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R350 Billion for ESKOM Grid
Private sector must cough up!


Eskom’s chairperson has said it will need around R350 billion over the next 10 years to build out sufficient transmission infrastructure for private energy projects to connect to the grid. Chairperson Mteto Nyati revealed this in an interview with Reuters, where he said that Eskom cannot do this alone and will need hundreds of billions of rands from the private sector. “We probably need close to R350 billion over the next 10 years to build the transmission infrastructure. We do not have, from our own operations, the capacity to fund that,” he said.

The need for such a massive expansion of transmission infrastructure is due to the rapid growth of private renewable energy projects across South Africa to reduce companies’ reliance on Eskom and help end load-shedding. Eskom’s transmission grid currently has a 14,000 km expansion backlog, particularly in its Cape provinces, which are ideal for renewable energy generation. South Africa’s grid is designed to carry electricity from large, central power stations in the country’s northeast to other parts. Renewable energy generation is decentralised, with generation facilities located almost anywhere. The areas, such as the Western Cape, Eastern Cape, and Northern Cape, which have rich renewable resources, do not have the grid capacity to distribute electricity to the rest of the country. The grid in these areas can only carry limited load, which is insufficient for large-scale projects, hence the need for massive investment in expanding and upgrading the grid. Despite Nyati outlining the need for private-sector investment, he also stressed that the government will own the assets built by the private sector.

“Private sector participation, yes, but the asset is going to end up with the government,” he said.

He added that the board was considering using the build, operate, and transfer models that have been used to build toll roads across the country. Under this model, the private sector would build the infrastructure and operate it for a set period, ranging from 5 to 20 years. Afterwards, it would be transferred to the government entity that procured it in the first place.

A electricity transmission tower close to the Eskom’s Lethabo coal-fired power station in Vereeniging. Photographer: Waldo Swiegers/Bloomberg

Electricity Minister Kgosientsho Ramokgopa has previously said that Eskom will need around R390 billion to expand and upgrade its transmission grid. Ramokgopa said the government would soon begin allowing private-sector investors to fund new grid infrastructure and upgrade the grid. He said it is important for the funding agreements to ensure the state, through the newly created National Transmission Company, will retain its full grid ownership. “The new infrastructure will be procured with speed by accessing the liquidity in the private sector without relinquishing state-owned ownership of the grid,” Ramokgopa said. He has said the country needs to build 6,000 km of transmission lines in the next three years.

This is far beyond what is currently forecasted to be 1,400 km over the next three years.

The government and Eskom were warned about the need to expand grid capacity across the country in the 2003 White Paper on Renewable Energy. However, Eskom’s focus shifted then to building new generation capacity at Medupi and Kusile, which were both hit by several delays and cost overruns. This led to the government and Eskom waking up far too late to the need to add capacity to the grid, and it severely weakened the utility’s ability to fund such a rapid expansion. Eskom has belatedly drawn up a transmission development plan to tackle this problem, requiring hundreds of billions of rands to build infrastructure nationwide.

This article was first published by Daily Investor and is reproduced with permission.