Solar PV may leave South Africa’s new Transmission Company with stranded assets

Opinion

• Ongoing delays in the planned unbundling of transmission and distribution divisions from South Africa’s state-owned energy utility, Eskom, into autonomous companies may see these assets stranded. 
• The relaxation of generation license requirements for projects up to 100MW and the increase in length and frequency of daily blackouts plus the fall in solar panel prices, has seen a massive uptick in solar PV hybrid installations by businesses and homeowners at point of use, which may eliminate the need for new build transmission infrastructure or leave current transmission infrastructure stranded.

Decades of poor planning, unqualified cadre deployment, corruption, theft and sabotage at the utility have eroded trust and confidence in the government to deliver reliable power to the people. South Africans braced themselves for up to 16 hours of daily blackouts this winter. They have now simply had enough.

The country has seen a flood of private sector solar PV projects totalling 2899MW since the amendment of Section 2 of the Electricity Regulation Act by the Department of Mineral Resources and Energy (DMRE) in August 2021, which allows the operation of a generation facility with a capacity of up to 100MW without obtaining a licence from the National Energy Regulator of South Africa. Read more

The South African Wind Energy Association (SAWEA) and South African Photovoltaic Industry Association SAPVIA recently conducted a ‘Renewable Energy Grid Survey’. The survey reveals that 13305MW of solar PV and 19572MW of solar PV with battery storage are ‘shovel ready’ (construction ready) or close to it. Read more

Chinese customs data compiled by Ember Climate show that South Africa imported over 5GW (or US$1.1bn) of solar panels from China since Jan 2022, with 3.7GW in this year alone.

Related news: Loadshedding a problem in your house? The Solis S6 Advance Power hybrid inverter with diesel generator and battery integration is now available in South Africa

Chris Yelland, respected energy analyst and CEO of EE Business Intelligence has calculated the overall estimated additional year-on-year capacity coming into commercial operation over the next four years to be 2200MW (2023), 6495MW (2024), 9090MW (2025) and 13220MW(2026). The majority of this is solar PV technology. The estimated outlook is broken down as follows:

• Eskom: no solar PV
• Public procurements: 40% solar PV
• Municipalities: 60% PV
• Private PPAs: 60% PV
• Domestic/commercial: 100% PV

The various data analyses described above have been based on registered projects. It is estimated that there is 2GW or more of unregistered solar PV generation capacity (at point of use) which has not been calculated into the estimates above or any government energy planning.

Considering that the country’s total energy demand hovers around 30000MW, inroads of solar PV start to stack up.

“It’s completely unrecognised by the government as to how big an industry it’s become, its a silent revolution” Frank Spencer, spokesman for the South African Photovoltaic Industry Association told Reuters in August last year. In Johannesburg alone, it is estimated that there are more than 20,000 unregistered solar systems, most of them residential, an official from the city’s power told Reuters. In the absence of attractive tariffs, those customers are increasingly going off-grid.

Solar PV adoption extends to farming, retail and mining at scale

Farmers, retail players and mining companies in South Africa are seeking to be completely independent from the unreliable Eskom grid plus the local municipality. There is a big switch to self-sufficient solar PV with battery energy storage and/or diesel generator hybrid systems to power irrigation and farming operations.

Louma Boerdery is one example. Lourens du Plessis from Louma Boerdery explains that they needed to eliminate their dependency on the Eskom grid to ensure energy security and to enjoy independence for sustainable profitable business operations. “This decision was based on the billing savings obtained by a disconnection, and the forecast that the quality of supply from Eskom would continue to worsen,” said du Plessis.

To date Louma Boerdery has converted six large farms totalling 2500 hectares to solar energy, removing them completely from the Eskom grid with a 7MW solar array coupled with a 5MWh battery synchronised with a diesel generator system. Read more

Another example is a group of farmers who recently installed a large solar powered water pump system in the Brede Valley region in the Western Cape to ensure water security and ongoing farming operations. The project’s technical intricacy includes the construction of up to 3MW of best-in-class solar PV plants, with nearly 2MW already operational. Additionally, the project encompasses mini-grids, transformers and transmission lines, guaranteeing the efficient operation of the energy system. Read more

One of multiple listed retail property owners, Resilient, recently announced that they will aggressively reduce reliance on Eskom. To overcome these challenges they will continue with the integration of solar, battery, municipal power and backup generators at their malls. The aim is to roll out 84.1MW solar PV at their shopping malls by the end of next year. Read more

Redefine Properties recently anounced a record breaking 5.5 MW solar PV rooftop wheeling project in Cape Town. Read more

American Platinum have announced three embedded solar PV projects including a 100-megawatt (MW) project at Mogalakwena Mine, a 125MW project at Amandelbult Complex and a 35MW project at Unki Mine. These projects are in various stages of development and are expected to be operational between Q4 2024 and 2025.

Harmony Gold Mining Company following major solar project announcements by coal miner Exxarro, has commissioned a 30MW solar photovoltaic plant as a first phase of two at their operations in the Free State. The second phase will add a whopping 137MW split in two construction phases.

