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Engineering News editor Terence Creamer discusses the coalition scenarios facing South Africa as the election results are being tallied and what this could mean for the reforms under way in electricity and freight logistics.

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The Department of Mineral Resources and Energy (DMRE) has confirmed another extension to the bid submission deadlines for the current renewables procurement round, as well as the second battery storage bidding round.

The deadline for Bid Window Seven (BW7) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) which had already been moved from April 30 to May 30, has been extended to August 15.

The DMRE is seeking to procure 5 000 MW during the bid window, comprising 3 200 MW of wind and 1 800 MW of solar PV.

Likewise, the deadline for the Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP) BW2, which was initially moved from April 30 to June 6, has been delayed to August 29.

The DMRE is seeking to procure 615 MW/2 460 MWh across eight substations sites in the North West province, including Mercury, Carmel, Hermes, Ngwedi, Midas, Marang, Bighorn and Ararat.

In a notice published on the website of the IPP Office, the department indicated that BESIPPPP BW2 had been delayed at the request of "a substantial number of registered bidders" to enable the issuance of environmental authorisations by the Department of Forestry, Fisheries and the Environment.

No reference was made to BESIPPPP BW3 in the Free State, the deadline for which was extended by three months to October 31 in early May.

Reasons were not provided for the extension of REIPPPP BW7, but the move coincides with a decision by the National Energy Regulator of South Africa (Nersa) to extend, from May 25 to June 17, the deadline for comment on Eskom's application to preserve and reserve grid capacity for IPPs participating in public procurement.

In its consultation paper, Nersa makes specific reference to BW7, as the request for grid reservation/preservation for projects being procured in line with Section 34 of the Electricity Regulation Act would have a direct bearing on the round.

Eskom indicates that public procurement could fail should the utility be disallowed from discriminating in favour of Section 34 IPPs at the expense of IPPs being developed on the back of private power purchase agreements.

"Without any form of protection, public procurement programmes remain incapable of competing with the much more agile and well-funded private sector energy procurement programmes.

"Therefore, without grid preservation/reservation in favour of the public energy procurement programmes, these programmes are likely to continue failing as evidenced by the recent failure of BW6 of the Renewable Energy Independent Power Producer Procurement Programme," Eskom says in its submission.

During BW6 in 2022, none of the 23 wind projects vying for 3 200 MW advanced to the preferred-bidder stage, owing to the grid capacity on which their bids were based being allocated to projects that secured grid connection budget quotes over the same capacity.

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Stable demand remains a prerequisite if South Africa has any prospect of stimulating industrialisation in the renewable-energy and battery storage value chains, Trade & Industrial Policy Strategies (TIPS) senior economist Gaylor Montmasson-Clair has reiterated. But absent complementary supply-side measures - including tax and financial incentives, as well as an active trade policy - the country will struggle to attract green manufacturing investment in what is now a highly competitive global environment.

In fact, Montmasson-Clair, who is also facilitator of the yet-to-be-launched South African Renewable Energy Masterplan (SAREM), counsels that South Africa will have to prepare a compelling investment case if it is to emerge as a market participant. One that cannot rely solely on rising demand for solar panels, wind turbines and batteries, nor on the country's natural resource advantages and its current relative attractiveness as a manufacturing location when compared with its peers.

Speaking during a TIPS event on the potential for greening South Africa's industrial policy, he noted the significant support already being advanced to green industries in other developed and emerging economies, saying: "Fair or not, this is the situation, and we have to deal with it".

Describing the industrial potential of the energy transition as a "once-in-a-century opportunity" Montmasson-Clair lamented the country's failure, to date, to match rising demand with growing domestic supply, highlighting the recent surge in the import of solar panels, lithium-ion batteries and inverters.

He also stressed that many of the immediate and medium-term localisation opportunities did not necessarily reside in seeking to produce those high-profile products domestically, but rather in supplying key materials and components into those value chains, including through the development of relationships with multinational original equipment manufacturers.

