Senior officials from the South African government’s Just Energy Transition (JET) Project Management Unit have set out potential financing options for transmission infrastructure, while the JET International Partners Group (JET IPG) have confirmed their readiness to work with financial institutions to expand transmission capacity.

During an event focused on transmission at the Africa Climate Summit, in Nairobi, on September 7, business leaders declared transmission the single-biggest bottleneck to reliable energy supply in the country.

The business leaders agreed that expanding transmission capacity in South Africa was key to bringing more renewable energy onto the grid and ending loadshedding.

The JET IPG, which comprises the UK, the US, the European Union, France and Germany, alongside other development partners and the private sector, mobilises significant finance for transmission infrastructure in South Africa.

Local and international banks and financiers also indicated interest in collaborating to support the sector in this endeavour.

Business Leadership South Africa (BLSA) CEO Busi Mavuso said it was critical that concrete steps be taken to address the transmission problem in South Africa, not only for short-term reliable energy but over the long term as well.

“We are pleased to see international partners looking at financing this vital area with their Just Transition funds and we hope to see government take up the offer,” Mavuso stated, adding that the BLSA strongly supported the government’s Energy Regulation Amendment Bill, which would hopefully be passed soon.

South African Photovoltaic Industry Association CEO Rethabile Melamu noted that the private sector was actively engaged in developing renewables at scale but needed grid extensions to connect their projects.

“The JET financing is a great opportunity and we are keen to see regulatory changes implemented to facilitate the financing for expanding the grid,” she added.

Increased transmission capacity in South Africa will include building new lines from where most of the large solar and wind energy projects are being built – predominantly the Cape provinces – to the rest of the country.

Expanding transmission will also generate significant employment in South Africa, including jobs in installation and operations, steel production and equipment manufacturing.

SUPPORT EXPRESSIONS

At the event, the JET IPG confirmed that JET financing remains available to support transmission as South Africa decides on the financing models and procurement arrangements to build the about 1 400 km of new transmission lines a year needed up to 2030.

Germany, through its international development bank KfW, is working on a €200-million sovereign loan to South African power utility Eskom to strengthen the capacity of transmission grids in the Northern and Western Cape and enable 2.2 GW of renewables to be connected to the grid.

Finalisation of the loan needs Eskom and National Treasury approval.

The UK, in turn, is willing to provide significant funds for transmission through African Development Bank lending – enabled through its JETP guarantee – while more facilities could be available from the European Investment Bank.

The JET IPG’s development finance institutions and the International Finance Corporation could become core investors in private transmission solutions.

Germany, the US, the UK and Denmark are providing support to complementary areas such as regulatory arrangements, grid optimisation to deliver more renewable energy, demand side management or providing and wheeling local energy across local grids that are less constrained.

The EU is also supporting cross-border transmission to support grid stability.

Chris Taylor, the UK’s Envoy for JET Partnerships, said the UK was keen to harness the large-scale finance on offer from the JET IPG to end power cuts and create jobs.

“JET financing, combined with leveraging South Africa’s thriving private sector and deep capital markets, will enable delivery of transmission upgrades on time, and on budget,” he added.

US Treasury international trade and development assistant secretary Alexia Latortue commented that South Africa had enormous clean energy potential that could be unlocked by building transmission infrastructure using the full range of capital sources available.

“I want to commend my South African counterparts for the work they have done to identify financing models and structures that can efficiently and effectively mobilise private capital,” she stated.

German Federal Minister for Economic Cooperation and Development’s Parliamentary State secretary Dr Bärbel Kofle said the South Africa JET Partnership was the first of its kind and had generated a lot of attention for this new partnership model.

“Together, we are committed to reaching ambitious climate goals [and] ensuring the transition will work for the people.

“A socially just energy transition is a huge opportunity for development. It is this spirit that guides our cooperation with South Africa, to make full use of the economic and technological opportunities that such a transition offers,” she concluded.