Eskom’s failure to invest in upgrading and expanding its grid is down to political problems, a lack of skills, and inefficient procurement – not a lack of financing.
This is feedback from energy analyst Chris Yelland, who told Newzroom Afrika that Eskom should leverage private sector funding to expand its grid.
Yelland said Eskom’s grid is not dilapidated, but it has been neglected over the past decade as money has been diverted to Medupi and Kusile.
Despite the transmission grid performing well, it is coming under increasing pressure as new generation capacity is built and connected to it.
Yelland said access to Eskom’s grid is severely limited, with the utility needing to build new substations, upgrade existing infrastructure, and build thousands of kilometres of new transmission lines.
Eskom aims to build 14,000 km of transmission lines over the next decade, an infrastructure project the likes of which South Africa has never done.
The utility has said it will need an additional R100 billion in the 2025 financial year to execute its transmission development plan. This amount will increase annually to R170 billion in 2029.
Eskom’s plan from 2021 to 2029 was initially expected to require R372 billion. However, this amount has increased substantially as the private sector has begun rolling out large-scale renewable energy projects in areas with little to no grid capacity.
Thus, the utility will have to turn to the private sector for funding as it has the finances capable of supporting the extensive infrastructure upgrade.
“There is a significant opportunity to raise a substantial amount of capital. In fact, money is not the problem from the private sector,” Yelland said.
The main problem is that the private sector does not think many of these projects are financially viable and is thus unwilling to commit capital to them.
This is due to the political problems surrounding Eskom, said Yelland.
“The whole ideological issue around private sector involvement is very real. There is significant distrust between the government and the private sector. This needs to be overcome.”
Yelland’s concern about political stumbling blocks echoes those of energy expert Hilton Trollip, who expects further resistance to the unbundling of Eskom’s operating divisions at the country’s detriment.
Eskom currently controls this entire value chain, apart from some municipalities that distribute electricity to consumers within their jurisdictions.
“This kind of setup was okay when we just had big, central coal-fired plants. What has happened in the last two decades is that a whole bunch of other technologies have become available, such as gas and renewables, which threaten to upend this system,” Trollip said.
These new technologies have been trying to connect to the grid through private sector companies but have faced resistance from Eskom’s generation division and politicians.
Eskom’s generation division has historically been the utility’s prized possession, generating most of its revenue and attracting most of its skills and resources.
It does not suit the interests of the generation division to allow competitors access to the grid. “The generation division simply does not want any competition that threatens its monopoly,” Trollip said.
To this end, Eskom has resisted the creation of an open-access electricity grid that would allow multiple sources of electricity generation to compete freely.
“As soon as we can get an open-access transmission grid, there are queues of private sector companies wanting to supply electricity. That will reinvigorate the whole sector.”
This also met opposition from Energy Minister Gwede Mantashe, resulting in the creation of an open-access grid being delayed.
There is speculation that the deliberate delay by Mantashe relates to ideological antipathy by sections of the ANC towards the unbundling of Eskom.
Mantashe is committed to coal-fired power stations and has dragged his feet in expediting the introduction of independent power producers.