Good news about private power in South Africa

The National Energy Regulator of South Africa (Nersa) has approved the National Transmission Company South Africa’s (NTCSA’s) application to classify congestion curtailment as a constrained generation ancillary service.

Allowing congestion curtailment would free up grid connection capacity for new private power projects, particularly wind and solar power in the Eastern and Western Cape.

Nersa announced the approval during a meeting held on 29 April 2025.

Congestion curtailment refers to a system where the amount of active power that a generating facility is permitted to generate is restricted by the System or Network Operator due to grid constraints or congestion.

“This decision represents a significant step toward unlocking grid connection capacity and enhancing energy availability in areas with high renewable energy potential,” said Nersa.

“The approval will enable the NTCSA to facilitate the connection of the electricity capacity identified in the country’s Eastern and Western Cape regions.”

The approval is effective from 1 April 2025 to 31 March 2028. However, it is subject to various conditions as follows:

• The maximum curtailment level is restricted to the approved allowable revenue for the Sixth Multi-Year Price Determination (MYPD6). Any costs incurred from exceeding the allocation won’t be passed on to consumers.
• Congestion curtailment is restricted to facilitating additional generation capacity in the Eastern Cape and Western Cape regions.
• Any grid connection capacity unlocked must be submitted to Nersa for approval before extending the ancillary service to other areas.
• The NTCSA must report to Nersa on implementing congestion curtailment every six months over the next three years.
• It must also address other forms of curtailment according to existing grid unavailability provisions outlined in power purchase agreements or connection agreements.

On the last point, the regulator stipulates that curtailment required for over-frequency control, resulting from low demand, must continue to be treated as it is currently.

Regarding the NTCSA’s report to Nersa, reports must include, at a minimum, information on the capacity connected to the grid through the service, the curtailment level implemented, records of the curtailment incidents, costs, progress on systems and ancillary service projects.

“The conditions are designed to balance the interests of all stakeholders, supporting the policy objective stated in section 2(g) of the Electricity Regulation Act,” said Nersa.

It added that the conditions also protect customers from potential cost escalations resulting from unmanaged curtailment while incentivising the NTCSA to accelerate its transmission infrastructure projects.

“The implementation of congestion curtailment will be conducted in a non-discriminatory manner,” said Nersa.

“All generators experiencing financial losses due to congestion curtailment will be eligible for compensation, limited to the provisions of the approved MYPD6 revenue application.”

Accelerating much-needed transmission grid expansion

Many Independent Power Producer (IPP) projects are set to come online in South Africa in the coming years.

However, there’s a problem. A lack of grid capacity in critical regions means these producers won’t be able to transmit the power they generate to other parts of the country.

A budget review document relating to the 2025 Budget Speech revealed that the government plans to allow private sector players to assist in expanding South Africa’s transmission grid capacity.

The document refers to an Independent Transmission Project launch later in 2025.

“A request for information for a multi-line package will be issued by the IPP Office in July this year, followed by a request for proposals in November,” the document reads.

“These will enable the private sector to invest in the expansion of the transmission network.”

However, Finance Minister Enoch Godongwana is set to retable the budget on 21 May 2025. Therefore, the plan could be subject to change.

Eskom is tasked with expanding its transmission lines by 14,000km by 2033. However, its progress has been slow.

In July 2023, Energy and Electricity Minister Kgosientsho Ramokgopa announced a project to expand South Africa’s transmission network by over 14,000km and increase transformers sixfold.

Given the 10-year timeframe, the plan required Eskom to expand its transmission network by 1,400km yearly.

However, in November 2024, Krutham managing director Peter Attard Montalto provided an update on the power utility’s progress, revealing that it was far behind schedule.

At the time, he said the plan required Eskom to expand the network by roughly 2,500km each year, while it could only expand the network by around 300km each year.

He noted that private sector involvement would be critical to the expansion project’s success.

“We’re going to need new models. We’re going to need the private sector doing independent transmission power projects. That’s how you roll out grids very quickly,” said Montalto.