South Africa's first IPP-led substation energised

From the newsletter

EDF Renewables, an independent power producer (IPP), has commissioned the first self-built Main Transmission Substation (MTS) in South Africa. The infrastructure is designed to connect 1,500 MW of renewable energy to the national grid in the Northern Cape. This is a significant boost to a region that lacked grid capacity.

• A lot of attention has previously focused on power generation, often overlooking transmission and distribution (T&D). Over the past decade, only 0.5% of total energy investments in Africa went to T&D infrastructure. This is mainly due to a lack of policies allowing private sector investment in these sectors.

• South Africa enacted the Electricity Act, which brought numerous changes. It unbundled the electricity sector, opening it up for private investment across different areas of the industry.

More details

• This project is the first to connect to the grid in over seven years. Speaking at its commissioning, Tshepo Tshivhasa, Head of Grid Engineering at EDF Renewables, stated, "This is the first greenfield transmission substation that is a full self-build, developed, financed, engineered, constructed, and commissioned by an Independent Power Producer."

• Phase 1 of the transmission line will link 420 MW from three wind farms as part of Round 5 of the Renewable Energy Independent Power Producer Procurement Programme. Phase 2 will connect an additional 520 MW from wind farms and solar facilities.

• The electricity sector in South Africa has been a hive of activity. In the last month alone, the country has introduced several key policies and regulations to guide the sector. Firstly, it announced plans to roll out a pilot programme for the procurement of 1,164 km of 400 kV power lines in November this year. Secondly, the cabinet approved its renewable energy master plan, which aims to tap into the growing renewables market by encouraging localisation. Then, this week, it published the draft regulations to guide the procurement of independent transmission projects (ITPs).

• The generation side has received significant attention and funding, positioning South Africa as Africa's leading renewable energy country with over 11,000 MW installed. However, the progress of transmission and distribution has been slow, largely due to its government-led nature. This is a common challenge across many African countries where national power utilities are responsible for everything from generation to distribution.

• This kind of arrangement has caused many utility companies to stagnate investments in transmission and distribution due to the high costs of T&D, which loss-making utilities cannot afford to fund. However, a few countries, such as Morocco, Uganda, and Zambia, have allowed private sector involvement in the T&D network, and these players tend to have better revenue and less power losses.

• Kenya is also developing its first transmission line under a public-private partnership (PPP). Since 2018, Africa50 and PowerGrid Corporation of India have been developing two transmission lines under the PPP structure and are in the final stages of commercial and financial close. The government has also identified 14 transmission projects for implementation under the PPP framework in its 2024-2043 master plan.

Our take

• The accelerating adoption of renewable energy sources makes robust investment in T&D not just timely, but absolutely essential. These new renewable energy projects, often located in remote areas, will necessitate the development of advanced transmission lines capable of handling their specific technical requirements and connecting these distant plants to the grid.

• However, this cannot happen without supportive policies and regulations. South Africa is setting a blueprint for others to follow. Given that transmission lines typically take a long time to develop due to land acquisition and permitting issues, governments should act swiftly to streamline the sector.

• The expansion of the renewable energy sector presents significant and diverse investment opportunities for private sector players. These opportunities span the entire value chain, from power generation itself to the increasingly important area of power wheeling, where they can generate revenue through wheeling charges.