New business and funding models to resolve grid infrastructure constraints in South Africa

To resolve the energy crisis and meet  future demand for clean energy, South Africa needs to rapidly build new transmission lines. Krutham, together with Meridian Economics (Pty) Ltd, recently completed a study on appropriate Independent Power Transmission (IPT) models that suit South Africa’s circumstances to be implemented alongside Eskom’s grid build programme.

The Meridian-Krutham team recommended two complementary models for private sector participation in the grid. For large backbone infrastructure (typically large 765kV inter-zonal power transfer lines), we recommend a standard IPT BOOT model, where the private sector finances and builds the grid for a state-backed capacity off-taker. For grids connecting and conveying IPP power into the main transmission backbone, typically 132kv, 400kv and up to 765kV lines, we recommend an IPP-backed IPT BOOT model.

A final recommendation relates to tariff reform. The current Eskom transmission tariff model has not been updated to reflect the fact that the main transmission constraints are encountered when renewable energy flows from the Cape provinces inland, rather than from Mpumalanga where the coal stations are located. The tariff level and structure need a complete overhaul to reflect the cost of the new grid build and the changing nature of the grid constraints as renewable generation capacity is connected.

Meridian Economics: Dr Grové Steyn & Liesel Kassier
Krutham: Dr Roy Havemann; Peter Attard Montalto; Nicky Prins & Donna Nemer

We would like to acknowledge The African Climate Foundation as the key funder of this work.