In the bustling landscape of emerging markets, the narrative of energy infrastructure often skews towards grand power generation projects and flashy renewable IPP tenders. Yet, the crucial link that delivers this power to end users—transmission infrastructure—is frequently overlooked. This oversight is not just a minor detail; it’s a chasm that could swallow the ambitious energy goals of many nations.
The global energy discourse is abuzz with battery storage, hydrogen, offshore wind, and cleaner power solutions. However, without a robust transmission backbone, these innovations risk becoming isolated outposts, unable to feed power into the grid effectively. The intermittent nature of renewable energy, technical losses, and the need to avoid unnecessary generation or storage capacity all point to one thing: well-developed transmission systems are not just an option; they are a necessity.
Sub-Saharan Africa, a region that has seen significant transmission expansion in recent years, offers a stark example. Here, state-owned utilities often manage aging and poorly maintained transmission infrastructure, hampered by operating losses and limited public budgets. Without private funding, these systems face neglect, leading to further interruptions and inefficiencies. Transmission assets, unlike generating facilities, require ongoing capital investment for upgrades and maintenance, making them a unique challenge for traditional project finance models.
Public-sector financing, predominant in Africa, sees governments borrowing directly to finance transmission projects, often through concessional loans from development finance institutions. However, this model has its pitfalls, as evidenced by the Lake Turkana Transmission Line project. Delays and financial risks borne by the government underscore the need for integrated planning and risk mitigation.
In Asia, initiatives like smart meters in Indonesia and substations in the Maldives show glimmers of private sector involvement, but these are exceptions rather than the rule. The International Energy Agency’s warning of a US$320bn grid investment gap by 2030 highlights the urgency of the situation. Regional grids and cross-border power pools are promising, but they require significant private sector investment to materialize.
Private sector funding alternatives, such as IPPs constructing transmission lines as part of their projects, offer a viable path forward. In Uzbekistan and South Africa, this model has seen transmission assets integrated into IPP projects, reducing connection risks and placing financing responsibility on the private sector. However, this approach requires a robust legal and regulatory framework to ensure financial viability and fair risk allocation.
Concessions, as seen in the Philippines with the National Grid Corporation of the Philippines (NGCP), provide another model. Here, a private consortium operates, maintains, and expands the transmission sector under government oversight. This structure requires an independent electricity regulator and a regulatory framework that allows for third-party transmission licenses.
Independent transmission projects (ITPs) are emerging as a way to unlock private sector capital. These projects, designed to be financially viable and operationally efficient, could be a game-changer in the transmission landscape. However, they require careful planning, risk allocation, and government safeguards to attract private investment.
The implications for markets are profound. A robust transmission infrastructure can catalyze renewable energy projects, stabilize grids, and drive economic growth. However, it requires a shift in focus from generation to transmission, a willingness to engage the private sector, and a commitment to regulatory reform.
Emerging markets stand at a crossroads. The path they choose—whether to continue with state-led models or embrace private sector innovation—will shape the future of their energy sectors. The stakes are high, but the potential rewards, in terms of energy security, economic growth, and environmental sustainability, are even higher. The time for action is now, and the direction is clear: transmission infrastructure must take center stage in the energy debate.
