State Takes First Step Toward Engaging Private Sector in Grid Development
Over a year has passed since Dr. Kgosientsho Ramokgopa, the former minister of electricity, hosted an investor conference aimed at encouraging private sector involvement in the development of the South African electricity grid. On Wednesday (11 December), a Request for Information (RFI) was released.
This marks the initial move towards procurement, which is expected to commence in the first quarter of the upcoming year.
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However, the RFI’s closing date is set for February, raising concerns about adherence to the timeline for the Request for Proposals (RFP).
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The South African Independent Power Producer Association (Saippa) has expressed support for the RFI, viewing it as a vital initial step in attracting private investment to enhance crucial grid infrastructure.
Expanding and reconfiguring the grid has become a key focus to facilitate the growth of numerous renewable energy initiatives led by both government and private sector entities.
Grid congestion
In regions such as the Eastern, Western, and Northern Cape, where optimal wind and solar resources are found, the grid is nearing its limits, preventing the addition of more projects. Eskom has launched a curtailment program to alleviate some pressure, but energy regulator Nersa still needs to establish the relevant tariffs.
The National Transmission Company of South Africa (NTCSA), which became an independent subsidiary within the Eskom group in July this year, has introduced an ambitious Transmission Development Plan (TDP) aimed at incorporating 56,000 MW of new generating capacity into the grid over the next decade.
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What grid congestion really means
Nersa tariff decision crucial for grid expansion plan, says NTCSA boss
“To meet this demand, we will need 14,500 km of new transmission lines and 210 transformers, providing an aggregate capacity of 133,000 MVA,” stated NTCSA interim CEO Segomoco Scheppers during the TDP launch.
“This signifies a fivefold increase in delivery over the next decade compared to the last ten years. R112 billion has been allocated for the TDP program in the coming five years.”
Eskom lacks the resources and capital to carry this out on its own, necessitating private sector involvement.
RFI
The RFI includes an online questionnaire soliciting market feedback on the duration and structure of contracts – such as build, own, operate, and transfer – as well as financing and security options, risk allocation, and regulatory considerations.
It inquires about potential offtakers and explores the possibility of forming contracts without government guarantees.
Following the investor conference in September of the previous year, Ramokgopa expressed enthusiasm for moving forward with the Independent Transmission Projects (ITP) initiative, promising a rollout announcement within weeks.
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Shortly after, the late Pravin Gordhan, who was then the minister of public enterprises, announced the formation of the NTCSA board, thereby removing the issue from Ramokgopa’s control.
After the May elections, the public enterprises department ceased to exist, and Ramokgopa transitioned to overseeing the energy portfolio, which includes regulations for Eskom. The Independent Power Producers (IPP) Office, responsible for managing the RFI and likely the procurement process, is situated within the energy department under Ramokgopa’s leadership.
He previously indicated that the ITP pilot project would launch in early 2025.
Be ‘realistic’ about timelines
Saippa chair Brian Day expresses skepticism about achieving this timeline.
“We must remain realistic regarding the timelines necessary for this overall process,” he states.
“The RFI’s closing date is set for the end of February 2025, after which the proposals will need evaluation, and the information gathered will inform the pilot initiative.
“I anticipate that the pilot scheme RfP will be released around September 2025, paving the way for subsequent bidding,” Day adds.
“The complete timeline remains uncertain, as we need to navigate adjudication, selection of preferred bidders, commercial contracts, and financial closure before commencing construction on the pilot project.
“This implies a minimum of 3 to 5 years before the pilot project becomes operational. Only then can a broader program be initiated.”
Therefore, Saippa now emphasizes the importance of focusing equally, if not more, on immediate and medium-term solutions, such as formalizing the curtailment regime by Nersa and expediting grid project construction by the NTCSA, as stated by Day.
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