South Africa needs around R390 billion to upgrade its transmission grid to enable new energy projects to connect to it, and the government is looking to tap the private sector’s liquidity without giving up control.
In his weekly update on the implementation of the Energy Action Plan, Electricity Minister Kgosientsho Ramokgopa said upgrading the transmission grid is vital to end load-shedding.
This upgrade will have to be completed with most of the finance coming from the private sector as Eskom and the government do not have strong enough balance sheets to finance the R390 billion upgrade.
Thus, Ramokgopa said the government would soon begin allowing private-sector investors to fund new grid infrastructure and upgrade the grid.
He said it is important for the funding agreements to ensure the state, through the newly created National Transmission Company, will retain its full grid ownership.
“The new infrastructure will be procured with speed by accessing the liquidity in the private sector without relinquishing state-owned ownership of the grid,” Ramokgopa said.
This would be done through a build, operate, transfer model similar to some of the country’s major toll roads.
Under this model, the private sector would build the infrastructure and operate it for a set period, ranging from 5 to 20 years. Afterwards, it would be transferred to the government entity that procured it in the first place.
Ramokgopa has previously said that the government needs to build 6,000 km of transmission lines in the next three years.
This is far beyond what is currently forecasted to be 1,400 km over the next three years.
Eskom’s transmission grid currently has a total expansion backlog of 14,000 km, which South Africa desperately needs to be able to connect more renewable energy projects in the country’s coastal areas.
Professor Sampson Mamphweli said South Africa’s Cape provinces, in particular, need new grid capacity as that is where the country’s best renewable resources are.
He estimated that around 3,200 MW worth of projects have not been able to connect to the grid due to the lack of capacity in those provinces.
South Africa’s grid is designed to carry electricity from large, central power stations in the country’s northeast to other parts.
Renewable energy generation is decentralised, with generation facilities located almost anywhere.
The areas, such as the Western Cape, Eastern Cape, and Northern Cape, which have rich renewable resources, do not have the grid capacity to distribute electricity to the rest of the country.
The grid in these areas can only carry limited load, which is insufficient for large-scale projects.
The government and Eskom were warned about the need to expand grid capacity across the country in the 2003 White Paper on Renewable Energy.
However, Eskom’s focus shifted then to building new generation capacity at Medupi and Kusile, which were both hit by several delays and cost overruns/
This led to the government and Eskom waking up far too late to the need to add capacity to the grid, and it severely weakened the utility’s ability to fund such a rapid expansion.
Eskom has belatedly drawn up a transmission development plan to tackle this problem, requiring hundreds of billions of rands to build infrastructure nationwide.
The utility aims to build 14,000 km of transmission lines over the next decade, costing an estimated R390 billion.