Confusion surrounds SA's Transmission System Operator amid electricity market changes

Banele Ginindza

Business has warned that a lack of clarity around the establishment of a Transmission System Operator (TSO) alongside the National Transmission Company South Africa (NTCSA) has introduced new complexity and uncertainty for investors in South Africa’s emerging open electricity market.

The concerns follow Electricity Minister Kgosientsho Ramokgopa’s approval last year of a revised Eskom unbundling strategy.

Under the new approach, Eskom will retain NTCSA as a subsidiary, alongside a proposed National Electricity Distribution Company of South Africa, a GenerationCo to house Eskom’s legacy generation assets, and a new Eskom Green subsidiary for its renewable energy business.

In addition, Eskom Holdings plans to establish a separate TraderCo, which will operate alongside other licensed traders in a more competitive electricity market.

Under the revised strategy, expected to be fully implemented by 2030, NTCSA will continue to own, operate and expand the country’s high-voltage transmission grid.

This includes implementing the Transmission Development Plan (TDP), which envisages the construction of around 14 000 kilometres of new power lines and associated infrastructure.

However, Discovery Green CEO Andre Nepgen, during a discussion on investing in South Africa’s electricity transmission grid on Tuesday, said the market response to the introduction of a TSO has been one of confusion and scepticism.

Discovery Green is a renewable energy platform that connects businesses across South Africa to affordable and renewable power generated by utility scale renewable plants.

Nepgen said the reaction from the market is that people don’t necessarily understand or agree with the technical reasons for these decisions, and there is now a process to unpack why these decisions are being made, because people don’t really agree.

"Think about the client and market side. There are few companies with the appetite to commit to something that will only start delivering energy from 2030 onwards," he said.

NTCSA executive Andrew Etzinger said the TSO debate was primarily a policy matter for government.

"This is squarely a policy issue from the government and it's not something we have had time to dwell on. The conclusion was that either model can work," Etzinger said.

"By law, the TSO has to be a separate company created within five years of the proclamation of the Electricity Regulation Act. We are one year into that. In four years time it has to be created and up and running, whether the assets remain in NTCSA or go to the TSO."

Meanwhile, Steel Industry Federation of South Africa CEO, Tafadzwa Chibanguza, stressed the importance of stabilising the public procurement framework underpinning the grid expansion programme.

"We are unfortunately in an environment where this grid programme has started in an environment where we are transitioning through public procurement legislation through the Public Finance Management Act and the Provincial Procurement Act, into what is the Public Procurement Act," he said.

"Firstly, this transition act has been honestly messy. We are operating with interim regulations that in fact gave rise to the issues that we raised when we raised issues around the exclusion of locals in the Independent Transmission Programme."

BUSINESS REPORT