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Grid(lock) risks

24th October 2014

By: Terence Creamer

Creamer Media Editor

  

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The relationship between economic growth and development and stable and affordable electricity supply is not only strong, but also indisputable.

The link is reaffirmed in the Africa Energy Outlook publication, which was released by the International Energy Agency (IEA) earlier this month. It highlights that a severe shortage of essential electricity infrastructure across the continent is undermining efforts to achieve more rapid social and economic development.

Notwithstanding the fact that energy use in sub-Saharan Africa has risen by 45% since 2000, only 290-million out of 915-million people have access to electricity and the total number without access is rising.

In addition, for the minority with grid-based connectivity, the IEA notes that supply is often unreliable, necessitating widespread and costly use of back-up generators running on diesel or gasoline. On-grid power generation capacity was 90 GW in 2012, with around half being in South Africa.

“Electricity tariffs are, in many cases, among the highest in the world and, outside South Africa, losses in poorly maintained transmission and distribution networks are double the world average.”

There is no question, therefore, that South Africa’s investment in an extensive and reliable transmission network is a real advantage and that the country’s grid is a true national asset.

It was, thus, concerning to learn that Eskom is planning to defer a number of its transmission infrastructure expansion plans for the coming ten years, owing largely to financial constraints (see story on page 11).

The overall budget, which was estimated at R163-billion, remains more or less as it was in previous versions of the Transmission Development Plan, with R146-billion required for capacity expansions and the balance split between refurbishments, spares, servitude acquisitions and environmental and corporate costs. However, the latest version has delayed much of the actual investment until after 2018.

One of the potential consequences is that it is going to be increasingly difficult, and expensive, for both renewable-energy and conventional independent power producers (IPPs) to connect their projects to the network.

There are already warnings that capacity has been all but absorbed at some substations where the potential for renewables projects is high. Moreover, Eskom has confirmed that grid connectivity is likely to become a real problem from the fourth bid window of the Renewable Energy Independent Power Producer Procurement Programme onwards.

The utility has indicated a willingness to consider, on a case-by-case basis, applications for self-build solutions by IPPs. However, the framework appears a somewhat discretionary and, therefore, uncertain.

For this reason, an entirely new model may well be required. And, it is arguably beyond urgent for the Department of Energy and/or the National Energy Regulator of South Africa to initiate broad-ranging consultations on the issue.

A failure to do so could well lower the attractiveness of South Africa as an IPP investment destination, which could undermine the truly positive work that has been done in the area of renewables over the past few years. It could also reduce the appetite among potential baseload IPPs when that bidding programme eventually moves ahead.

Edited by Terence Creamer
Creamer Media Editor

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