The National Treasury confirms South Africa’s proactive approach in piloting a model that allows direct private sector participation in developing and operating transmission grid infrastructure.
This innovative model draws inspiration from the country’s successful experience with independent power producers (IPPs) in the generation sector.
Addressing the Investment Gap for Renewables
Deputy Director-General Mmakgoshi Lekhethe highlights the urgency of this initiative, emphasizing the significant investment needed to unlock grid capacity for new renewable energy projects.
With a target of adding 1,400 km of new power lines annually by 2032, the government recognizes the necessity of private finance and expertise to achieve this ambitious goal.
Lekhethe reveals that the government is diligently working to pilot a model that leverages private sector resources for grid expansion.
This approach, while similar to the IPP model for generation, will be tailored to the unique circumstances of transmission infrastructure.
Energy Action Plan Remains a Priority
Silas Zimu, special adviser to the Electricity Minister, reaffirms the government’s commitment to the Energy Action Plan (EAP), including reforms that enable private participation in the grid. He assures stakeholders that the EAP will remain a priority, regardless of the new governance arrangements following the 2024 elections.
Lessons Learned from the IPP Program
Bernard Magoro, head of the IPP Office, acknowledges the success of the IPP program in procuring electricity infrastructure from the private sector.
However, he cautions against a simple “cut and paste” approach for independent transmission projects (ITPs) due to unique challenges, such as servitude acquisitions and the eventual transfer of ITPs back to the National Transmission Company South Africa (NTCSA).
Addressing Complexities and Risks
Magoro stresses the importance of addressing the complexities and risks associated with ITPs, including land acquisitions and the long-term operational model.
Nonetheless, he believes that valuable lessons from the IPP experience, such as risk allocation and stakeholder engagement, can be applied to the ITP program.
Establishing a successful ITP program will require time and effort to create a new ecosystem of participants, as few IPPs currently identify as grid operators.
However, the National Treasury is actively working to improve the investment environment for clean energy and ensure that limited government resources effectively stimulate such investments.
Exploring Financial Solutions and International Collaboration
To mitigate the financial burden of government guarantees for IPP procurement, the National Treasury is collaborating with the African Development Bank and the World Bank to explore a “credit guarantee vehicle.”
Furthermore, the government is working to unlock $11.5 billion in pledges for the country’s Just Energy Transition Investment Plan, including investments at the municipal level.
Lekhethe also reveals the government’s intention to utilize South Africa’s hosting of the G20 in 2025 to advocate for the International Monetary Fund (IMF) to use its Special Drawing Rights assets to support green infrastructure investments in Africa.
A Roadmap for Clean Energy Investment
The “Mobilising Investment for Clean Energy in South Africa” report, published by the Development Bank of Southern Africa in collaboration with the World Economic Forum and Accenture, estimates that South Africa needs R600 billion in clean generation and grid infrastructure investments by 2030.
The report provides policy and non-policy recommendations to enhance the investment environment and accelerate the transition to a just energy future.