South Africa already had "an existing ecosystem of manufacturers" that were well positioned to supply value-added mineral products, such as manganese metal or vanadium pentoxide, as well as key components, including mounting structures and trackers, step-up transformers, wind-tower internals, concrete and steel towers, medium-voltage cables, primary steel, assembled solar modules and inverters.

Should those "big wins" be made, there was potential over the medium term, to add various other components and systems and even to consider pursuing niche opportunities in "high stakes, high reward" areas such as battery cell manufacture or turbine blades.

Stable yearly demand of between 3 GW and 5 GW was "a fundamental prerequisite" for any industrial development, while avoiding the 'stop-start' patterns that had bedevilled South Africa's renewables roll-out between 2014 and 2020.

"However, ambitious supply-side support is also paramount to enhance the competitiveness of locally manufactured products."

He stressed that price and quality competitiveness had become even more important in light of the renewables market's shift from public to private procurement, while underlining the need for both markets to remain active to facilitate a "smoother demand profile".

There was also a need for public procurement to integrate more ambitious, yet realistic, localisation objectives and for increased engagement with large private procurers of renewable energy to consider ways to increase their appetite for and commitment to local content.

Here, Montmasson-Clair said industrial policy could play a key role in increasing the competitiveness of manufacturers by extending tax incentives to "greentech" companies; improving the value proposition of special economic zones, including through improved customs clearance or introducing zero-rated value added tax; and by using trade ins...

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The yearly $1.9-trillion being invested currently on clean energy would have to more than double and be more evenly distributed to place the world on track to meet net-zero emissions by 2050, a new International Energy Agency (IEA) report confirms.

However, it also stresses that such investments could reduce the operating costs of the global energy system by more than half over the next decade, resulting in greater affordability for consumers.

"Capital investment is only one part of the picture," the 'Strategies for Affordable and Fair Clean Energy Transitions' report asserts.

"Running today's energy system - including paying off investments and financing costs, and operating expenditure - costs over $7-trillion annually," it adds, cautioning that these expenses are poised to rise in future.

In addition, governments worldwide collectively spent around $620-billion in 2023 subsidising the use of fossil fuels, eclipsing the $70-billion spent on support for consumer-facing clean energy investments.

The IEA states that, in many cases, clean energy technologies are already more cost competitive over their lifespans than those reliant on conventional fuels such as coal, natural gas and oil.

Solar PV and wind are the cheapest options for new generation and even when electric vehicles have higher upfront costs, they typically result in savings owing to lower operating expenses, as is the case for the lifetime costs of energy efficient appliances such as air conditioners.

"The benefits of a faster energy transition and growing shares of renewables - such as solar and wind, which have lower operating costs than fossil fuel alternatives - would filter down to consumers."

The report also argues that retail electricity prices are typically less volatile than oil product prices, providing more predictable costs. A factor that is set to be reinforced as electricity overtakes oil as the leading fuel source in final consumption, with the IEA forecasting that milestone by 2035.

"Overall, our analysis finds that clean energy transitions deliver a lower-cost and more affordable energy system over time," the report states.

Realising such gains, however, hinges on unlocking higher levels of upfront investment, especially in emerging and developing economies where clean energy investments are lagging.

"Policy intervention will be crucial to address the stark inequalities that already exist in the current energy system, where affordable and sustainable energy technologies are out of reach for many people.

"The most fundamental inequities are faced by the almost 750-million people in emerging and developing economies who lack access to electricity, and the more than two-billion people without clean cooking technologies and fuels.

"At the same time, the poorest 10% of households in advanced economies spend up to a quarter of their disposable income on energy for their home and transport, even though they consume less than half as much energy as the richest 10%."

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The Presidential Climate Commission (PCC) is currently assessing the impact of South Africa's decision to delay the decommissioning of the Hendrina, Grootvlei and Camden coal-fired power stations on the country's Nationally Determined Contribution (NDC), which outlines the country's decarbonisation goals.

Eskom confirmed recently that Cabinet and board permission had been granted for the continued operation of the three power stations beyond their original decommissioning dates, owing to the ongoing shortage of supply and delays in adding new generation.

