Overview

The process of providing sustainable power to a region can be broken down into three primary activities: generation, transmission and distribution. While generation typically gets the lion’s share of the world’s attention, one cannot underestimate the importance of delivering that power to the people who need it, wherever they may be. That’s what Pegasys is working on in Southern Africa.

The Challenges

As the global population grows, so too does the demand for sustainable, reliable and renewable sources of energy. But when it comes to the production of power, not all countries are created equal – and for the 13 countries that make up the Southern African Power Pool (SAPP), the solution to this growing demand lies in establishing strategic interconnections that allow for increased electricity trade.

There are several reasons to do this:

  1. Security of supply: If a country operates as a closed system and relies solely on its own power plants, then it won’t have additional supply if and when interruptions occur.
  2. Economies of scale: Some of the biggest power plants might be too large to service only the local market and can become valuable when the surplus power is traded with neighbouring countries.
  3. Renewable energy: Some areas are able to generate more renewable energy than others; and some renewable energy sources can be intermittent. Trade could help manage this variability in power production; exporting surplus energy helps provide other countries with the power they need. When the wind is not blowing in Dar es Salaam, for example, you could import power from Lusaka.

Yet, creating the transmission infrastructure required to connect several countries requires careful planning and international cooperation – and it costs money. Thus far, accessing that money hasn’t been easy for the power companies and project developers who are tackling the problem.

The Solution

In 2019, SAPP commissioned Pegasys to help identify the options for unlocking investment in cross-border transmission infrastructure, through a dedicated facility known as the Regional Transmission Infrastructure Financing Facility (RTIFF).

This facility will ultimately accelerate the development of strategic interconnections and integrated transmission infrastructure across Southern Africa, by providing stakeholders with access to the financing they so desperately need.

Once established, RTIFF will act at three levels:

  1. Providing project preparation and transaction advisory services for multi-country projects: Involves providing all of the support required to transform an idea into action, and walking that journey with multiple countries simultaneously. These services include project viability screening; planning support; legal structuring; environment reform support; and marketing and investor relations management.
  2. Supporting project-level debt structuring, including viability gap funding: Identifying different ways to finance a project, structuring the strategy to ensure the project’s success, and bridging the gap between the money that’s available and the money that is still needed.
  3. Acting as a funding platform itself: RTIFF will make direct equity investments and/or provide subordinated debt for regional transmission projects.

Transmission across national borders can enable economies of scale that bring down the cost of power for households and businesses, and allow for greater efficiencies in accessing and deploying renewable sources.

Laura Rizzotto, Principal

Results

Having completed the initial diagnostic phase, Pegasys has now established and outlined:

  1. A clear problem definition, which identifies a series of interrelated barriers to the financing of regional transmission infrastructure, as well as a prioritised set of enabling activities.
  2. A strategic case for the facility, which articulates the economic benefits that could be created by delivering regional transmission infrastructure, and identifies three high-priority transmission corridors.
  3. An institutional “blueprint” that builds on the extensive analysis and engagement, aimed at conceptualising the strategic role, functions, and services of RTIFF. The blueprint identifies various options for its institutional form and structure, and sets out several key considerations that need to be addressed to finalise the design.

With all the design elements now in place, the next phase will move into detailed design, financial structuring, and operationalisation of the facility. Following this, we will expand on the initial design to create the facility itself. From there, the infrastructure will be put in place.

Once established, strategic interconnection across SAPP can save the region US$37-42 billion in net present value (NPV) terms by 2040. Among the many economic benefits are increased security of supply and the availability of additional renewable energy. Each of the of the eight high-priority transmission projects that have been analysed will bring economic benefits of US$4.3 billion, again in NPV terms.

The Numbers

42bil
The dollar amount an integrated power grid will save the region in NPV terms by 2040
4.3bil
The approximate dollar value of the economic benefits of each high-priority transmission project

Transmission across national borders will enable greater renewable energy penetration, supporting the green energy transition in southern Africa.

Laura Rizzotto, Principal

Meet the Team

Daniel Seddon-Daines

Associate Director

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Laura Rizzotto

Principal

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