Related news: Solis S6 hybrid inverter ideal for South African households and businesses 

Transmission impossible

The announcement that Eskom would be unbundled into three separate entities namely; generation, transmission and distribution was originally announced in February 2019. The license for the transmission unbundling was finally approved this month by the country’s energy regulator, but the final process is challenged by parent debt covenants. Read more

Public Enterprises Minister Pravin Gordhan recently outlined that Eskom’s unbundling of its transmission division into the National Transmission Company of SA will be operational by November 2023 but this is unlikely. Read more

The Managing director of Eskom’s’ new Transmission Company, Mr Segomo Scheppers, has publicly confirmed that the country needed to add more than 1500 km of new transmission lines annually over the next ten years to ensure transmission capacity to accommodate new generation power which will mainly come from intermittent renewable energy (wind and solar projects).

Currently, Eskom’s transmission division is adding 300 km of new power lines annually. Scheppers confirmed that in the last ten years, only 4 347 km of new powerlines were added. Another challenge is transformer capacity. Scheppers confirmed that more than 122 600 MVA transformation capacity would have to be added, representing 77% of Eskom’s current installed base of just over 160,000 MVA. In the last ten years, only 19 060 MVA have been added to the grid infrastructure.

The modern grid typically accommodates variable energy sources, low emissions power, peaking power, decommissioning of ageing plants, storage and demand response management. Traditionally designed for coal power generation, South Africa’s existing infrastructure currently does not accommodate a diversity of energy generation options, energy efficiency, demand management, increased interconnectivity between provinces and the development of smart grids, integrating with critical infrastructure.

No money

“The transmission expansion and strengthening exercise will require a considerable amount of resources and we know that the Eskom balance sheet is constrained and we know that the sovereign matrix has deteriorated, so it’s important that we explore opportunities for the country to tap into the liquidity that is sitting with the private sector,” South Africa’s Electricity Minister said yesterday. The problem here is that government wants to retain ownership of the transmission sector in a traditionally dysfunctional and incompetent developmental state institution while the private sector investors want majority ownership and control of day to day management. Read more 

Administrative bungling

After administrative bungling or likely deliberate delays, the country’s Ministry of Government Mineral Resources and Energy finally tabled the Electricity Regulation Act Amendment Bill this month. The Bill will now only start the process through committees to become law and will likely not be passed before next year’s national election.

“The bill is an urgent piece of legislation that is central to the joint efforts of business and government to solve the electricity crisis,” said Busisiwe Mavuso, CEO of Business Leadership South Africa, in her recent weekly newsletter.

“It will allow for the creation of a Transmission System Operator to manage the national grid and procure electricity from a competitive market. It is key to attracting the investment needed to expand the capacity of the grid. It will create a level playing field for all generators of electricity, both private and public. This is the fastest way to get new electricity onto the grid at the lowest cost,” added Mavuso. Read more

With the current National Transmission Plan already outdated plus the ongoing delays in adopting the Electricity Regulation Act Amendment Bill, and considering that government neither has the money, urgency or seemingly the will to reset and move speadily to modernise the transmission grid,  it is difficult to imagine that any meaningful new transmission infrastructure will come online in the next three to five years.

So where does this all lead?

It is clear that the South African government’s decision to unbundle its transmission division during a massive energy crisis, the associated delays in doing so plus the relaxation of self-generation license rules,  has resulted in consumers as a collective, rolling out self-generation projects at point of use, at scale across the country.

Transmission takes a long time to build and with the horse now bolted, the new transmission company, when finally does unbundle, may be left with stranded assets because energy users no longer rely on the state for electricity supply. It has been a massive misread from the government because solar PV, batteries and generator hybrid systems can be rolled out by the consumer at the point of use faster than modern transmission infrastructure, leading to a declining need for the latter.

The existing transmission assets will nonetheless prevail but this capacity is already allocated. The country has already experienced capacity saturation in the Northern, Eastern and Western Cape regions for additional solar and wind projects.  Just last month, Eskom confirmed that it is prioritising 47 grid-related projects within its larger R210-billion Transmission Development Plan by finding feed-in capacity. They will also be updating their Generation Connection Capacity Assessment (GCCA) ahead of the next renewables bid window to provide investors with visibility of the grid capacity and connection points, as well as to avoid grid-related problems. With no meaningful transmission infrastructure coming online soon, Eskom is also trying to find additional generation capacity through a new curtailment framework.

While the massive conundrum points to utility-scale storage (at scale) as an immediate way out, the government has been slow to procure grid storage technology.  The country’s Battery Energy Storage IPP Procurement Programme, gazetted in September 2020, is designed to facilitate the procurement of up to 513MW. Only last month were 17 shortlisted bidders announced. Eskom, in the interim, has pushed ahead with its energy storage programme starting with the construction of the first 8MW at Elandskop which began December last year. Read more

With a national election coming up next year and the likelihood of a coalition government, it is clear that the current transmission plan may change and its implementation is likely to be further delayed. The people of South Africa, having lost all faith and trust in the government to deliver pretty much anything let alone a reliable electricity supply, will continue to go it alone with self-generation at the point of use.

South Africa is likely to have a completely different energy future than is currently envisioned and planned by the government. If there is no reset and the current transmission plan is implemented, the new national Transmission Company may find itself with stranded assets.

Author: Bryan Groenendaal

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