Under the original plan, the power stations were scheduled to be retired between 2023 and 2027, following Komati's retirement in October 2022.

PCC executive director Dr Crispian Olver told delegates to a sustainable finance gathering in Sandton, being co-hosted by the International Finance Corporation and Banking Association South Africa, that the initial indications were that the delayed decommissioning would not result in an NDC breach, but that meeting the target in 2030 could be a "bit of a push".

However, he did not provide details, saying only that a report would be published soon.

Ahead of COP26 in Glasgow in 2021, South Africa lodged an NDC outlining its goal of reducing carbon dioxide-equivalent (CO2-eq) emissions to between 420-million and 350-million CO2-eq tons in 2030.

It subsequently entered into a Just Energy Transition Partnership with France, Germany, the UK, the US and the European Union under which $8.5-billion in concessional and grant finance was pledged in support of South Africa's Just Energy Transition Investment Plan (JET-IP).

The plan, the slow implementation of which has been criticised, outlines the $100-billion in investment needed in electricity, electric vehicles and green hydrogen by 2030 to meet the lower end of the NDC range.

Pledges to the JET-IP have since increased to $11.5-billion, with the Netherlands, Denmark, Canada, Spain and Switzerland also making commitments.

"As the climate commission we are looking long and hard at what [the delayed decommissioning] means in terms of our NDC commitments . . . [and] we will be putting a report out in the next month or so," Olver said.

He added that it was "impossible" for South Africa to retire coal capacity "in the middle of a power crisis".

In addition, having studied the decommissioning of Komati, the PCC felt that the schedule for the subsequent retirements would have to have been delayed regardless of whether Eskom and government were to complete the consultations and planning required to cushion affected workers and communities.

"We think that sequencing around Komati was completely back to front: they took a decision to decommission, then they started some half-hearted consultation, and then they did the economic diversification.

"We want to reverse that: so we want to start with consultations, then do the repurposing and diversification and only then pull the power plants off.

"That in itself is already going to push decommissioning deadlines up by four or five years.

"So, for us, this decision [to delay decommissioning] is not the make or break, it's not going to collapse our climate commitments as a country," Olver argued.

He also urged the finance community to acknowledge the "major reforms" under way in parallel, which were already having an impact on the real economy and which would require public and private funding support to be advanced and sustained.

These changes were listed as the accelerated investment in private renewables generation that had followed a reforms exempting distributed projects of any size from licensing, including those that were connected to the grid.

Besides the more than 1 400 projects that had been registered since the reform, with a combined capacity of more than 7 100 MW, Olver highlighted that ther...

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The National Energy Regulator of South Africa (Nersa) has extended to June 17 the deadline for comment on Eskom's application to preserve and reserve grid capacity for independent power producers (IPPs) participating in public procurement processes implemented in line with Section 34 of the Electricity Regulation Act (ERA).

The initial deadline was May 25.

In its submission, Eskom is seeking permission to discriminate in favour of public procurement IPP projects, at the expense of private IPP projects, arguing that such discrimination would be in the "public interest".

"Without any form of protection, public procurement programmes remain incapable of competing with the much more agile and well-funded private sector energy procurement programmes.

"Therefore, without grid preservation/reservation in favour of the public energy procurement programmes, these programmes are likely to continue failing as evidenced by the recent failure of Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme," Eskom says in its submission.

During BW6 in 2022, none of the 23 wind projects vying for 3 200 MW advanced to the preferred-bidder stage, owing to the grid capacity on which their bids were based being allocated to projects that secured grid connection budget quotes over the same capacity.

This was made possible by reforms made to Schedule 2 of the Electricity Regulation Act, which allowed private projects to proceed without a licence and which Eskom says, "resulted in an exponential increase in applications for grid connections from IPPs with private power purchase agreements".

Private IPPs, Eskom claims, are moving at a faster pace to secure grid-connection capacity compared with Section 34 IPPs, which must go through a protracted procurement process.

