In a significant move aimed at bolstering its energy infrastructure and accelerating the integration of renewable energy sources, South Africa has published draft regulations paving the way for the procurement of independent transmission projects (ITPs).
This development marks a crucial turning point in the country’s efforts to address its persistent energy challenges and modernize its electricity grid.
The newly released draft regulations, open for a 30-day public comment period, outline the framework for private sector participation in the financing, construction, operation, and maintenance of critical transmission infrastructure.
This initiative follows a recent Ministerial determination by the Minister of Electricity and Energy, Dr. Kgosientsho Ramokgopa, which greenlit the procurement of the first phase of ITPs.
This initial phase encompasses seven key projects spanning 1,164 kilometres of 400 kV power lines and 2,630 MVA of transformer capacity across three provinces: Northern Cape, Northwest, and Gauteng.
South Africa’s existing transmission infrastructure has become a bottleneck, hindering the connection of new generation capacity, particularly from renewable energy projects.
The current grid’s limitations exacerbate the country’s energy deficit and impede economic growth. Recognizing the urgency, the government is pursuing a dual strategy: the National Transmission Company South Africa (NTCSA), a legally separated entity of Eskom Holdings, will continue its own grid expansion program, while ITPs are seen as a vital mechanism to accelerate development and attract much-needed private capital and expertise.
The draft regulations provide crucial details regarding the contractual relationships between ITPs and the NTCSA, which will act as the buyer of the transmission services.
These regulations will define the terms of the transmission service agreements, including the cost-recovery mechanisms that will enable the NTCSA to compensate ITPs for their investment and operational expenses over the concession period, while ensuring a “fair” return on investment.
Ministerial advisor Shaakira Karolia emphasized the importance of these regulations in establishing a “predictable, credible and transparent framework” essential for attracting private sector involvement in the expansion of South Africa’s transmission network.
The First Phase of Independent Transmission Projects:
The initial phase of the ITP program focuses on seven strategically important projects, carefully selected from the NTCSA’s Transmission Development Plan.
These projects are at an advanced stage of development, with significant progress in land acquisition and environmental approvals. The identified projects are:
- Aries-Aggeneis 400 kV powerline (Northern Cape): A 200-kilometer line crucial for connecting renewable energy projects in the region.
- Groeipunt 400 kV power lines upgrade (Northern Cape): Upgrading 126 kilometres of existing lines with 500 MVA of transformer capacity to enhance grid stability.
- Kimberley Street Phase 4 project (Northern Cape): Construction of a 265-kilometer Boundary-Ferrum 400 kV overhead line to strengthen the network in the area.
- Nama and Gromis projects (Northern Cape): Developing 117 kilometres of power lines and 1,000 MVA of transformation capacity to integrate new generation.
- Mahikeng Integration Phase 1 development (North West): A 180-kilometer line with 630 MVA of transformation capacity to improve supply in the province.
- Mookodi-Hermes 400 kV powerline (North West): A 240-kilometer line to enhance transmission capacity in the region.
- Hera-Westgate 400 kV powerline and transformation capacity (Gauteng): A 36-kilometer line with 500 MVA of transformation capacity to reinforce the grid in the economic hub.
These seven projects are expected to unlock an impressive 3,222 MW of additional renewable energy generation capacity when they become commercially operational in stages between 2029 and 2030.
Two-Stage Procurement Process and Key Players:
The government intends to implement a two-stage procurement process. A request for qualifications (RFQ) is slated for July 2025, aiming to prequalify potential bidders. This will be followed by a full-blown request for proposals (RFP) in November 2025.
Leveraging its extensive experience in managing bidding processes and advancing projects to financial closure in the power generation sector, the Independent Power Producer (IPP) Office will act as the procurement agent for these initial ITPs.
The NTCSA has also appointed an ITP project manager to oversee and facilitate the program.
De-risking Investment through a Credit Guarantee Vehicle:
Recognizing the need to mitigate risks for private investors without placing further strain on the national fiscus, the National Treasury and the World Bank Group are collaborating to establish a new credit guarantee vehicle (CGV).
This blended-finance instrument, anticipated to launch in early 2026, will aim to cover payment and termination risks by leveraging development finance, multilateral development bank support, political-risk insurance, and grant funding.
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The initial funding requirement for the CGV is estimated at $500 billion, with plans for scaling it up over the next decade and potentially extending its application to other infrastructure sectors. The pilot deployment of the CGV will coincide with the first phase of ITPs.
Experts in the energy sector have lauded this development as a critical step towards addressing South Africa’s energy crisis.
Peter Attard Montalto, Managing Director at Krutham, highlighted the necessity of private sector involvement in transmission projects, noting that Eskom’s current capacity to build new lines (approximately 300 km per year) falls significantly short of the required 2,500 km per year.
The 30-day public comment period provides an opportunity for stakeholders to provide valuable feedback on the draft regulations, ensuring a robust and effective framework for the successful implementation of the ITP program.
This collaborative approach underscores the government’s commitment to creating a conducive environment for private investment in the crucial expansion of South Africa’s electricity transmission infrastructure.
