Although the attention today is on World Environment Day and the rising tide of plastic pollution, my focus is elsewhere – the Eskom transmission infrastructure plan and wheeling have my full concentration. 

South Africa’s power utility has become a catchphrase for mismanagement and negativity. However, another idiom, the ‘energy transition’ (bandied about like a meme these days), is underway and driving a changing business model for companies like Eskom.

The utility is forced to reinvent the way it conducts business, and it appears they are choosing to see challenging times as an opportunity to change for the better.

Within this (already happening) energy transition, two items are noteworthy for the South African power market: the transmission grid and electricity wheeling.

In brief, here is why.

Eskom and its transmission plan

While the unofficial definition of loadshedding is insufficient generation to evacuate across the country through the transmission grid, thus rendering the grid purposeless, it still needs to exist.

As such, you may wonder why Eskom is on a drive to improve and expand its transmission grid when the very existence of loadshedding points to the utility having too little generational capacity to meet the country’s electricity demand.

South Africa’s Integrated Resources Plan 2019 (IRP) calls for connecting 30GW of new generation capacity to the grid by 2030, while market professionals state 53GW of new generation capacity will be needed by 2032. The grid must therefore be prepared for the influx of variable renewable energy power plus hopefully new baseload power to replace decommissioning coal power plants.

It is heartening that Eskom’s 2035 Corporate Strategy supports these new generation figures, as well as applications via the DMRE procurement programme and information supplied by non-DMRE applications and engagements with renewable energy associations.

This places the transmission grid (and the new transmission company) in a healthy position to conduct future business.

In fact, Eskom has already identified transmission grid-related projects that have Execution Release Approval for the next three years. EPC companies are warned to be alert for new project tenders from Eskom’s transmission division during Q3 and Q4 this year.

The team at ESI Africa will also keep a close watch to publish these for your benefit.

And the budget?

The Eskom Transmission Development Plan (TDP) 2022-2031 puts the capital plan at R178 billion between 2022 and 2031.

Of that, R144 billion is needed for reliability projects, integration of committed generation (Medupi, Kusile, IPPs up to Bid Window 4B), integration of the IRP2019 projects, the connection of new loads onto the system and acquiring the necessary servitudes. In addition, R34 billion is required for refurbishment, production equipment, telecoms and strategic spares. Also, the utility will set aside a budget for strengthening the grid.

Within this infrastructure growth plan, Eskom does draw attention to the tenders being subject to environmental authorisations, servitude acquisitions and customers accepting budget quotes.

Of interest, the utility company put forward plans for new projects demanding inventory for the next three years, including:

• 23 transformers and 924km of power lines in 2024
• 39 transformers and 2,333km of power lines in 2025
• 19 transformers and 806km of power lines for 2026

Overall, this strategy is an impressive move by the state-owned enterprise, which its management team acknowledges.

Naresh Singh, General Manager of Transmission Project Delivery, said the move to an EPC-heavy business model for new transmission build is a big mind-shift for Eskom. “There are times when we [will] do EPC, times when we just procure and construct, and other times where we stick to the historical approach of multiple packages with free issue.”

Electricity to be governed by wheeling, not Eskom transmission

Coming back to the ‘energy transition’. We desperately need these changes (in generation, transmission and distribution) because of lost revenue for businesses and South Africans.

A study conducted by SALGA into the cost of Eskom loadshedding to municipalities for water reticulation, grid maintenance, and lost income stands at around R24 billion.

This lost revenue impacts municipalities’ ability to deliver utility services, maintain assets and upgrade systems. The impact is much more than this: lost revenue opportunities due to loadshedding adds to businesses’ inability to pay utility bills.

The list of negative impacts goes on and has prompted customers to go their own way. They are building power plants of all sizes for their own use. The long-term risk to municipalities is that these customers are unlikely to return to municipal grids. With the migration, why put so much effort into the transmission grid? The answer: the national power network will continue to be needed by most who cannot afford to ‘power migrate’.

Plus, businesses will always need power and they don’t always get created in places where buildings can support their own power generation. So, there will always be a need to move power around to where the demand exists.

We have covered several articles on wheeling and how municipalities can plan for a positive outcome. Many technical and strategy questions remain, but one thing is clear: wheeling is vital to support our energy transition.

Have a powerful week.
Nicolette