Unlocking South Africa’s energy future: The importance of grid access

SOUTH Africa's electricity transition has entered a decisive phase.

- THOMAS GARNER

The past three years have delivered steady improvements in plant performance, private sector investment in new generation and a visible strengthening of the institutions that govern the sector. The approval of the Market Operator licence and the formation of the Electricity Market Advisory Forum are important milestones that move the country closer to a competitive electricity market.The most significant development of the last quarter, however, is the publication of the Grid Capacity Allocation Rules by the National Energy Regulator of South Africa (Nersa). The rules come at a time when grid access has become the binding constraint on the pace of new investment. South Africa has reached a point where the generation pipeline is healthy, capital is available, and technological progress has lowered the cost of wind, solar and storage. The barrier is the grid.

Developers have been forced to queue for years in a congested and opaque allocation system while renewable energy potential in the Cape provinces remains largely stranded behind inadequate transmission capacity. For years, grid access in South Africa operated on a first come first served basis. The approach created perverse incentives. Projects could reserve grid capacity with minimal progress, block viable projects, and collapse at a late stage. Capacity was allocated without meaningful evidence of project readiness.This contributed to long queue backlogs, stranded investments and an escalation of grid speculation.