New impetus needed to drive Sapp’s cross-border transmission model
African Energy
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Establishing a reliable financial framework for building cross-border power interconnections may be the single most effective way to improve electrification across sub-Saharan Africa. Yet bureaucratic impediments are holding up progress at an important scheme, the Southern Africa Power Pool (Sapp)’s Regional Transmission Infrastructure Financing Facility (RTIFF), which could implement its first projects in two to three years – with the right support.
RTIFF is potentially the ‘holy grail’ of infrastructure in Africa – a relatively low risk framework for bringing private finance, mostly from development finance institutions (DFIs), into cross-border transmission interconnections. If successful, it will unblock a number of emblematic projects such as the Angola-Namibia (Anna) and Zambia-Tanzania-Kenya (ZTK) interconnections that have been in limbo for years (AE 468/15).
Angola already has surplus power which it is unable to trade on SAPP and next year’s commissioning of the 2.1GW Julius Nyerere dam will put Tanzania in a similar position (AE 476/12). If these lines could be built, they would offer a relatively quick way to address South Africa’s electricity supply crisis.
Until now RTIFF’s main support has come from the World Bank Group (WBG)’s Accelerating Regional Transformational Energy Projects (Sapp-Arep) programme, for which funding expired at the end of 2022. Although an extension has been agreed, African Energy understands there has been no progress this year.
The WBG said in April 2021 that the Arep programme was “progressing well” and was expected to fully achieve or exceed its project development objectives by its November 2022 closing date. RTIFF’s importance was emphasised by WBG president David Malpass at last November’s COP27 climate change summit in Sharm El Sheikh, Egypt, when he placed the facility at the heart of the “comprehensive approach” needed to unlock renewable energy and power trade at regional and national levels.
Malpass said Sapp needed $2bn to finance already identified interconnections and pointed to RTIFF as “an innovative financing mechanism” that could unlock current constraints and “crowd in the public and private sector financing required”.
That assessment means work must still be happening behind the scenes to overcome the present hiatus. The first objective – which is likely to require at least 12 months of intensive work – is to get some pilot projects to financial close.
African Energy understands that one proposal is to use an already operating interconnection to show how revenues generated by transmission tariffs, rather than from capacity payments, could be used to support financing.
Building interconnections
The ultimate aim is to finance the construction of 10-15 interconnections across the region, reducing the risk of power flows being interrupted on individual lines.
According to plans presented at various conferences, a provisional list of five priority interconnectors have been drawn up, costing $1.2bn to build. The fund’s initial fundraising target is expected to be $350m-400m, covering about one-quarter of this.
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On the target list are the Anna project, the remaining Zambia component of ZTK, the Mozambique-Zambia (Moza) line, Solwezi-Kolwezi – which will enable more Zambian hydropower to be exported to mining enterprises in Democratic Republic of Congo (DRC)’s copperbelt – and the Zimbabwe to Namibia ZiZaBoNa line first proposed in 2009 (AE 450/15, 464/15, 173/12).
Most of these projects have been on the drawing board for at least a decade and none are making progress at present because of utilities’ capacity and finance constraints, particularly in Zambia and Zimbabwe, which are hamstrung by sovereign debt crises.
A further five projects would comprise a second development phase. These are new lines connecting Botswana with South Africa, Namibia and Zimbabwe (Bosa, Bona and Zibo), and DRC-Angola and Mozambique-Tanzania interconnectors.
The fund is likely to be set up in Mauritius under a global business licence. Alongside it, each utility would set up its own arrangement to manage revenue on its portion of the interconnectors. This would ring-fence project cash flows and move transmission projects from being expenses to revenue-generating assets. The structure would allow individual or multiple transmission lines to be refinanced or let under concessions in the future.
Several DFIs who may provide capital are said to be enthusiastic about the concept. Once it is established, the RTIFF will arguably offer a low-risk investment opportunity.
Among the important tasks that lie ahead are the need to increase Sapp’s tariffs based on a new nodal transmission pricing methodology.
Consultants have also started work on risk modelling to show how energy flows might change over a 25-year period.
As one expert told African Energy, “generation projects are self-contained. Everything you need to do is contained in the project. It doesn’t matter what the state of the grid is, providing you can send your power to your designated substation you will get paid. Transmission lines are very different, they need support from the rest of the grid.”
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