SA has been approached by several international finance institutions offering multibillion-rand loans to fund the upgrade and expansion of the Eskom-owned national transmission grid, electricity minister Kgosientsho Ramokgopa said on Sunday.
Eskom needs to invest at least R210bn (about $11bn) to expand the transmission grid by 2030 to create capacity to connect new renewable energy projects. A shortage of available grid capacity in the Northern Cape, Western Cape and Eastern Cape is already undermining Eskom’s ability to bring on board new generation capacity from renewable energy sources.
Ramokgopa said previously that projects with a total generation capacity of about 8,000MW had applied for grid access in these provinces, but only about 200MW of transmission capacity is available in the Eastern Cape, for instance.
The only provinces where applications for grid access do not far exceed available capacity are KwaZulu-Natal, which has 6,000MW available, and Gauteng, which has 4,000MW of available capacity but no pending applications for grid access.
About 14,000km of new transmission lines will have to be built in the next eight to 10 years, far exceeding Eskom’s current capacity for such infrastructure projects — over the last 10 years it has built a mere 4,300km of transmission lines.
At the Africa Climate Summit in Nairobi, Kenya, last week public and private finance institutions in various countries agreed to work with SA on finding financing solutions for transmission as part of the country’s transition to using renewable energy. A German spokesperson said at the event that country was working on a €200m sovereign loan to Eskom, through its international development bank KfW, to strengthen the transmission grid.
Germany is a member of the International Partners Group supporting SA’s Just Energy Transition Partnership (a $8.5bn agreement between SA, France, Germany, the UK, the US and the EU to fund the decarbonisation of the country’s energy mix).
The loan would target transmission grid expansion in the Northern Cape and Western Cape and enable 2.2GW of renewables to be connected to the grid.
Approval
However, to finalise the loan, it needs approval from Eskom and National Treasury since one of the conditions of the three-year R254bn debt relief plan for Eskom announced by the Treasury in February is that it will not be allowed any new borrowing during the debt relief period unless written permission is granted by the finance minister.
The conditions also stipulate that Eskom, the Treasury and the department of public enterprises will design a mechanism to allow “extensive private participation” in the building of new transmission infrastructure.
The International Partners Group also said in Nairobi last week that the UK is willing to provide “significant funds” for transmission through guarantees to the African Development Bank that will enable the bank to lend an additional $1.3bn to SA, and more facilities could be available from the European Investment Bank.
According to Ramokgopa it is not only these countries that have indicated their interest in funding transmission expansion projects in SA. "[During the Africa Climate Summit] we had conversations with multiple players who said they are ready to finance the strengthening of the grid. We have had talks with the New Development Bank (previously the Brics Development Bank) about a possible $3bn loan, to be disbursed over three years, to finance grid expansion,” he said.
The minister said that the government is planning to host a transmission financing seminar before the end of September to “aggregate everyone in one room to understand the size of the facilities that are available ... and what is needed on the technical side”.
Out of this seminar the ministry and Eskom would generate a report to present to the cabinet and the Treasury, he said.
In terms of Eskom’s debt relief plan the utility will have to be given special approval for any new loan agreements.
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