Ramokgopa warns of another electricity crisis ahead

Ramokgopa warns of another electricity crisis ahead

New crisis, Ramokgopa warns

Energy CorrespondentEskom will have to build 14,000km of new transmission lines over the next eight to 10 years to avoid another electricity crisis in the near future.

This exceeds its current capacity for such infrastructure projects. Over the past 10 years it has built a mere 4,300km of transmission lines.

For this to happen the country will have to achieve an infrastructure upgrade at a scale SA has never seen before, Isabel Fick, GM for system operations at Eskom, said recently.

As Eskom and the government try to get to grips with how to fund and execute this huge expansion of the grid, at a cost of at least R235bn, electricity minister Kgosientsho Ramokgopa, in collaboration with Eskom and the JSE, hosted a transmission financing seminar in Johannesburg on Thursday.

During his opening address, Ramokgopa said it would be "difficult for the sovereign balance sheet to accommodate the [grid] expansion that is required". SA, he said, made the mistake of not acting early enough before 2007, when construction began on Medupi and Kusile, to increase electricity generation capacity. This resulted in the current electricity crisis.

The government must not make the same mistake of waiting too long with transmission, the minister said.

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 sources. According to Ramokgopa, the problem will become even more pronounced over the next 12 months.

This, he said, is one of the weaknesses of the Energy Action Plan, which is now being implemented.

The government intends to launch bid window 7 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) by the end of October. Bid window 7 will aim to procure 5,000MW of solar and wind power, but Ramokgopa said the grid constraints that resulted in the procurement of only 860MW out of an anticipated 5,200MW in bid window 6 are unresolved.

Speaking to the media on Thursday afternoon, Segomoco Scheppers, Eskom GM for transmission, said the capital requirement to fund Eskom’s transmission development plans over the next four to five years is about R70bn. This is already provided for in Eskom’s corporate plan, which has been approved and was largely made possible by the R254bn debt solution that the government has put in place, as well as other instruments that were already available. However, the full amount is not yet funded.

A number of projects that are to be delivered over the immediate five-year period are already under way. Some of these projects will, to a limited extent, deliver new infrastructure that will allow new renewable energy projects to be added in the Cape provinces under bid window 7, Scheppers said.

"One of the focus areas we are investigating vigorously is around curtailment, which, if applied specifically to wind projects, can unlock a lot of capacity on the existing infrastructure. But this still has to go through various governance processes, including engagements with the energy regulator, because if we [implement curtailment] it may impact on the tariff," he said.

Ramokgopa said: "For the next four to five years Eskom has got sufficient capacity from a financing point of view to address what their needs are. What we need to resolve is what happens beyond that period of three to five years when we will require a significant amount of investment."

Some options the government could consider to "crowd in" private sector finance for grid expansion included replicating the REIPPPP on the transmission side, Ramokgopa said.

A recently published joint consultation paper by the Centre for Sustainability Transitions (CST) at Stellenbosch University, the Centre for Renewable and Sustainable Energy Studies and the Blended Finance Taskforce said a model favouring independent transmission projects is likely to be the most successful for off-balance-sheet financing of transmission infrastructure.

The paper, with lead authors Prof Mark Swilling and Erica Johnson from the CST, said Eskom already has experience with the regulatory requirement of such a model through the REIPPPP. The model, which is already successfully employed in Brazil and India, can be designed to allow for varieties of ownership, risk sharing and division of responsibilities.

erasmusda@businesslive.co.za

R235bn

needed for the huge expansion of Eskom’s grid

5,000

megawatts of solar and wind power will be sought in bid window 7

Electricity minister Kgosientsho Ramokgopa. Picture: DARREN STEWART/GALLO IMAGES