Eskom CEO Andre de Ruyter has provided an explanation of how the government plans to separate its transmission business into an independent entity.
De Ruyter was speaking at an online event hosted by Nedbank, EE Business Intelligence, and JCSE at Wits University, entitled “An Independent Transmission System and Market Operator (ITSMO) in SA”.
Eskom has previously disclosed its plans to split up the three key areas of its business – generation, transmission, and distribution – into separate entities.
The process, which Eskom refers to as “divisionalisation” is detailed below.
Ultimately, de Ruyter explained, this will allow Eskom to create an Independent Transmission and System Operator (ITSMO).
The ITSMO will focus squarely on the transmission system – including non-discriminatory third-party access to the grid.
This means that it would be easier for private entries in the generation market to link up to the national grid.
The structure of this independent transmission entity is detailed below.
De Ruyter also noted that there will be a need for over 8,000km of new power lines by 2030.
“However, based on re-phasing and deferrals to beyond FY25 and due to Capex cuts, only 25% of required lines can be built in the next 5 years, and 62% in the following 5 years,” De Ruyter said.
To deal with this, Eskom will require private investment – and de Ruyter said this is progressing well.
“Major developmental financing institutions globally have committed in writing to support this transition,” he said.
“We, therefore, anticipate that we can access this green financing to enable expansion of transmission grid.”
Strain on the grid
De Ruyter also made clear the magnitude of Eskom’s long-term capacity situation.
He explained that approximately 10,000MW will be retired over the next 10 years, which will place a greater strain on the power grid.
While he acknowledged that NERSA recently committed to opening up the deployment of 12,000MW of power through independent power producers (IPPs), he said that the expectation, based on current figures, is that there would be a 16,000MW gap in capacity by 2030.
To solve this, De Ruyter believes that renewable energy will play a major role.
This is because photovoltaic (PV) and wind power would take between 18 and 36 months to implement, compared to the 10-12 years required for new coal plants, or 12-15 years for nuclear plants.
“It is clear that renewable energy has to play a key role in our energy portfolio, even if you are impervious to the environmental benefits,” said De Ruyter.
The importance of fixing the Eskom problem
Public Enterprises Minister Pravin Gordhan also spoke at the event and highlighted the importance of solving the problems that Eskom currently faces.
“It is important to place Eskom on a reliable and sustainable footing as an entity,” said Gordhan.
Gordhan noted that Eskom’s R480 billion debt burden is a major problem, and various considerations are being made in this regard.
However, Gordhan said that this level of debt cannot simply be overturned through trading.
Gordhan also highlighted that major damage has been done to Eskom over the past decade.
“At the Zondo Commission, those who have held board positions in Eskom over past 10 years have been getting away with narratives such as “I didn’t know,” said Gordhan.
“These elements need to be held to account.”
Now, said Gordhan, it is up to de Ruyter and his team to undo the damage these people have caused and to rebuild the national power utility.