Private transmission projects coming early next year

The Department of Electricity and Energy is currently drafting regulations to set out how the government will procure private sector investment in transmission lines and hopes to commence with a pilot round early next year. 

This process will clarify many unanswered questions regarding the extent of private sector involvement in the R1.5 trillion transmission development needed up to 2032, the institutional arrangements of the procurement programme, and the nature of the contracts that will be concluded.

This became clear at Monday’s official launch of the National Transmission Company of South Africa (NTCSA) at Eskom’s Megawatt Park head office.

The NTCSA is now an unbundled subsidiary of Eskom but must eventually be established as an independent company outside of Eskom. 

Minister of Electricity and Energy Dr Kgosientsho Ramokgopa said the launch was a milestone in the democratising of the grid and follows the work of the late Pravin Gordhan when he was minister of public enterprises and Gwede Mantashe when the energy portfolio was his responsibility.

“Now it is all under one roof,” he said, which makes efficient decision-making possible. 

According to Segomoco Scheppers, interim NTCSA CEO, the process towards complete independence from Eskom requires the establishment of a new operating model and the appropriate internal processes, systems and governance structures required to operate. 

He said the company will, after consulting with Eskom and the department, provide a high-level roadmap with timelines to implement all the requirements of the Electricity Regulation Amendment Act with transitional arrangements. 

The act, which was signed into law in August, requires the establishment of an independent transmission system operator within five years to provide open, fair and transparent access to the grid. This will be part of the NTCSA’s function.

It also provides for a market operator that will also be situated within the NTCSA to provide a transparent, non-discriminatory trading platform for market participants.

The rules for trading in this competitive market must be developed.

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Transmission Development Plan a big priority

One of the NTCSA’s biggest priorities is the execution of an accelerated Transmission Development Plan (TDP), which is expected to be made public by the end of this month.

Ramokgopa said a transmission network that can facilitate new forms of electricity generation is a key requirement to realising South Africa’s 2021 commitment to the UN framework on climate change to reduce carbon equivalents by 350-420 metric tons per annum.

Currently, the optimal renewable resources are located in areas where grid capacity is limited, and the NTCSA needs to address that.

The TDP 2022 provides for the construction of an additional 14 000km of transmission lines in the following 10 years as well as 122 000MVA of new transformer capacity. 

While Eskom has set aside R122 billion for the next five years, this needs to be supplemented by private sector investment and capacity.

That is why the department is now working on special instruments that will not burden the NTCSA’s balance sheet.

Ramokgopa said that following almost 200 days without load shedding: “We have the luxury of having the conversation with the lights on.”

He added: “It is no longer only about megawatts.”

He said many countries around the world, including developing countries, have successfully tapped into the private sector to develop their grids, and South Africa can learn from them and the wealth of knowledge at the World Bank.

ALSO READ: Ramokgopa eyes private funding for Eskom transmission boost

Several procurement models weighed

Scheppers told Moneyweb that several procurement models are currently being weighed.

It has not yet been decided whether the NTCSA will lead the procurement or if a special office will be created, as was the case with the independent power producer (IPP) office for procurement of generation capacity from IPPs.

He said it is also possible that the existing IPP office in the Department of Energy and Electricity will lead the process.

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Construction sector able to deliver?

Regarding the capacity of the local construction industry to deliver on the aggressive plan, he said the NTCSA is looking at the whole value chain and has already appointed a panel of suppliers to manufacture the power transformers to supplement the limited available local supply capacity. 

The panel will compete for contracts with elements to promote localisation. 

Scheppers told Moneyweb that, as with the 2010 construction boom, it is possible that international construction companies may partner with local counterparts to participate in transmission development.

He notes, however, that many countries around the globe are currently on similar drives to expand their grids. 

This article was republished from Moneyweb. Read the original here.