Eskom warns on IPP connections as it defers some transmission capex

Eskom warns on IPP connections as it defers some transmission capex

State-owned power utility Eskom has made significant changes to its transmission infrastructure expansion plan for the coming ten years, owing to financial constraints that made its previous plan “no longer realistic”.

Group executive for transmission Mongezi Ntsokolo reported on Friday that the latest Transmission Development Plan (TDP), covering the period from 2015 to 2024, had been revised to align with available funding.

The outcome, which would be detailed in a document to be published on Eskom’s website by the end of November, was a reprioritisation and rephrasing of a number of network strengthening and expansion projects.

Eskom also confirmed that the lack of capital posed a risk to the integration of future renewables and baseload independent power producers (IPPs), especially where such projects required “deep” grid strengthening.

However, discussions were under way with the Department of Energy (DoE), National Treasury and the National Energy Regulator of South Africa (Nersa) about alternative funding models, including self-provisioning of both dedicated and shared infrastructure by IPPs on a case-by-case basis.

Ntsokolo also confirmed that the revision would result in a delay to the migration of the network to full redundancy as stipulated by the South African Grid Code.

The compliance schedule had been shifted out from 2016 to 2022, a move that was described as regrettable, but unavoidable.

R163BN ROLL-OUT PLAN

The overall budget, which was estimated at R163-billion, remained more or less as it was in previous versions of the TDP, with R146-billion required for capacity expansions and the balance split between refurbishments, spares, servitude acquisitions and environmental and corporate costs.

However, the latest version also delayed or deferred much of the actual investment into the fourth multiyear price determination period, or MYPD4.

This was partly attributed to the fact that Eskom had received lower-than-requested tariff increases from Nersa for the MYPD3 period from 2013 to 2018 – it had sought 16%, but was granted 8%.

However, the new TDP also took account of delays associated with securing land, servitudes and environmental approvals for transmission-line and substation projects.

The rephrased plan still envisaged the building of 13 396 km of new transmission lines and the introduction of 81 385 MVA of additional transformation capacity by 2024. But over 8 100 km of new lines and 51 895 MVA of transformer capacity would now only be rolled out after 2020.

Ntsokolo said that plan was focused on ensuring that the network met minimum reliability criteria, while being robust enough to ensure the connection of new generation capacity being developed by both Eskom and IPPs.

He also said the utility was looking for opportunities to “smooth” the awarding of contracts, as it was sensitive to the fact that a “stop-start” approach was disruptive to suppliers and contractors.

Meanwhile, GM grid planning Mbulelo Kibido confirmed that it was becoming increasingly difficult and expensive to integrate IPPs, with the easy-to-connect projects having been selected during the first two bid windows under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Eskom had connected a total of 32 bid window one and two projects with a combined capacity of over 1 600 MW. However, it was concerned about finding a viable financial model to deal with the connection costs of projects arising from bid window three onwards.

The financial close for the third bid window had been delayed largely as a result of connection issues, but the DoE was still hoping that the preferred bidders would be in a position to close before the end of November.

The connection concerns were not confined to the REIPPPP programme with the DoE planning to issue tenders soon for baseload coal, gas and cogeneration IPP programmes. But there was particular concern about connection capacity in the Northern Cape, where many of the current and future REIPPPP projects were located.

Senior manager: infrastructure investment Leslie Naidoo indicated that a budget of higher than R163-billion would probably be required to deal with the integration of new IPPs.

However, he stressed that the figure was based on the best available information as to where future projects could arise and that the figure would be revised as greater certainty emerged.

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