The government’s pilot project to introduce private sector participation for the expansion of Eskom’s transmission network is expected to go to market in the third quarter in a move that would set the ball rolling for companies to play a role in the estimated R100bn-plus scheme.
In a presentation prepared for organised business on the sidelines of the ANC’s anniversary celebrations, electricity minister Kgosientsho Ramokgopa said his ministry and the Treasury had been working on regulatory requirements and strategies to make it easier and safer for private companies to invest in a power lines network.
They have also been figuring out the best way to finance the project without putting too much strain on the fiscus by finding the most cost-effective way to get the money needed.
Ramokgopa said the board of the National Transmission Company (NTC), an Eskom spin-off focusing on the power lines, had approved a model under which the NTC would build and own its infrastructure using its own funds.
For the rest, the board has instructed management to enlist the private sector under the build, operate and transfer model, in which companies would build and run the transmission lines for some time — usually 20-30 years — before transferring ownership back, according to Ramokgopa’s presentation.
SA has seen an influx of renewable energy projects in recent years, especially in the Northern Cape, which hosts the highest concentration of these projects thanks to its abundant sunlight and wind.
The government aims to increase generation capacity from 48GW to 78GW by 2035, with significant investments in renewable energy, natural gas and nuclear power.
However, the region, alongside others such as the Western Cape and the Eastern Cape, does not have enough power lines to fully distribute the generated energy, exposing infrastructure gaps that heap pressure on President Cyril Ramaphosa’s plan to revive the economy through private sector-led spending.
Interim facility
NTCSA, which has been established as part of the unbundling of Eskom’s generation, distribution and transmission businesses, previously said that R112bn has been approved for the project over the next five years for 14,500km of new transmission lines and 210 transformers.
The Electricity Regulation Amendment Act requires the establishment of an independent transmission system operator to facilitate the transition to a competitive market for electricity.
The NTC, which will function as an interim facility taking on the role of the transmission system operator, will set up a market platform through which electricity can be bought and sold by multiple buyers and sellers.
The expansion of the transmission network will bode well for Eskom, which on Tuesday celebrated 300 days without load-shedding after an improvement in generation performance.
“These 300 days without load-shedding have been characterised by a significant reduction in unplanned outages, which have long been one of the biggest challenges, a notable improvement in the energy availability factor of about 7%, and savings in diesel expenditure of R16.42bn,” Eskom’s Bheki Nxumalo said in a statement.
The suspension of load-shedding and the improvement of Eskom’s performance is one of the key messages Ramokgopa is using to attract foreign investment in SA’s energy sector during the World Economic Forum’s annual meeting in Davos, Switzerland.
“This concrete and ongoing delivery of the action plan has boosted business confidence with credit ratings agencies and banks stating Eskom’s performance recovery is a key contributor towards positive sentiments as far as SA’s GDP growth prospects of up to 2% are concerned,” Dan Marokane, CEO of Eskom, said in a statement.
“Public sentiment is shifting, business leaders who once had to invest precious [capital expenditure] in self-generation have inquired whether they should revert to investing in Eskom for their power needs.
“The savings we are making in diesel spend are invested in the business to drive efficiencies further and place Eskom on a path to profitability and long-term operational and financial sustainability.”
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