While the focus in recent years has been centred firmly on renewable energy generation to assist with load-shedding, a new problem has been getting more attention of late: the lack of grid connection and transmission capacity.
This is a significant future stumbling block as it means SA’s vast endowment of natural energy resources cannot be connected to the grid and therefore cannot help alleviate the power crisis.
Some reports estimate that Eskom will need to triple its grid capacity in the next 10 years, while Eskom’s Transmission Development Plan 2022 speaks of an investment of R180bn to 2031 being necessary to unlock the grid for renewables.
Longer-term grid capacity and grid design for a changing generation and usage base are elements that have a long lead time and need to be initiated immediately. However, while longer-term investment and upgrades are facilitated, there are several short-term initiatives that can be pursued to help optimise SA’s grid infrastructure.
No grid
With increasing load-shedding in SA energy users have not waited for external solutions but have taken advantage of excellent solar irradiation across the country to install solar on their rooftops. Eskom estimates this capacity to be about 4,700MW, which substantially covers shortfalls in the various renewable energy procurement programmes.
Being close to or at the load, no grid capacity is required to connect this new power source. However, for this to be more useful to reduce transmission and grid capacity, users should invest in battery storage to smooth out peak production and protect power supply during load-shedding.
Private citizens and property companies have been leading the charge here, but a more consistent municipal procurement programme to procure excess power can help municipalities take advantage of excess generation capacity within their network to sell to other users.
Addressing the geography
The grid still has connection capacity of about 16GW. The issue is that this is not available in the best solar or wind areas, which are typically the Northern, Western and Eastern Cape. Many independent power producers (IPP) have planned projects in these Cape regions, but there is insufficient grid connection capacity to feed this energy back into the system.
Eskom’s Transmission Development Plan is aimed at unlocking the renewable energy generation potential across the country but it will take time, and all eyes were on the recent Transmission Development Plan Implementation Forum to see what would transpire.
There are some immediate activities that allow for continued investment in the sector. While they may not be “as good”, there are still many reasonable resource areas that can be tapped, and the remaining grid capacity can then be utilised while the plan and other initiatives are being completed. One that can be explored is geographically focused bidding rounds, allowing for successful IPP bids in these areas where untapped grid capacity already exists, which will help to fast-track renewable energy generation onto the grid.
‘Self-build’ arrangements
The grid is not constrained in the same manner in all areas. For example, in the Northern Cape it would be the transmission capacity that is the constraint. However, in other locations it could be the ability to connect to the grid. Upgrading the main transmission system connection points and strengthening the infrastructure around these will require significant investment — estimated to be about R70bn-R80bn of the overall R180bn to 2031.
The private sector has historically funded and “self-built” its own overhead lines to the grid connection point — most of which is handed over to the network operator for continued operation and maintenance. Increasingly, however, IPPs are also investing in the main transmission system connections and potentially even deeper grid strengthening works.
Both provide capacity to the grid in excess of what the IPP needs and are for the future benefit of other parties that may connect to and therefore benefit from that infrastructure. The grid codes describe a National Energy Regulator SA-approved mechanism for the reimbursement of the original investor for that investment, but this needs to be spelt out clearly in the self-build agreements.
Optimising line usage
There are a number of other “quick win” grid optimising initiatives that can be implemented while grid connection and transmission capacity is being increased. One of these is curtailment of the intermittent renewable generators — actively restricting the output of typically wind generators when there is oversupply from excess wind resources and in response to grid capacity constraints. This will help free up further grid capacity to get more renewable generation capacity onto the grid. The discussion continues as to how that curtailed capacity will be paid for.
When it comes to solar power, which has a more predictable generation profile, rather than curtailing generation, battery storage of excess power during peak generation for delivery during peak demand times is a more effective solution. To incentivise investment in batteries, power delivered by IPPs at other peak usage times (such as 6am to 8am and 4pm to 6pm) should attract a premium tariff. New investments in renewable energy — particularly solar power — should include battery storage and incentives to deliver the power to the grid at key times.
Finally, to support the longer-term development of the grid the private sector can provide support through public-private partnerships (PPPs) or concessions in areas where they are most needed in SA — specifically the Northern, Western and Eastern Cape links to Gauteng. SA has successfully procured infrastructure through several approaches such as PPPs along the lines of the Gautrain project, or concessions such as toll roads, which can bring additional private sector skills and resources to the financing, building and operating of transmission lines and help connect renewable energy from its generation site to the national grid.
However, for this to be a viable option the government needs to focus on cultivating regulations that clarify the revenue model through splitting out the proposed transmission company and creating clear procurement processes through the PPP or IPP office to facilitate this investment on behalf of the national transmission company.
This is essential for developing a sustainable power sector and harnessing the potential of diverse generation technologies going forward.
Webb is Senior Transactor, Infrastructure Finance at RMB.
