Minister of Electricity Dr Kgosientsho Ramokgopa has rallied the captains of industry to invest in the expansion of the transmission lines in South Africa as the government will be adding more renewable energy generation capacity to the grid.
Ramokgopa said yesterday that the government would soon open Bid Window 7 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) to procure 9 200MW in a bid to alleviate the generation grid capacity constraints.
If it happens, the opening of Bid Window 7 will come three months overdue as it was supposed to open in July, with Bid Window 8 opening in the fourth quarter of this financial year.
The installed base of solar not contracted to Eskom or government programmes has leapt from 981MW in March 2022 to 4 740MW by August 2023.
“There’s an intention by the end of October to go out with Bid Window 7 to procure 5 000MW of solar PV, and wind about 3 000MW and 1 200MW of battery storage,” Ramokgopa said.
“Again, we have not addressed the question of the transmission side.”
The development and expansion of South Africa’s electricity transmission infrastructure is seen as a critical cog to enabling diverse energy solutions to contribute to the country’s electricity grid.
This will significantly strengthen and increase South Africa’s electricity supply and capacitate the energy sector in meeting global decarbonisation targets and ensure South Africa’s long-term energy security and energy sovereignty.
This comes as Eskom will need more than R250 billion to expand the grid by 14 000km over the next 10 years after expanding the lines by only 4 500km in the last decade.
Insufficient investment in the transmission system, government’s financial constraints, and governance deficiencies have resulted in Eskom delaying investment in the maintenance, refurbishment and expansion of the national grid infrastructure.
Speaking during the Transmission Financing Seminar at the JSE as part of galvanising discussions on the financing of South Africa’s Transmission Development Plan, Ramokgopa said Eskom should be constructing just more than 2 000km of new transmission lines per annum at its peak, but had been going at a rate of 800km per annum in the last decade.
The minister reiterated that the Energy Action Plan referred to five outcomes, which included fixing Eskom, accelerating the procurement of renewable energy sources and increasing the levels of private sector investments in the energy space.
He said the removal of the cap on embedded generation has had implications on the transmission side as the current grid was not designed to accommodate the new generating capacity.
As a result, Ramokgopa called for the creation of a dispensation that would make it possible for the private sector to invest in the expansion of the transmission grid.
Ramokgopa said the government had to find ways of tapping into the liquidity that was sitting with the private sector because Eskom’s balance sheet was constrained because of legacy issues and the fiscal metrics had deteriorated.
He said Eskom had done their computation and the numbers showed that it would need R50bn by 2029, but the figures he was presenting to business were kept to the next six years or so.
“So it is important that we get to have this conversation with the private sector to see how best we can finance these requirements going into the future. We think that there are issues that are systemic that require attention, the funding and financing issue,” Ramokgopa said.
“I think there has to be dispensation that is created by the State that makes it possible for the private sector to come into this space, for the private sector to know that the risk is appropriately distributed, to know that the State can be trusted.”
The discussions were framed in four focus areas under Chatham House Rule and unpacked the various financing requirements and potential solutions for the transmission, expansion and modernisation programme.
The Chatham House Rule is an agreement between meeting participants that allows people to use the information from a discussion, but they can’t say who the speaker was, or what organisation they’re from.
Chairman of the JSE, Phutuma Nhleko, also emphasised the importance of partnerships in finding solutions to protect the country’s long-term socio-economic interests while balancing sustainability obligations and international commitments to climate change and decarbonisation.
“As a key player in the economy, the JSE is encouraged by government’s commitment to partner with the private sector in exploring alternative funding opportunities for maintaining, modernising and expanding the national grid,” Nhleko said.