The current margin on transmission tariffs is not enough to justify such investment.The portion of electricity tariffs currently allocated for the transmission function is too small to justify the private investment that is envisaged to supplement Eskom’s grid expansion.
“If we don’t expand the grid, it would be detrimental especially to the development of more wind generation, because the wind resources are very area-specific,” says Meridian’s Dr Grové Steyn.Restricting wind generation to areas where resources are less favourable may result in an increase of 20% in the cost of energy generated, he says.Steyn emphasises that the network needs wind generation as it supplements solar generation which is only available during the day.
In Eskom’s tariff, the costs of generation, transmission and distribution are all bundled together, although Eskom does structure its tariff application in a differentiated way. For the state-backed IPT, the report suggests a ‘build, own, operate and transfer’ model, where government appoints companies through procurement auctions to finance, construct and operate specific lines for a period of 20-30 years.During this period, the company must maintain the line to a specified standard and receive a fixed return. At the end of the period, the line is transferred to the utility.
Since the resources for renewable energy are often located in a specific area, several independent wind or solar farms may be situated near each other.