State issues request for information for power transmission projects

The government has taken the first step towards the introduction of private sector participation in the development of Eskom’s transmission network, announcing a Request for Information (RFI) for Independent Transmission Projects (ITPs).

Characterised as a market sounding exercise, the department of electricity and energy and the Treasury called the RFI “a key initiative to transform the country’s energy and infrastructure sectors”, in a joint statement this week.

The SA Independent Power Producers Association (SAIPPA) welcomed the RFI as “a crucial first step to unlocking private capital towards expanding essential grid infrastructure.”

Peter Attard Montalto, Krutham’s MD for capital markets, political economy and the Just Energy Transition, said the publication of the ITP RFI was a crucial step to launching private sector involvement in the transmission build out. He said that it would be impossible for the National Transmission Company of SA (NTCSA) to hit the Transmission Development Plan (TDP) targets.

In October, the NTCSA (an independent subsidiary of Eskom since July) announced ambitious grid expansion plans to accommodate the fast-growing number of renewable energy projects as the country reduces its reliance on ageing, coal-fired power stations.

At the time, interim NTCSA CEO Segomoco Scheppers said: “To meet this demand, 14,500km of new transmission lines and 210 transformers, providing 133,000 MVA of capacity, will be required. This represents a fivefold increase in delivery over the next 10 years compared to the previous decade. R112bn has been approved for the TDP programme over the next five years.”

This funding is, however, dependent on the tariff consumers pay for electricity. Energy regulator Nersa is expected to announce its decision on December 20 amid grave concerns about affordability. Eskom applied for a 36% increase next year, 11.8% the year thereafter and 9% in 2027/28.

The RFI “is designed to gauge the level of interest and readiness among industry stakeholders, and to explore innovative, alternative models for the development and delivery of power transmission infrastructure and expedite the implementation of the TDP,” the two departments said in its announcement on Wednesday.

It is a key building block to achieve the country’s “ambitious infrastructure investment goals set at 10% of GDP, (which) hinges on the successful mobilisation of public and private capital.”

According to Montalto there is broad alignment of all actors outside of NTCSA on the crucial role of ITPs, but still the idea is receiving pushback from the NTCSA board “on irrational grounds around their balance sheet”, he said.

“Such blockages will have to be bust through with instructions from the shareholder, which will happen in the new year. This RFI supports the process of solidifying how the eventual pilot projects happen to ensure they are fit for purpose.”

The RFI consists of an online questionnaire to be completed by interested parties.

It is “open to all interested parties, including private developers, financiers, DFIs and other interested stakeholders. Responses to the RFI will play a critical role in shaping the final structure of the tender and the successful implementation of the ITP programme, the government statement reads.”

The questions address a variety of issues, including the format of the contract with private sector partners. One option is that the private sector companies build, own and operate (BOOT) the specific transmission line and associated infrastructure for an extended period, at the end of which it will be transferred to the NTCSA.

It also includes questions around the need for government guarantees, something the government would like to avoid, limiting the contingent liabilities associated with the Renewable Independent Power Producer Procurement Programme (REIPPPP).

The ITP programme has been long in the making.

Kgosientsho Ramokgopa, then-minister of electricity, held an investment conference in September last year and reported considerable appetite among investors.

He appreciated the urgency of grid expansion to connect renewable generation projects especially in the Eastern, Western and Northern Cape, where the wind and solar resources are best. The grid in those regions is saturated and Eskom’s proposal to free up some capacity through curtailment is awaiting approval by energy regulator Nersa.

Ramokgopa’s push for the ITP programme was interrupted when the late Pravin Gordhan, then-minister of public enterprises, appointed the NTCSA board in January and the matter was transferred to their desk.

After the May election, the energy portfolio, including the political oversight over Eskom, was transferred to Ramokgopa. It also includes the IPP office, which will seemingly run the ITP programme.

Ramokgopa said earlier that a pilot OTP project would be launched early in 2025, but that may be delayed, according to SAIPPA.

SAIPPA chair Brian Day cautioned: “We must, however, be realistic about the timeliness required for the overall process to unfold. The closing date for this RFI is the end of February 2025, after which the submissions will need to be assessed and the insights received be used in the pilot scheme.

“I believe the pilot scheme RFP will then be issued around September 2025, allowing for bids to follow. The overall timeliness is not yet clear, as adjudication, appointment of preferred bidders, commercial contracting, and financial close must follow before the first construction starts on the pilot project. That means it is at least 3-5 years before the pilot project will be operational. Only then will a comprehensive programme be launched.

“We urge that the short- and medium-term solutions receive as much or more focus — that being the formalisation of the curtailment regime by Nersa and the expediting of the construction of grid projects by the NTCSA.”