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Eskom efforts to ease grid bottlenecks for renewables backed up by World Bank agency

Eskom efforts to ease grid bottlenecks for renewables backed up by World Bank agency

Photo by Duane Daws

30th March 2016

By: Terence Creamer

Creamer Media Editor

  

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The World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) announced on Wednesday that it had extended €698.9-million in guarantees to South Arica’s Eskom to support transmission infrastructure investments, which would help it alleviate prevailing grid bottlenecks holding up the connection of new renewable-energy projects.

The MIGA guarantees would back €470-million in loan facilities extended to Eskom by Deutsche Bank and Mizuho Bank and would provide coverage against the “risk of non-honoring of sovereign financial obligations for a period of up to 15 years for the lenders”.

Eskom CEO Brian Molefe welcomed MIGA’s credit-enhancement facility, which he said had allowed the State-owned utility to secure euro-denominated funding for longer tenors and on more favourable terms.

The financing would enable Eskom to add about 255 km of new powerlines to support the transmission of 4 665 MW and to help remove hold-ups in the execution of the government’s electrification agenda, including procurement of new capacity from renewables independent power producers (IPPs).

The lack of grid-connection capacity had emerged as a key constraint to South Africa’s otherwise successful Renewable Energy Independent Power Producer Procurement Programme, under which 6 376 MW of renewables capacity had, to date, been procured from 102 IPPs.

Government was aiming to procure 13 225 MW from renewables IPPs by 2025 and the IPP Office was currently said to be adjudicating 106 bids received under an ‘expedited bid window’, open to all bids that were not successful during the previous four bid windows.

The IPP Office received bids totalling 9 500MW by the November 11 submission date, which itself had been delayed as a result of Eskom having initially failed to deliver grid-connection quotes.

Energy Minister Tina Joemat-Pettersson confirmed recently that grid access had emerged as a key constraint to the future roll out of renewables projects, particularly in the Northern Cape, which is regarded as having some of the best conditions for solar globally.

“The projects procured in the province to date have utilised much of the available grid capacity in the Northern Cape area,” she said, adding that network strengthening was required.

“Until more funds are made available for transmission projects, development costs and relevant capital costs to connect IPPs, private investment in the grid remains an option to address the funding and implementation constraints experienced,” Joemat-Pettersson added.

This constraint was also underlined by MIGA CEO Keiko Honda who said South Africa’s power system would remain constrained until new generation fleets and transmission lines came online. “MIGA is doing its part to contribute to this massive and urgent effort,” Honda added.

Economic Development Minister Ebrahim Patel also indicated recently that South Africa had approached the Brics New Development Bank for $250-million of funding to build transmission lines connecting solar and wind power plants to the national grid.

“Given Eskom’s role as the dominant vertically integrated power utility in South Africa, I cannot overstate the impact of this financing on the lives of South Africans and their businesses,” World Bank Group executive director for the constituency of Angola, Nigeria and South Africa Ana Afonso Dias Lourenço added.

Edited by Creamer Media Reporter

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