In June 2023, The Localisation Support Fund, pursuant to the national effort around securing energy supply initiated a study to understand the local manufacturing capability for components used in the Transmission and Distribution network. The LSF partnered with Rhythm Power Solutions to map out a detailed transmission and distribution manufacturing capability value chain. The value chain was developed through interaction with key stakeholders in the local energy components manufacturing sector to ascertain capability, key drivers and trends, and localisation opportunities within the broader sector.
This report presents a detailed analysis of the capability of the South African Transmission and Distribution (T&D) manufacturing sector for all the main systems and products used in the T&D value chain. The report has provided a consolidated list of the main manufactured systems and products, the supply base thereof, the manufacturing capability, and the specific trends, challenges, and opportunities in order to promote efforts around increased levels of localisation.
Transmission and Distribution Network
In South Africa, the Transmission network operates from 765kV to 132kV voltage level, and distribution networks (including sub-transmission) operate from 132 kV down to 220 V at the end-user’s site. The key driver for growth in the T&D sector is the planned integration of up to 53 GW of new generation capacity by 2032 as estimated in the 2022 Eskom TDP. For this to happen, significant Transmission & Distribution (T&D) investment of more than R72 Billion for Transmission alone, is needed in the next 5 years and it is estimated to grow by more than three times that in the five years that follow. This increase was estimated by using a simple extrapolation based on the length of the powerlines and the number of transformers needed in the latter 5 years when compared to that for the first 5 years and meant to give an indication of the scale of the growth anticipated. Therefore, for the next 10 years, between R288 Billion to R360 Billion of Transmission Grid related investment is anticipated. This is in addition to the ongoing need to cater for growth in the industrial, mining, commercial and residential sectors as well as the drive for increased electrification. There is also a need for the refurbishment, upgrading and replacement of existing networks that are now operating beyond their service life.
Eskom estimates a total length of 14,218 km of new transmission line and 170 large transformer units totaling 105,865 MVA capacity will be needed in the next 10 years. In addition, the various refurbishment projects on an ageing T&D grid will need to be addressed. Furthermore, there is a large emerging market for private sector Independent Power Producers who will construct their own T&D infrastructure once approved following due processes. There is also a need for municipality networks to be upgraded and expanded adding further growth potential. This presents an unprecedented opportunity for localisation and stimulation of manufacturing capacity for major economic and social benefits for the country.
A notable shift in user procurement strategy is expected, where the private sector assumes greater responsibility once approved, for the development, funding, engineering, procurement, and construction of certain T&D assets, which are then handed over to Eskom after construction. This trend is already gaining momentum, with IPPs involved in self-build projects for their own connections as well as upstream works to expedite grid unlocking. Eskom Transmission is also adjusting its procurement strategy towards an Engineering, Procurement, and Construction (EPC) approach, again changing the dynamics of how T&D assets are built.
Anticipated trends include increased usage of Battery Energy Storage Systems, the shift to Electric Vehicles, smart grid expansion, the hydrogen economy, grid modernisation, microgrids, and the increasing demand for smart energy management systems and advanced transmission and distribution management systems to address the variability of renewable power generation. New technologies are at an advanced research phase at present, including the grid-forming inverter systems which are designed to address the grid stability issues related to the large-scale penetration of inverter-based generation technologies associated with solar PV, wind, and battery energy storage. This will complement the existing flexible alternating current transmission technology systems (FACTs) which include Statcom’s and SVC’s.
This report emphasizes the manufacturing function within the T&D value chain, recognizing the challenges faced across the entire value chain. By effectively coordinating these challenges, opportunities for localization and job creation can be capitalized upon. The capabilities of both local and foreign manufacturers are covered, presenting avenues for skills development, and fostering collaborations with academia, such as the Eskom Power Engineering Program (EPEP).
The report notes that despite the South African government's support for innovation and the willingness of companies and utilities to embrace it, the regulatory structure presents a significant hurdle to the adoption of innovative devices and systems.
Local Manufacturing Capability
While overhead line products and steelwork are largely locally manufactured, substation equipment and intelligent electronic devices (IEDs) for the protection and telecontrol of the networks are predominantly imported. There is therefore considerable opportunity for the expansion of local expertise and manufacturing capability in this sector. With the anticipated growth of the industry (Eskom, municipalities, and IPPs) to meet the network strengthening, expansion, replacement & refurbishment requirements, and the new build program, there is also ample room for existing local suppliers to expand their manufacturing capacity.
Currently, local manufacturing capability for powerline components is generally sufficient to meet current demands which are low at present. Proactive measures must be taken to avoid an overreliance on imported products when demand increases and there are peaks in demand that the local manufacturers cannot meet in certain years. Local manufacturers require support and workload certainty to facilitate expansion and ensure a robust supply chain. Once established, the potential of supplying products to neighbouring countries and the rest of Africa becomes a viable expansion strategy.
It must be highlighted that the manufacturers, suppliers, end users, associations, and other value chain players listed in this report are not exhaustive. The report concludes with recommendations and key initiatives that could be considered to expand and improve the local manufacturing capabilities of the systems and products required for the strengthening, expansion, and refurbishment of the electric power network. These recommendations cut across the supply chain and range from skills, procurement efficiencies, funding, raw materials, and research collaborations.
This report serves as a stimulus for other ideas, local manufacturing opportunities and recommendations to be forwarded to the LSF and other stakeholders within the localisation ecosystem for further consideration.
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