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Powerline industry warns it may not survive until grid roll-out ‘feast’ given current investment ‘famine’

Polasa chairperson Sagren Moodley

Polasa chairperson Sagren Moodley

13th December 2023

By: Terence Creamer

Creamer Media Editor

     

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The Power Operations & Leadership Association of Southern Africa (Polasa) believes the famine-then-feast profile of Eskom’s execution plan for the roll-out of new transmission infrastructure will starve an already embattled domestic industry to the point where it will be unable to make the manufacturing and skills investments required to participate in the later steep rise in grid expenditure.

Chairperson Sagren Moodley tells Engineering News that the back-end-loaded nature of the execution plan for the ten-year Transmission Development Plan (TDP) to 2032 is of “great concern” to the industry as only 12% of the 14 218 km of powerlines proposed for construction under the plan has been earmarked for implementation during the first five-year window.

From financial year 2023 to 2027, only 1 675 km of line is planned for construction, he notes, leaving 88% for the second five-year period from 2028 to 2032.

“This feast-and-famine approach is unsustainable and will cripple many in the industry during the famine years and increase costs and project slippages during the feast years.

“This is an untenable environment for both the industry and for Eskom’s own internal resource management,” Moodley says.

Polasa is, thus, calling for an urgent collaborative intervention between Eskom, government and the industry to find ways to “flatten” the demand profile by creating more consistent demand in the current five-year execution window.

The association, which has manufacturers, suppliers, consultants and professionals in the transmission and distribution value chain as members, describes the initial ramp-up as too slow, with the execution plan currently even showing a ramp-down from 326 km last year to only 165 km in the current financial year.

“The obvious problem is that many companies throughout the value chain might not be able to survive the famine years, leaving Eskom with a smaller pool of suppliers in the latter years,” Moodley adds. This point is also made in the recent Transmission and Distribution Manufacturing Value Chain report released by the Localisation Support Fund.

The lack of workflow also threatens the survival of those startup companies currently participating in Eskom’s incubation programme, which has been launched to support the transformation of the sector.

“Whilst this is commendable and supported, the concern is that there is not enough work in the next five years to sustain the main contractors and sub-contractors let alone keep the incubation companies sustainably busy.”

Polasa is equally concerned that Eskom is not meeting even its modest roll-out targets, with the pace at which tenders are being released lagging not only the TDP, but the implementation timeframes communicated by Eskom.

“We should have seen the projects in this first five-year window already in the market. This is not the case and therefore casts doubt as to whether we are going to successfully reach this 1 675 km milestone.”

As a consequence, more kilometres could well be pushed into the second five-year window, steepening the demand profile further in the latter years and potentially leaving gigawatts of much-needed new generation capacity unable to connect to the grid.

Such a scenario could also trigger a vicious cycle, whereby local manufacturing and contractor capacity is lost to company closures, leaving the market dependent on foreign enterprises and skills once the programme truly accelerates.

“As South Africans, we can ill afford the further de-industrialisation of a battered South African economy. . .The nature of the power line manufacturing and construction sectors is that we are a mass employer of both skilled and unskilled people [and] can make a significant contribution to employment.”

Electricity Minister Kgosientsho Ramokgopa has confirmed that inadequate transmission spending poses a threat to government’s plan to end loadshedding permanently and has also flagged the prospect of opening the market to private sector participation.

However, a plan aimed at crowding in private sector finance and skills has not yet been approved by Cabinet and has been returned to the National Energy Crisis Committee for further work.

Eskom has indicated that, following being awarded R254-billion in debt relief by the National Treasury, its transmission investments for the coming three years are fully funded.

Funding beyond that horizon is uncertain, however, and with Eskom currently prevented from accessing new debt, the main transmission build programme, which will presumably be carried out by the National Transmission Company South Africa currently being separated from Eskom, does not appear to be funded.

Polasa believes other deployment models should be considered, particularly given that the full TDP is expected to involve investment of about R300-billion.

To address the problem, Moodley is appealing for “meaningful engagement” between Eskom Transmission and industry, including a move away from the current TDP Forum approach, which is dominated by presentations and where there is limited scope for questions and suggestions.

The current situation, he argues, can be remedied only when all parties collaborate on the basis of a genuine intention to engage in good faith.

“As leaders of industry, labour, Eskom and government, we must work together in a genuine spirit of patriotism to not only deliver on the 14 218 km of new power line and associated infrastructure but do so in a cost-effective and timeous manner and establish South Africa as a centre of capability and excellence for the necessary expansion of the African grid.”

Moodley also believes greater priority should be given to the execution plan rather than the overarching plan.

“The TDP is still important, but this is not where the rubber hits the road.”

Edited by Creamer Media Reporter

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