Big win for private power expansion in South Africa

The National Energy Regulator of South Africa (Nersa) has approved two important licences to be issued to the National Transmission Company of South Africa (NTSCA), paving the way for expanding the country’s grid capacity.

In a statement on the outcomes of its special meeting on 14 September 2023, Nersa approved the NTCSA’s electricity trading and import and export licences.

The NTCSA is a spin-off of Eskom’s transmission division and was previously only granted a facilities licence by Nersa in July 2023.

That licence permitted the entity to operate the national grid but not the right to buy, import, or export electricity.

At the time, the Presidency expressed concern over Nersa’s delay in granting the trading and import/export licences needed to allow NTCSA to carry out its full mandate.

Nersa said Eskom had bundled the three licence applications together but that the outstanding ones were not in line with the definitions of their functions in the Electricity Regulation Act (ERA).

At the time, Nersa’s full-time member for electricity, Nhlanhla Gumede, said the trading and import/export licences application process could be completed by November 2023.

NTCSA managing director and head of Eskom transmission, Segomoco Scheppers, described the delay as a small administrative issue.

Segomoco Scheppers, Eskom group executive for transmission and NTCSA managing director

Nersa said the service permitted under the NTCSA’s trading licence would be the buying and selling of electricity as a commercial activity.

“The NTCSA applied for a trading licence to buy and sell electricity from Eskom power stations, independent power producers (IPPs) under section 34 determinations,” Nersa said.

The latter includes cross-border electricity imports and IPP generators under the Eskom Holdings programmes, such as short-term power purchases to Eskom Distribution.

Nersa said the trading licence will be valid for five years as part of a transitional arrangement to allow for transition from the exclusive trading arrangement and incorporation of changes that may emanate from the Electricity Regulation Act amendments and price review processes.

The import/export licence will enable the NTCSA to import and export electricity between South Africa and the Southern African Development Community (SADC) using the NTCSA’s transmission network and the transmission systems of other SADC member countries.

“The service that will be rendered under the licence is importing and exporting power in terms of power supply agreements, power purchase agreements and Southern African Power Pool (SAPP) competitive markets,” said Nersa.

“NTCSA will also facilitate wheeling on behalf of cross-border utilities and receiving a wheeling service from the cross-border utilities.”

Nersa added the licence would enable the continuation of import and export activities presently fulfilled by Eskom.

Licences enable much-needed grid expansion

The trading and import/export licencing approvals mark an important step in the unbundling of Eskom into separate entities to allow for increased private sector participation in South Africa’s electricity supply chain.

The division will have its own balance sheet and regulated income, without any impact from Eskom’s struggling generation division.

That will make it easier to secure the much-needed investment needed to expand South Africa’s transmission grid and increase capacity for more power stations.

That includes numerous renewable builds that have been delayed in the Cape provinces due to insufficient grid slots in that region.

Eskom’s distribution division is also being spun off into a separate subsidiary.

Public enterprises minister Pravin Gordhan recently approved the sale of Eskom’s distribution assets to the as-yet-unnamed company.

It has been more than four years since President Cyril Ramaphosa announced the unbundling of Eskom in his 2019 State of the Nation Address.

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Big win for private power expansion in South Africa