A long-awaited power transmission company that will for the first time create an energy market — in which Eskom will compete with independent power producers (IPPs) to sell power directly to residential, industrial and commercial users — could be up and running in December.
This is according to the department of public enterprises, which is commercialising the transmission company that is being separated from Eskom.
Responding to questions from Business Times, the department said it had seen the model of a national transmission entity work in countries such as the Philippines, Singapore and China with independent system operators. Vietnam is also implementing a similar model.
The development has its roots in President Cyril Ramaphosa’s 2019 state of the nation address, when he said the beleaguered Eskom would be broken down into three entities — for generation, transmission and distribution — to enhance governance and management.
Public enterprises spokesperson Ellis Mnyandu said they were working to get the transmission company up and running by December when it would act as a single buyer purchasing power from Eskom generation and IPPs and selling to Eskom distribution, municipalities and large power users.
“The national transmission entity’s core functions will include balancing electricity supply and demand in real time, dispatching the generators according to least-cost merit order principles, providing open access in a fair and equitable manner to the transmission network and acting as an unbiased electricity market broker,” said Mnyandu.
Mineral resources & energy minister Gwede Mantashe took the opportunity at the Enlit Africa conference in May to punt amendments to the Electricity Regulation Act, allowing for the creation of the transmission systems operator.
“We are establishing a standalone transmission system when the transmission is a market of its own, independent of the dynamics of Eskom. You can’t have a market when there is a monopoly,” he said.
South African Independent Power Producers Association chair Thomas Garner said the move was a positive and critical development as the system operator and transmission operator needed to be independent and Eskom could not be expected to make calls on IPPs that could not dispatch their own plants.
“That’s very good news if they’re going to make December … They should have made it last December or the December before that. It is very important for the electricity market in South Africa that you split Eskom into three entities.”
Garner said the sooner South Africa could ensure the independence of a systems operator and transmission, the sooner it would be able to liberalise the electricity system and ease load-shedding.
Fifteen commercial electricity suppliers will start wheeling electricity through Cape Town’s grid in July as part of a pilot project
He said municipalities, as distributors, must be more proactive in developing a wheeling regime for IPPs. He said work to create a wheeling regime had started late and that larger municipalities with greater capacity must assist smaller counterparts with their wheeling frameworks.
Wheeling refers to the delivery of energy from a generator to the end user in a different location through an existing transmission or distribution network.
“In terms of the risks and what the challenges are, it’s really for IPPs to be able to wheel their electricity, also, through municipal grids. The municipalities have not been forthcoming in creating a transparent wheeling regime.
“I know Cape Town is busy doing it and there are one or two others. But … 40% of the off-takers in the country sit behind municipal distributors and we as IPPs need access to those municipal distributors to enable us to sell to end users,” Garner said.
Fifteen commercial electricity suppliers will start wheeling electricity through Cape Town’s grid in July as part of a pilot project allowing third parties to sell electricity to address the country’s energy crisis.
According to the plan, these suppliers will sell electricity through the local grid infrastructure to 40 customers; this is expected to be ramped up towards the end of the year.
Green energy non-profit GreenCape, in its 2023 Large-Scale Renewable Energy Market Intelligence Report, said the establishment of the transmission entity would play a major role in enabling competition in the market.
“When the restructuring is completed, the buyer will be the transmission entity. Consequently, the existing power purchasing agreements between Eskom and various IPPs will be transferred to the transmission entity.
“However, it should not be of great concern to IPPs and lenders, as long as the sovereign guarantees provided by the South African government under the implementation agreements are not adversely affected,” the report said.
The GreenCape report said the transmission entity, as a buyer, ideally could stimulate the market through an open market model. “As a transition from the existing single utility model, the transmission entity model will encourage competition, leading to cheap, accessible and clean energy for South African communities.”
Mnyandu said Eskom expected the transmission entity to continue being the central purchasing agent and single buyer office until a market begins functioning.
“The establishment of the TSO [transmission system operator] will contribute to promoting capital investment within the industry and to catalysing cost sustainability. The National Transmission Company of South Africa [NTCSA] was incorporated as a wholly owned subsidiary of Eskom Holdings in December 2021, and the aim is to have the entity operational by December 2023,” Mnyandu said.
The operationalisation of the transmission company is subject to the issuing of a licence by the National Energy Regulator of South Africa (Nersa) and the lenders’ consent. Nersa’s public hearings on licence applications were held in April. Formal requests for consent submitted to the relevant lenders were awaiting feedback, he added.
“The establishment and operationalisation of the NTCSA are intended to create a competitive market once finalised. The establishment of a separate transmission company with its own dedicated board is the first step towards the reformation of the electricity sector.”
Improved generation capacity resulted in load-shedding being eased this week, with stage 3 implemented at peak periods, thanks to wind from cold fronts in the Eastern and Western Cape which enabled IPPs to produce 2GW of power. But with increased load-shedding looming as winter worsens, there are plans to add 2,899MW of solar PV and 6,890MW of wind energy before the end of the year.
For decades Eskom has hopped from one crisis to the next, beset with financial, operational and governance challenges, to the point that André de Ruyter quit as CEO under controversial circumstances and vacated his position even before his notice period lapsed. He pointed to corruption on a grand scale at Eskom.
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