The New Development Bank (NDB) annual meeting has provided the first seeds of a solution to a seemingly intractable problem facing South Africa: How to pay for and build at least 14 000 kilometres of electricity transmission lines required by 2030 for the energy transition.
NDB chief operating officer Vladimir Kazbekov said at the BRICS institution’s meeting in Cape Town over the weekend that they intend to use the NDB’s Project Preparation Fund and draw on the expertise of fellow BRICS members countries – and on South Africa’s unique requirements – to prepare a project plan to possibly help fund the expansion of the electricity transmission system.
Some 55GW of new renewable energy generation capacity is expected to come on stream in South Africa by 2032 (Eskom currently generates about 44GW), but because renewable power plants are not near places of high transmission capability, an additional 14 000 kilometres of electricity grid lines are needed.
South Africa has historically never built more than 1000 kilometres in a year. In addition, given Eskom’s indebtedness, it is unlikely to be able to fund the estimated R200 billion that will be required for the expansion.
Acting Minister of Energy Patricia de Lille said South Africa needed to scale up the expansion of its transmission grid by eight times more than currently, by 2030. Not only did the country not have the capacity to fund this expansion, but it also did not have the skills to roll out the grid expansion at scale and speed.
Kazbekov said the NDB had already allocated up to $5 billion (about R89.2bn) for South Africa’s just energy transition, and the outcome of the Project Preparation Fund study could become a “robust pipeline” of projects. He said this would be the first time that Brics countries would collaborate, via the NDB, using their experience to tackle a developmental challenge in one of the member countries.
He spoke at the meeting at the conclusion of a seminar in which electricity experts from India, Russia, Brazil and China spoke about how they overcame the funding challenges of their renewable energy transitions.
These countries have advanced much further on their energy transition than South Africa, with, for instance, China’s state-owned electricity transmission company State Grid, currently the world’s biggest utility by assets, investing $70bn a year on its transmission network.
In Brazil, of the total 226GW transmitted over its network, 50% comprises hydroelectric power; 17% is solar power; its grid comprises some 172 000 kilometres; and 85% of its national grid is privatised. Brazil has held 47 power auctions since 2001.
De Lille said South Africa no longer had time for trial-and-error projects to expand its electricity transmission network, “we need the tried and tested own experiences of our BRICS partners”.
She said that by integrating the experiences and knowledge of the country’s BRICS partners on the development of plans to expand the transmission network, “we can implement our own project quickly and scale up our infrastructure with agility”, she said.
When the experts were asked at the end of the NDB meeting to name one key learning from their respective markets, their answers included the formulation and implementation of policy to liberalise the transmission market, and the need to establish a high level committee to plan and oversee the implementation.
They said competition for the procurement of transmission capacity needed to be introduced, commercial risk needed to be determined by the government and the projects had to be sufficiently low risk to be commercially viable for the private sector, and a leader in the government needed to be tasked with overseeing the project.
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