Collaboration vital to address South Africa’s grid expansion requirements

The National Transmission Company of South Africa (NTCSA), an independent subsidiary of Eskom, will implement the South African Whole Electricity Market (SAWEM) Code from April 2026, with the aim to liberalise the market with day-ahead and intraday markets established by early 2030.

Realising these ambitions requires focused investment in building new generation capacity and the transmission infrastructure required to deliver this new capacity. 

Capacity requirements

To meet its international carbon emissions targets, Eskom will need to decommission 10 to 11 GW of its ageing coal-fired generation fleet by 2032/2034. Replacing this capacity will require a mix of solar photovoltaic (PV), wind, Battery Energy Storage Systems (BESS), as well as new dispatchable baseload projects.

The market estimates that over the next decade the following power generation capacities and technologies will need to be deployed each year:

• 500 to 700 MW of solar PV on-site behind-the-metre projects
• 2000 MW of utility-scale solar PV power capacity
• 1000 to 2000 MW of utility-scale wind power capacity
• 1000 MWh BESS capacity

Transmission and distribution network

Grid capacity constraints already hamper the delivery of generation capacity from existing grid-connected projects, with those in the Eastern and Western Cape subject to a potential 10% grid curtailment. These and other regions with abundant renewable resources, including wind and solar, are facing a sterilisation effect due to grid capacity limitations, hindering the development of renewable energy projects. 

To address these challenges, NTCSA has developed the Transmission Development Plan (TDP) which outlines the need for significant infrastructure upgrades to accommodate increased generation capacity, particularly from renewable sources.

The TDP highlights the country’s need to build approximately 14,000 km of transmission lines and 100,000 MVA of grid connection capacity over the next decade. The estimated cost of this roll out is c. R440 billion.

Furthermore, the National Energy Distribution Company of South Africa (NEDCSA) is planning to build 6,000 km of new lines, 3,000 MVA of transformer capacity, 7.2 million smart meters and 50 microgrids by 2030 within the Eskom and Municipal distribution systems.

NTCSA plans to construct 6,600 km of its own transmission lines and 67,000 MVA of its own transformer capacity by 2030 and will also need to support the remaining transmission line requirements until such time as the independent transmission programme has been implemented and projects to be run by the Independent Transmission Operators (ITOs) are awarded.

The government has established the first phase of the independent transmission programme to introduce private sector participation to expand the transmission network. This aims to mobilise private capital through private sector participation (PSP) in an estimated R100 billion-plus programme, much the same way that the private sector was brought in under the renewable energy independent power producer procurement programme (REIPPPPP).

The first phase of the independent transmission programme aims to procure 1,164 km of transmission lines, involving seven corridors in three provinces. While this figure may increase once the government secures the necessary land servitudes, NTCSA needs to ramp up its self-build efforts to address South Africa’s mounting grid constraints.

Blended funding model necessary

Financing requirements for the significant infrastructure build will need a combination of state funding, private sector investment and funding from development finance institutions. A large portion of this funding is expected to come from the private sector and implemented through the build, own, operate, and transfer (BOOT) model.

Credit enhancement is expected to form an important part of the funding solution. A Credit Guarantee Vehicle (CGV) will look to unlock private capital and complement public financing for infrastructure while minimising contingent liabilities on the sovereign balance sheet. The risk cover of the CGV guarantees is intended to replicate the existing National Treasury guarantees provided to independent power producers (IPPs) in the REIPPPP.

The CGV will issue bespoke, structured guarantees to strategic infrastructure projects financed with private capital through PSPs. The CGV aims to leverage its capital base to optimise private capital mobilisation and bridge the gap in market confidence until the sector becomes financially sustainable and off-taker risks are considered acceptable to private investors.

Developing collaborative solutions

With the groundbreaking REIPPP programme, the opening of the SAWEM, and its ambitious transmission and distribution system development plans, South Africa is spearheading Africa’s energy transformation.

At this pivotal moment in the country’s energy transition, it is set to host the Africa Energy Forum, taking place in Cape Town from 17-20 June 2025. The conference will provide a robust platform for governments, state utilities and the private sector to meet and discuss the challenges facing South Africa’s and Africa’s energy transition and to develop collaborative solutions that support sustainable growth on the continent.