The National Transmission Company of SA (NTCSA) has made substantial progress with the drafting of rules for a wholesale electricity market set to come into operation in 2025, says Brian Day, chair of the SA Association for Independent Power Producers (SAIPPA).
After the official launch of the NTCSA as an unbundled subsidiary of Eskom on Monday, Day said the wholesale market would provide choice to large electricity users and distributors such as municipalities by allowing them to trade on a day-to-day basis.
“They will be able to buy what they need, when they need it and settle the purchases daily,” he said.
The NTCSA is responsible for operating the national electricity grid in a transparent and nondiscriminatory way. In terms of the recently adopted Electricity Regulation Amendment Act, it must set up an independent Transmission System Operator (TSO) within five years of the act coming into effect.
It must also set up a market operator and market code to regulate the future competitive wholesale environment.
“The market code will provide the foundation of day-ahead energy and reserve markets, intraday auctions, and a balancing mechanism to facilitate physical energy trading and will ensure the clearing and settlement of these trades in a timely and efficient manner, the NTCSA said in a statement.
“The benefit of a competitive market is that it improves customer choice and supplier efficiency and promotes an efficient price for energy and associated services.”
Day pointed out that the load profile — the pattern of demand — changes through the course of every day. Accordingly, supply and demand will determine the price on an hourly basis and where possible, large users will be able to change operations and take advantage of cheaper time slots.
“A welding shop that operates from 8am-5pm does not need electricity during the night.”
He said it was not yet clear what the overall price effect of a competitive wholesale market would be, but he expected more fixed costs to fund the grid. “It is the heart and sole of the electricity system,” he says.
Day said the NTCSA had already done the majority of 10 public engagements with industry players regarding the market code and had the input of key people from electricity markets in, among others, Europe.
He said independent power producers were currently either contracted to the government or to a single large power user such as a mine. Earlier in 2024, licensed electricity trader Etana became the first trader to contract with various parties after it signed power purchase agreements with property company Growthpoint and Gqeberha component manufacturer Autocast.
Once the wholesale market has been established and market confidence has grown, it will no longer be necessary to have power purchase agreements for the all or most of the generation capacity to make a project bankable, Day said.
Another major task for the NTCSA is the development of the grid to enable the connection of 30GW of utility-scale renewables to the grid by the end of 2029. In the longer term, the NTCSA plans to build 14,000km of new transmission lines and 122,000 megavolt amperes (MVA) of new transformer capacity to accommodate 53GW of new generation capacity by 2032.
NTCSA interim CEO Segomoco Scheppers said R122bn had been set aside for the next five years. Eskom would, however, not be able to fund the grid expansion on its own.
Following a transmission investment conference a year ago, electricity and energy minister Kgosientsho Ramokgopa stated that the appetite in the private sector for investment in transmission assets was huge.
Ramokgopa’s department was drafting regulations that would determine how that would be procured. That is expected to be finalised in the first quarter of 2025, after which a pilot procurement round will follow.
Scheppers said it was not yet clear who would do the procurement — NTCSA, the department’s IPP office or a similar office to be set up specially for transmission projects.
He said the government must still determine which portion of the 14,000km would be available to the private sector. It was expected the parties would be invited to build and operate specific transmission lines and transfer them to the NTCSA at the end of the determined period.
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