Although Nersa's consultation paper makes specific reference to BW7, the deadline for which has already shifted out once and appears poised to be extended again, Eskom's submission is suggestive of broader and ongoing preservation and reservation requests.

Market reaction is expected to be negative, given that it is in clear breach of the open and non-discriminatory access stipulated in legislation and the Grid Code.

In its submission, Eskom bases its public-interest justification on the argument that the continued failure of public procurement programmes will erode investor confidence, undermine government efforts to attract foreign direct investment, and frustrate ambitions related to the just energy transition and climate mitigation.

Engineering News editor Terence Creamer discusses Eskom's application to the National Energy Regulator of South Africa, seeking permission to preserve and reserve grid capacity for publicly procured IPP projects, as well as the implications should permission be granted.

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The National Energy Regulator of South Africa (Nersa) reports that it registered a further 105 generation facilities during the period from January to March 2024, raising to 1 415 the number of facilities registered since the system was introduced in 2018.

In a statement, Nersa said the newly registered facilities had a combined capacity of 788 MW and a total investment value of R18.4-billion, increasing the overall capacity of registered projects to 7 158 MW and the total investment value to R131-billion.

Registrations, which have been facilitated by a liberalisation of the regulatory restrictions governing private generation, surged in 2022 and 2023, and spiked at over 2 400 MW registered in the first quarter of 2023 as loadshedding intensified. The latest quarterly registrations are more or less in line with the capacity registered in the last quarter of the 2023 calendar year.

The average investment cost for the latest batch of registered projects is R23 374/kW, Nersa said.

The 105 registrations include solar PV, a solar PV generator combined with battery energy storage, a wind turbine, cogeneration and gas, with solar PV comprising 99 of the facilities, which have a total capacity of 499 MW and an investment cost of R9.9-billion.

Nersa's Nhlanhla Gumede reiterated his concern about the high number of registered facilities not coupled with storage.

The highest number of newly registered generation facilities are in Gauteng (24), Western Cape (22) and Free State (13), with the top three provinces by capacity being the Western Cape (213 MW), Northern Cape (152 MW) and North West (142 MW).

Seventy-seven generation facilities, with a combined capacity of 664 MW, are connected to the Eskom network, while 28 generation facilities are connected to the municipal distribution network and have a capacity of 124 MW.

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Eskom Transmission CEO Segomoco Scheppers says he believes the "pieces are falling into place" that will allow the power utility to "ramp up and move faster" in expanding the country's constrained power grid.

Grid expansion will enable Eskom and independent power producers to bring much-needed new generation capacity online.

Eskom's Transmission Development Plan (TDP), issued in October 2022, comprises more than 300 projects to expand the grid. It focuses on the need for the extensive expansion of transformer capacity at substations, as well as the construction of new transmission lines, at some 14 000 km in the next ten years.

Speaking at Enlit Afria 2024, held in Cape Town this week, Scheppers said that Eskom had, however, identified 47 quick-win projects that would allow it to connect roughly 37 GW of new generation capacity.

A significant number of these - 25 - revolved around strengthening existing substations by bringing onboard new transformers.

"That programme will allow us to connect 13 000 MW of new generation," said Scheppers.

The balance of these expedited projects - 22 - was a mix of line and substation work that would allow Eskom to connect 34 000 MW of new generation capacity.

"When you look at the development of these projects, we talk about a project lifecycle-model where you conceptualise the project and the definition phase where you deal with the designs and the environmental approvals, and out of that you reach execution phase when you make the final investment decision," noted Scheppers.

"Compared with financial year 2023, when there were five projects in the definition phase, in the last financial year, that number jumped to 22 - just to put emphasis that we are driving to develop these projects to get approval and to move into execution."

"In terms of execution and actual construction and procurement…in financial year 2023 there were zero projects that went into that process from this programme," said Scheppers. "But, in the last financial year, 11 projects have gone through that programme."

Scheppers added that 14 firms had been appointed to help Eskom with the "upfront work in terms of project preparation to supplement our own skills".

He also emphasised that it was critical for Eskom that have access to "certain supplies and commodities, specifically transformers".

