The slow progress made by Eskom on expanding the transmission grid risks stalling the renewable energy investment pipeline, the Energy Council of SA says.
According to the council’s CEO James Mackay, a lack of grid access, which has already stopped the development of new renewable energy projects in some provinces during previous bidding rounds of the government-backed independent power producer project, could disrupt the flow of investment needed in SA’s electricity sector.
The abatement of load-shedding has exposed other critical challenges, such as progress in expanding the grid faced by the power sector as SA moves from a centralised, monopoly system controlled by Eskom to a decentralised, competitive, market-led system. Mackay was one of several speakers to point out SA’s transmission grid challenges at a coal industry conference hosted by Resources 4 Africa in Johannesburg on Tuesday.
SA needs an estimated R300bn to R390bn to strengthen its transmission capacity and connect new energy projects to the grid. This is required to fund Eskom’s current transmission development plan, which outlines the need for the installation of more than 14,000km of new high-voltage power lines by 2032. Over the past 10 years, Eskom has built a mere 4,300km of transmission lines, but it plans to build 1,400km over the next three years at a cost of about R70bn. According to Mackay, only about 40km of new transmission lines were built in 2023.
The government has said that to fast-track investment in grid infrastructure it would enable private investment. The Treasury announced in the 2024 budget it would launch a pilot project that would enable private investment in electricity grid infrastructure in July as part of wide-ranging reforms.
Energy Council modelling shows that SA needs about R1.8-trillion in investment in the electricity sector over the next 10 years. “This will get SA to about a 40% renewables penetration in the energy mix.”
The R1.8-trillion capital investment requirement includes about R300bn to be invested in transmission infrastructure, R480bn in solar power, R320bn in wind power and R150bn in battery energy storage systems.
Job creation
Localising value chains to deliver on these investments could create more than 500,000 jobs — about 125,000 jobs could be created from investments in expanding the transmission grid and more than 400,000 jobs from localising renewable energy value chains.
But, Mackay said, enabling this type of industrialisation would require a more consistent investment pipeline. At the moment the renewable energy investment space in SA still experienced too many peaks and troughs.
For rooftop solar, for example, there was huge expansion in 2023 with about 2,600MW of capacity added. This year, over the last four months, the pace of rooftop solar expansion was between 50% and 60% down, he said. “That is not a sustainable, and we are already seeing red flags, such as the slow pace of transmission grid development, that could result in similar peaks and troughs in the corporate power purchase agreement environment.”
Another challenge is market reform and finding fair solutions to setting future electricity tariffs. South Africans are facing fast-rising electricity tariffs that continue to increase at a faster pace than headline inflation, but Eskom has long maintained that tariffs do not fully reflect the costs incurred by the utility to generate and supply electricity.
“A rapidly rising cost base and tariff restructuring to reflect the new market realities will impact electricity affordability at an industry and societal level,” Mackay said. The utility is expected to apply for a tariff increase of 35% next year.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.