When it comes to connecting power to the grid, Public Enterprises Minister Pravin Gordhan has expressed concern that South Africa is being left in the dust by other nations. The minister raised these concerns at the Presidential Climate Commission’s quarterly meeting, following a presentation by Rudi Dicks, the head of the project management office in the Presidency, regarding the progress on the energy action plan.
A Surge in Private Investment, Yet Snags in the Process
The relaxation of license restrictions on generation projects has seen an impressive R200 billion of investment from the private sector pour into power projects. In fact, the National Energy Regulator of South Africa (Nersa) recorded an increase in registered projects from 134 MW in 2021, to 1,664 MW in 2022, and a leap to 2,500 MW in the first quarter of this year.
However, even with this progress, Gordhan noted that the grid connection process is still far from efficient. “This entire process takes too long in South Africa. There are still possibilities in shortening the time. If this is an emergency, which it is, each empire needs to give up some of its powers on the one hand – and act with a greater sense of urgency,” Gordhan pointed out.
The minister cited that other nations typically manage the process within 8 to 15 months, while South Africa takes around two to two and a half years, a delay Gordhan deemed as “unacceptable”.
Navigating the Complex Grid Connection Process
Dicks delved deeper into the complexities of the grid connection process. Project registration comes after permits and authorisations are granted and precedes financial closure and commercial operation date announcements.
At present, about 13 GW of projects are queuing for grid connection with Eskom, with roughly 55-60 GW of projects enquiring about the cost estimate letter, the first step in this process. The final stage involves receiving a budget quote from Eskom, which requires the projects to pay a security deposit.
While over 4,000 MW of projects have been issued budget quotes, around 9,000 MW is waiting for budget quote confirmation letters. Upon receipt of a budget quote, projects typically face a 12-18 month wait for megawatts to flow to the grid. Dicks acknowledged this as a long-winded process but added that Eskom has worked to trim this down to 4-6 months.
The Hurdles Before Construction Phase
According to Dicks, once projects reach the budget quote stage, most have their permits in place. This approval is crucial as no financier will invest until all authorisations and grid connection are sorted.
The process becomes more demanding as technical specifications, including details on the connections, substations, transmission and distribution lines to be linked to the plant, are required. These steps pose a major hurdle before entering the construction phase.
Strengthening Eskom’s Capacity and Streamlining Approvals
A rush of applications following the elevation of the license threshold prompted the need to strengthen Eskom’s budget quote unit with more engineers and accountants. Efforts to expedite cost estimate letters, budget quotes, and registration are ongoing, Dicks confirmed.
Another time-consuming part of the timeline involves securing Environmental Impact Assessment (EIA) approval. However, Minister Creecy of Forestry, Fisheries and Environment has taken steps to expedite this process, slashing the decision-making time from around 120 days to 57 days.
Moreover, for projects built on areas with low environmental sensitivity, EIAs are no longer required. Dicks also revealed that the Nersa registration process has been shortened substantially, from 90 days to an average of 19 days.
Proposed Solutions and Challenges
A significant challenge lies in the onerous process where off-takers, such as mining companies, must apply to the Department of Mineral Resources and Energy for land use changes to build renewable energy plants. Dicks confirmed that discussions with the DMRE to tackle this delay are underway.
To prevent projects from simply occupying space on the grid without using it, Eskom has introduced a “grid queue” process. Here, projects must show intentions to utilise the grid connection, or it will be reassigned to another project.
However, grid constraints remain a critical challenge for the expansion of renewables in South Africa, with 23 wind project bids last year unable to be awarded due to a lack of capacity.
“We need more megawatts on the grid…,” Dicks concluded, insisting that projects can’t just “sit on” these allocations until they find an ideal power purchase agreement or price for their power.