Matimba coal-powered station in Lephalale. (Paul Botes/AFP)
Eskom says it is puzzled by the National Energy Regulator of South Africa’s (Nersa) lack of urgency in approving licences that will help reduce load-shedding.
The power utility said Nersa approved only one licence instead of three, without giving an explanation. In 2019, Eskom applied for transmission, trading and import/export licences. After a three-year delay, Nersa last week approved the transmission licence.
Eskom said the delay and the decision to approve only one of three licences needed to finalise the establishment of the National Transmission Company of South Africa (NTCSA) has “further deteriorated Eskom’s balance sheet”.
“Because Eskom remains dependent on other parties for the projections to be achieved, we do not understand why it would take three years to approve a licence. The delays have placed Eskom in a tight corner, meaning we can’t improve our financial position without those licences,” the utility said.
“This means we will not meet the 10-year deadline to transition to cleaner energy by 2035 because it takes 10 years to fully expand the grid.”
An expansion of the grid would enable more renewable energy projects to feed into the electricity supply, helping to make up for the energy shortage the country faces. The transmission licence would assist the power utility to raise money to expand and improve its grid.
“It is Eskom’s understanding that Nersa has subsequently been evaluating the applications and are following their governance processes to conclude on their decisions.
“Eskom is, however, disappointed that not all licences were approved, regardless of their importance in resolving the energy crisis currently facing the country.”
It added that it will continue to work with the regulator to understand the new timelines and new dates for the release of the other licences required for the National Transmission Company.
Unbundling Eskom into three divisions — transmission, distribution and generation — is an important step in liberalising the electricity market and attracting private sector financing to upgrade and expand the transmission network. The electricity minister, Kgosientsho Ramokgopa, said this will require an investment of about R210 billion over the next 10 years.
Nersa approved a 25-year transmission licence for the National Transmission Company during its meeting on 27 July, and said the trading licence and an import/export licence would be processed separately.
Johannesburg is submerged in darkness during load-shedding . Eskom needs to bring renewable energy online to prevent rolling blackouts. (AFP)
“The NTC’s independence is an important signal to all stakeholders, including investors, that they will have non-discriminatory access to the transmission system,” Nersa said in a statement.
Eskom has previously said it is aiming to have the National Transmission Company up and running before the end of the year. It said the three licences, along with consent from the treasury and the appointment of a board, remained the main outstanding preconditions for the independent functioning of the new grid company, which will initially remain a wholly owned subsidiary of Eskom Holdings.
Eskom said the strategic objective and key aspect of the utility’s turnaround plan is envisaged in the department of public enterprises’s Roadmap for Eskom In a Reformed Electricity Supply Industry.
A big build
Ramokgopa said during a media briefing on Sunday that Eskom needed a 325% increase in transmission infrastructure over the next 10 years, including 14 218 kilometres of new transmission lines. The minister noted that transmission projects would need close to R100 billion in the 2025 financial year and a further R170 billion in 2029.
“This far exceeds Eskom’s current capacity. We will have to build 2 700km of new [transmission lines] per annum. If you look at the past 10 years, Eskom increased its transmission network by 4 300km in total for the period,” he said.
He said the most Eskom has been able to achieve in the past was 800km of new transmission lines a year.
“This shows that outside the money being available [to fund this expansion] we will need to build industry capacity,” he said.
Saul Musker, the director of strategy and delivery support in the private office of the president, said the presidency is “very concerned” about Nersa’s failure to grant all three licences for the National Transmission Company.
“But we are concerned about that because the [transmission company] needs all three licences to operate and to fulfil its functions. Including, for example, replacing Eskom as the buyer for [power generated] by legacy independent power projects, which the trading licence would allow.”
He added that Eskom does not have a record of decision from Nersa on the two outstanding licences. “We also don’t have the time frames in which the decision will be made.”
Musker stressed that Nersa had not rejected the other two licence applications, but said the Presidency was nevertheless troubled that the applications had not yet been approved.
“[Given] the enormous importance of fully operationalising the NTC, our hope is that we would be able to resolve this sooner rather than later and have the remaining two licences in place alongside the other two conditions [lender consent and an independent board], so that there shouldn’t be too much of a delay in establishing the entity,” he added.
It was becoming increasingly apparent that the Eskom and fiscal balance sheets were insufficient to ensure grid investment at the “speed and scale” required to address capacity backlogs, particularly in the renewables-rich provinces of the Western, Eastern and Northern Cape.
Musker said that having a “meaningfully independent” grid company was critical for levelling the playing field between Eskom and independent power producers, as well as to ensure that transmission infrastructure investment was prioritised.
“Given the scale of the investment that is required in the transmission network over the next decade, having a transmission company that is able to focus on that roll-out is really crucial.”
Ramokgopa said various models were being assessed for mobilising private financing and skills in support of accelerated grid investment.
According to Thembani Bukula, NERSA chairperson, the decision made by the energy regulator was a “milestone” that would “immensely contribute in Eskom’s unbundling trajectory”.
This story has been updated to include comments from Thembani Bukula.
Mandisa Nyathi is a climate reporting fellow funded by the Open Society Foundation for South Africa.