Ramokgopa says private sector has key role in electricity funding

ELECTRICITY Minister Dr Kgosientsho Ramokgopa has assured private sector players and investors that they will now play a bigger role in funding the more than R200 billion required for the expansion of the transmission grid in South Africa.

This comes as the first stage of getting the National Transmission Company of SA (NTCSA) operational has received the green light, which would lead to the full unbundling of Eskom into three units.

During his weekly media briefing on Sunday, Ramokgopa said Eskom would need about R100bn for the 2025 financial year to expand the transmission grid, which would be ramped up to R170bn by 2029.

“We are engaging with the team to see how best we can finance this roll-out that is required for us to support the issues around transmission,” Ramokgopa said.

“We are sitting with a number of permutations and some of them have got policy implications, to the degree that they require considerations by the policy makers.”

Ramokgopa said they had identified 22 renewable energy projects in three provinces that could supply 24,000MW to the national grid by 2033, and they would start working on them by 2026 to expedite the expansion of the grid.

He said the funding shortfall for grid expansion could be resolved by the market, as long as the market had certainty about the future.

“What we know is that the scale and the speed that is required for us to be able to invest in that is highly unlikely going to be met by the balance sheet constraints of both Eskom and the national fiscus,” Ramokgopa said.

“The second thing that we know is that there is a big appetite and a significant amount of liquidity in the private sector that stands ready to finance that. The other thing we know is that the grid in many parts of the world remains monopoly-owned, it’s not something that is relinquished to private sector ownership.”

The National Energy Regulator of SA (Nersa) on Friday approved that the NTCSA be issued with a licence to operate a transmission system within the national boundaries.

The NTCSA is envisioned to be an independent transmission system operator incorporating, inter alia, the currently non-licensable but integrated functions of network provision, system operation and system planning.

Nersa chairperson Thembani Bukula said: “This is a milestone decision by the Energy Regulator and will immensely contribute in Eskom’s unbundling trajectory.”

Independent energy expert Lungile Mashele said this was a step in the right direction and would increase investment in the sector.

Mashele said interested generators could sell to the NTCSA directly by entering into sale agreements with the entity, and also procure emergency generation that would allow it to stabilise the grid without going through the onerous Department of Minerals and Energy determination process.

“They won't be hamstrung by Eskom generation processes. This was preceded by the updating of the grid queuing rules last month which will favour most ready projects,” Mashele said.

“Another interesting development from the licensing is that NTCSA will not be developing transmission for Eskom alone, but for the country and external sources. That means they are going to be very busy over the next 10 years readying the grid for imports/exports and for new generators outside of the typical areas.”

Saul Musker, director at the private office in the Presidency, said Nersa’s approval of the NTCSA’s transmission licence was the first of three steps that were required to get the NTCSA off the ground.

Musker said Nersa was considering two other licences, one for trading and another for importing/exporting, which would culminate in the NTCSA to act as a system operator of the national grid.

“Having an independent national grid operator will create a level playing field for public and private energy generators,crucial so it is good for the market reform process,” Musker said.

“Given the scale of investment in the transmission network that is needed over the next decade, having a transmission company that is able to focus on that rollout is really crucial.

“Nersa has not made a decision on the other two licences. We are very concerned about that because the NTCSA needs all three licences in order to operate, including for example to be able to be the buyer for Iegacy IPP contracts, which Eskom is currently. That is what the trading licence would allow.”

– BUSINESS REPORT