In his State of the Nation Address (SONA), President Ramaphosa provided an update on the progress of his “action plan to address the energy crisis”. However, he neglected to mention a big problem – the lack of grid capacity.
As part of his action plan, Ramaphosa announced that an additional 300MW would be sourced from neighbouring states.
He said 100 projects from private power producers totalling 9,500MW would come online along with an additional 2,800MW from the renewable energy programme.
This follows his previous SONA announcements of expanding Bid Window 6 to 5,200MW of power generation and is part of the massive R1.5 trillion Just Energy Transition Investment Plan.
When this is coupled with an expected annual increase of 1,000MW of power generation from private citizens and companies, it is clear that Eskom’s grid will be placed under immense strain.
Wayne McCurrie of FNB Wealth and Investments noted in a tweet that the additional power generation expected to come online within the next 18 months is roughly 30% of Eskom’s current generating capacity.
This would require large-scale investment in Eskom’s grid capacity.
Of primary concern is the location of these new power generation sources.
South Africa’s primary sources of renewable energy generation are found in the Northern Cape, Western Cape, and Eastern Cape. This is due to their relatively cheap, open land and high sunshine and wind rates.
These regions lack one important element which prevents them from becoming renewable energy powerhouses – Generation Connection Capacity.
Below is a breakdown of Generation Connection Capacity from Eskom.
South Africa’s generation connection capacity is highly concentrated in Mpumalanga, KwaZulu Natal, Gauteng, and the Free State.
However, the power generation capacity to solve the energy shortfall is expected to come from the Northern Cape, Western Cape, and Eastern Cape.
These regions have very little, or in the case of the Northern Cape, no more generation connection capacity. Simply put, little to no additional power can be added to the grid in these regions.
The lack of generation connection capacity in these regions has already delayed the approval, funding, and construction of many projects in the government’s Renewable Independent Power Producer Programme (REIPP).
Bid Windows 5 and 6 of the REIPP are now only expected to be completed by the end of 2026, provided grid capacity is expanded.
Outgoing Eskom CEO, Andre de Ruyter, has tried to find a solution by leasing Eskom land in Mpumalanga to independent power producers.
However, the efficiency of renewable energy is much lower in Mpumalanga than in the Northern Cape, Western Cape, and Eastern Cape.
Ramaphosa paid fleeting attention to this fundamental problem during his SONA address.
The government’s takeover of Eskom’s debt was pushed back to the Budget Speech. If implemented, this should free up Eskom’s balance sheet to invest in expanding its grid capacity.
The President also briefly mentioned that there would be a drive to invest in expanding grid capacity in the Northern Cape, Western Cape, and Eastern Cape. Unfortunately, he provided little detail.
The long-term solution to this problem has been to unbundle Eskom into three separate entities.
A National Transmission Company (NTCSA) has been created with a separate balance sheet from Eskom, allowing it to invest in additional capacity.
De Ruyter lamented the slow progress in unbundling Eskom and pointed out that the NTCSA has not yet received licenses to operate.
This is four years since Ramaphosa announced the unbundling of Eskom at the 2019 SONA.