How much money is needed to end Eskom’s monopoly
Eskom’s new transmission company plans to invest R112 billion over five years to help South Africa transform the current electricity market, but significant challenges lie ahead.
This was explained by Priscillah Mabelane, Chairperson of the National Transmission Company South Africa (NTCSA) on the Money Show with Stephen Grootes.
This week saw the official launch of the National Transmission Company of South Africa (NTCSA), a crucial step towards transforming the country’s electricity market.
The NTCSA was created to manage the transmission of electricity nationwide, moving away from Eskom’s longstanding monopoly and enabling different power generators to sell electricity to various customers.
Under an agreement with Eskom, NTCSA will take over the transmission network, which includes power lines, transformers, and the system operator.
They will assume all the rights and responsibilities Eskom previously held, with NERSA issuing the necessary licences for NTCSA to operate under the Electricity Regulation Amendment Act.
“It is an exciting moment,” Mabelane said. “We became operationalised from the first of July this year and as part of that, we have been focusing on setting up a new business which is a subsidiary of Eskom at the same time.”
Mabelane explained that the company’s board has already approved a five-year strategy and funding plan, alongside an operational model to support management in executing the strategy.
“We are now starting to engage with various stakeholders to ensure that we can actually make a reality of this independent business as to move forward.”
In order to achieve the NTCSA’s ambitious goals, though, a massive investment will be needed.
“As part of the tariff application, we have prioritised R112 billion for the next five years.”
She explained that this should help them unlock around 11 gigawatts of new connections.
The group’s broader target is to connect 30 gigawatts by 2029, bringing the company closer to its long-term goals.
“So one of the things that we are looking at as we move forward is that we work closely with the private sector to look at the best way to address this.”
Electricity tariffs remain a pressing issue in South Africa, and Mabelane acknowledged that NTCSA might not receive all the funding it needs through tariffs alone.
“One of our fundamental roles going forward is to ensure that we can connect as much as possible.”
The company is aiming to add 53 gigawatts, which should drive competition and lower electricity costs. Currently, transmission makes up less than 10% of the total tariff.
“I do believe that NERSA has a good understanding of the role of transmission and the need to accelerate this investment,” she added.
“I’m hoping and praying that transmission will be the easiest of all in the dialogues around tariffs because of the value we need to unlock.”
“Otherwise, it will continue to become an evolving situation where the country will not be competitive as we move forward.”
The returns on these investments will be significant, though they are facing challenges like land rights and global supply chain bottlenecks.
“We’re seeing a lot of bottlenecks in supply chains,” Mabelane said. To address this, the NTCSA’s is working to revitalise local industries like steel, which could help address unemployment and improve competitiveness.
In addition, they are also looking at digital solutions to optimise existing infrastructure, especially within transformation substations.
This approach will help find cost-effective solutions that contribute to reducing tariffs once investments are made.
Another challenge which comes with this transition, is navigating Eskom’s tariff structure.
NTCSA will be transmitting power over the grid, and there are charges for that. Naturally, this will have implications for those already using the grid for transmission.
Mabelane explained that while Eskom’s tariff structure includes transmission charges, these will likely be unbundled in the future.
“If you look at Eskom’s tariff structure, there is definitely a charge there for transmission, which is embedded. As we move forward, we expect that there’s going to be separation and unbundling of the tariff structures as well.”
She explained that the board and executive team are working with NERSA to ensure transparency and that future tariffs reflect operational costs and necessary investments for expanding grid access.