"We have the approvals in place to put a framework agreement in place. Of the seven or so major suppliers, two have already signed contracts, and we expect the balance to be concluded this year.

"So, access to these transformers will be readily available going forward, which will help us speed up implementation."

In terms of transmission line construction, Scheppers said Eskom had adopted an engineering, procurement and construction model, which differed from its previous approach.

"As for the matter of securing servitude, the right to construct and traverse private property and government land have been a huge challenge for the longest time," said Scheppers.

"In this regard we have successfully worked with the Department of Public Enterprises and Department of Public Works and Infrastructure to expropriate land, at market-related compensation, with exception, and where required."

Scheppers also noted that the multibillion-rand debt solution offered to Eskom, in which government had taken on R254-billion rand of the utility's debt over the medium term, had allowed the Transmission business to gain access to the necessary capital to invest in infrastructure.

"But, clearly, as we move towards being a separate company, we would need to work with the regulator to ensure we secure the revenue stream that fundamentally underpins all the investment that needs to be made."

The unbundling of Eskom into three entities will see the formation of the National Transmission Company of South Afric...

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Transnet Freight Rail (TFR) CEO Russell Baatjies has added his voice to industry-wide concerns being expressed about the high rail tariffs that would arise should the methodology included in a draft Network Statement be implemented.

The Network Statement was released for public comment in March by Transnet's interim Infrastructure Manager (TRIM), which is being separated from the Transnet Freight Rail Operating Company, or TFROC, which Baatjies oversees.

As with any private train operating company, TFROC would be subjected to the same tariff methodology, about which customers and potential private operators have also expressed their anxiety.

Speaking during the launch of the Multimodal Inland Port Association (MIPA), Baatjies confirmed that TFROC had made a presentation to the Interim Rail Economic Regulatory Capacity (IRERC), which is considering the Network Statement, outlining TFROC's unhappiness with the tariff.

"We think it's very high and we don't think you will have significant growth if we go with that tariff," he said during the virtual event, which was hosted by the Transport Forum.

IRERC is expected to consolidate the comments received by stakeholders and prepare recommendations for consideration by the Transport Minister prior to the Network Statement being approved. In future, an independent Transport Economic Regulator will regulate both tariffs and access to the rail network, with the TRIM being the owner and operator of the network.

Baatjies insisted that "Chinese walls" had already been built between TRIM and TFROC, with the brand identity of the latter likely to be changed in the not-too-distant future to underline the distinction between the two entities that have hitherto been vertically integrated under TFR.

In response to a question posed by MIPA chairperson Warwick Lord above the level of independence of the TRIM, Baatjies responded that the separation was already being treated internally as entrenched.

As head of TFROC he had not signed-off on the draft Network Statement, which was approved instead by Transnet CEO Michelle Phillips, to whom the TRIM executives were also reporting.

"With the Network Statement, for instance, I did not sign off … and as TFROC, the operating company, we also had our comments about the Network Statement and some things that we think should be relooked at, for instance the tariff.

"[But] instead of influencing the process from inside, we are seeking to ensure that we keep the independence, and we are following the same process that other train operating companies will have to follow," Baatjies said.

Speaking on the same platform, GAIN Group director and emeritus professor at Stellenbosch University, Jan Havenga, also underlined the unaffordability of the tariff, which he attributed to Transnet's unsustainable debt levels and the large maintenance backlog.

"No company on its own can fix this, not if you have R130-billion-worth of debt, half of which is State capture debt … the government needs to step in," Havenga averred.

Baatjies also used the platform to signal Transnet's eagerness to integrate intermodal inland ports to improve the efficiency of rail and port operations, as well as to redirected rail-friendly cargo back from road.

He highlighted the success that had already been achieved in the manganese sector through collaboration between inland and back-of-port terminals, which had resulted in yearly export volumes rising from five-million tons to 15-million tons.

Lord said that MIPA had been established with the specific aim of supporting the movement of cargo from road to rail via inland ports, where freight volumes could be consolidated to lower overall distribution costs and improve capacity on existing networks.