CEO Dr Rethabile Melamu states that grid constraints have limited the deployment rate of solar PV projects because of, firstly, an oversubscription of the transmission network in high-solar-yield areas, such as the Northern Cape and the Western Cape, and secondly, a lack of clearly defined grid access rules and actionable timelines.

Renewables Cooperation

Govender states the wind sector is invested in working with Eskom and SAPVIA – as a key stakeholder – to find solutions so that new electricity can be injected into the network.

Melamu adds that both SAPVIA and SAWEA are supporting the efforts of Eskom’s Grid Access and Transmission Development units to provide clear grid access guidelines, and data for grid development and planning.

“SAWEA has maintained the importance of understanding, unpacking and improving the grid queuing rules – now officially named the Grid Capacity Allocation Rules – to ensure fair and transparent access to grid connections for all renewable-energy projects. This has remained one of the key priority areas for the SAWEA Grid Task Team, a joint endeavour with SAPVIA.”

Melamu says this task team is actively supporting the updating of grid capacity allocation rules, which were presented to Nersa earlier this month.

SAWEA, SAPVIA and Eskom also launched the 2023 South African Renewable Energy Grid survey this month.

The survey provides the renewable-energy industry with an opportunity to inform and influence grid expansion, which will benefit the REIPPPP and private investment in new generation capacity.

Transmission Expansion

A presentation made public by Eskom in October last year – regarding its Transmission Development Plan (TDP) for 2023 to 2032 – indicated that the utility has committed capital to allow for the integration of projects by successful bidders from bid windows 1 to 5 into the national grid.

“Beyond Bid Window 5, the transmission network capacity in the Western, Eastern and Northern Cape regions is constrained and would require substantial strengthening at local and corridor level to provide additional network capacity to integrate renewable- energy plants to the system.”

The presentation highlighted that the Integrated Resource Plan, gazetted in 2019, proposed 30 GW of new generation capacity to be connected to the energy grid by 2030.

When considering the Eskom 2035 corporation strategy, applications processed through the Department of Mineral Resources and Energy (DMRE) procurement programmes, and non-DMRE applications and engagements with renewable-energy associations, the TDP presentation pointed out that 53 GW of new generation capacity has to be integrated by 2032.

Failure to do this will lead to an increased risk in security of electricity supply, stressed the presentation.

According to the presentation, the transmission network infrastructure augmentation in areas with renewable-energy resources is critical for South Africa to maximise on the lowest-cost energy.

Therefore, significant transmission development is required in the northern, central and southern corridors.

Engineering Support

Industry body Consulting Engineers South Africa (CESA) CEO Chris Campbell points out that about 8 500 km of transmission lines need to be built to support future generation capacity.

“We can’t just change the direction of flow of electrical current in the existing transmission system. One needs almost a parallel, duplicate system to feed energy from the southern parts of the country, where the majority of the renewable-energy generation is located, to the northern parts of the country.”

He stresses that there is sufficient capacity available in the private sector to support the infrastructure development needed for the energy transition, particularly among CESA member companies, as CESA’s latest surveys show the local industry’s capacity for infrastructure development is currently utilised at 80%.

Campbell also argues that mines have had capacity for implementing renewable- energy projects for a number of years, and that this capacity should have been added to the energy grid years ago. However, this did not materialise because the necessary transmission capacity had not been built.

Private-Sector Contribution

Partnerships are required in the development of transmission infrastructure, stressed the TDP presentation.

This appears to have found support in Budget 2023, when Finance Minister Enoch Godongwana announced that one of the conditions for the R254-billion debt relief package to Eskom was that the utility would be allowed to spend new capital only on transmission and distribution.

The Budget Review indicates that Eskom, the National Treasury and the Department of Public Enterprises have agreed to design a mechanism for building new transmission infrastructure. This would “allow for extensive private-sector participation in the development of the transmission network”.

This could be a game changer, as Campbell notes that, despite public funds being earmarked for infrastructure development, public–private partnerships (PPPs) are vital for transmission development.

Successfully unbundling the transmission unit of Eskom, and treating it as a separate business entity for transmission, could make it easier to incorporate private partners on a consistent basis, he stresses.

Melamu emphasises that legal separation would also enable the Transmission unit to undertake crucial infrastructure expansion and development.

Transmission infrastructure is widely regarded as low-risk capital expenditure projects, and will be eligible for just energy transition funding, Melamu stresses.

This can also come with concessions, such as returns on investment for the private sector, which can be granted based on how active the built transmission infrastructure has been.

“The role of the consulting engineering sector is to play a supporting role in whatever form the PPPs take. Consulting engineers can also play a role in the planning, managing and monitoring of these projects to create the need for maintenance,” states Campbell.

Melamu adds that long-term transmission development planning provides companies across the solar PV value chain with the certainty required to set up local manufacturing facilities and advance the industrialisation of the renewable-energy industry. This will, in turn, contribute to job development.

SAWEA stresses that, to achieve long-term energy security, it is vital that Eskom and government be willing to partner with the wind industry and other private-sector partners to implement technical solutions that will alleviate grid constraints.

“This should be geared towards adding the grid capacity required to unlock new generation capacity, including in the Cape provinces, where South Africa’s best wind resources are located. The process to accelerate the roll-out of grid infrastructure needs to be better defined to fit within policy, regulatory and procurement frameworks,” Govender concludes.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor


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