South Africa Energizes Future with Private Grid Investment Plan

Ramokgopa Announces Final Steps Towards Private Grid Financing

by Ikeoluwa Juliana Ogungbangbe
South Africa Grid Financing

Electricity Minister Kgosientsho Ramokgopa has shared promising news that the South African government is on the verge of finalizing a financial framework designed to attract private investments into the country’s transmission infrastructure. This effort is part of a broader initiative to enhance the nation’s power grid without burdening the fiscal budget or negatively impacting Eskom’s financial health.

During a recent briefing on the Energy Action Plan, Ramokgopa revealed that his Ministry is leading the charge, pooling efforts from the National Treasury and the International Finance Corporation (IFC) to create an innovative “EPC plus F” model. This model aims to streamline the engineering, procurement, construction, and financing of new transmission projects, marking a significant leap towards modernizing South Africa’s energy sector.

The approach seeks to establish a method for structuring such investments that won’t require government backing in the traditional sense, nor will it compromise the integrity of the National Transmission Company South Africa (NTCSA). The NTCSA is set to become an independent grid and system operator under Eskom Holdings, heralding a new era of efficiency and reliability in power distribution.

Ramokgopa expressed optimism about presenting a concrete plan to the public in the coming weeks, indicating that internal discussions are nearing completion. This progress could potentially pave the way for private sector involvement in developing three critical corridors, potentially unleashing up to 2,300 MW of new renewable energy generation capacity. The Minister also pointed out the availability of funds for new grid infrastructure, suggesting a build, own, operate, and transfer (BOOT) model that has seen success internationally could be adapted for South Africa. This model would ensure that the NTCSA remains the central system operator and guardian of the national grid, aligning with the government’s strategic vision.

Drawing from South Africa’s history of engaging private investors for generation capacity, Ramokgopa underscored the benefits of separating procurement from government processes. Such a move, he noted, could replicate the efficiency seen in the Independent Power Producer Office’s operations. The potential location of the transmission procurement agency within the Development Bank of Southern Africa or the Industrial Development Corporation was discussed, following the recent establishment of the NTCSA board. The NTCSA’s Transmission Development Plan will guide any private sector collaboration, aiming to fast-track project implementation.

Additionally, Ramokgopa highlighted the goal to link concessional and grant funding, particularly the substantial commitments made under the Just Energy Transition Partnership Implementation Plan, directly to transmission projects. This strategic financial planning aims to overcome the “structuring problem” currently facing the energy sector, moving beyond the challenge of funding availability to actual project execution.

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