EPaper

President unleashes new power sources

• Business hails licensing threshold of 100MW • Mantashe says Ramaphosa ‘twisted his arm’

Carol Paton

President Cyril Ramaphosa has lifted the threshold for companies to produce their own electricity without a licence to 100MW in a surprise announcement that will be much celebrated by business.

Embedded generation — when a company produces electricity for its own use or for use by others — is widely regarded as the quickest way to bring additional megawatts onto the grid.

Companies, mines and farms are believed to have 5,000MW in pent-up projects, which could be released if licensing requirements are lifted.

The energy reforms, the most significant in about a decade, came as Eskom was on stage 3 load-shedding on Thursday, dropping 3,000MW of demand from the grid to protect it from overload.

Business organisations and large users of electricity, including mines, have lobbied for the licensing threshold to be raised to at least 50MW. Firms with embedded generation will also be able to sell the electricity they generate to third parties, which will not only alleviate Eskom’s constraints but will also transform the electricity market into one with multiple generators.

Generators will be subject to “wheeling charges” for the use of the Eskom grid and will need to make connection agreements with the state-owned utility and municipalities.

The current regulatory regime requires that those who generate their own electricity and who remain connected to the grid need to apply for a licence from the National Energy Regulator of SA (Nersa) for all projects over 1MW. This has proved to be a time-consuming and costly process.

With the threshold lifted to 100MW, generators will still be required to obtain a grid connection permit to ensure they meet the requirements of grid compliance. They will also need to have their registration approved by Nersa to verify they have met the requirements to operate.

“Our intervention reflects our determination to take the necessary action to achieve energy security and reduce the

impact of load-shedding on businesses and households. It is evidence of our intention to tackle this economic crisis head-on, by implementing major economic reforms that will transform our economy,” Ramaphosa said.

Mineral resources & energy minister Gwede Mantashe, who briefed the media alongside Ramaphosa on Thursday, said permits would take no longer than 90 days to issue.

Municipalities will have the discretion to approve grid connection applications in their networks, based on their own assessment, Ramaphosa said.

The reforms announced by

Ramaphosa are the most farreaching steps taken to reform the electricity sector since independent power producers were first brought on to the grid to supply Eskom in 2011.

The further liberalisation of the electricity sector has been controversial in the ANC and its allies, as it is regarded as a form of privatisation. Mantashe, for instance, has doggedly opposed a higher licensing threshold and in his proposed amendment to schedule 2 of the Electricity Regulation Act proposed raising the threshold to 10MW.

Mantashe said that Ramaphosa had “twisted his arm” and that he agreed with the new direction. Ramaphosa thanked Mantashe for his efforts, as well as Operation Vulindlela, a joint unit set up in the presidency and the Treasury, which has been key to pushing the department of energy to raise the threshold.

The move will also affect Eskom’s financial viability as it is certain to lose some large customers as they migrate from the grid. Ramaphosa said that contrary to liberalisation accelerating the death spiral of Eskom, it would breathe new life into the utility, ease the pressure on it, allowing it to fix its plant and move into the generation of renewable energy.

“It is always good to have competition. That is what other countries are doing. Even a country like China has multiple generators. Efficiency is enhanced and everybody is kept on their toes,” Ramaphosa said.

The Minerals Council SA, whose members are most likely to take advantage of the new regulatory environment, described the announcement as “an excellent starting point”, which would enable the industry to bring to at least 1.6GW of largely renewable energy projects to fruition, injecting about R27bn into the economy.

“This has the potential to raise SA’s overall growth rate. What is needed as a next step is to develop concrete plans to shorten the grid-tie licensing process with Eskom and to expedite environmental authorisations without compromising their integrity,” the council said.

Business Unity SA which has campaigned long and hard for the reform, said it would go a long way to unlocking embedded generation. “We hope [this] is the beginning of a trend where the president will act decisively to unblock numerous blockages in delivery that, if unlocked, would significantly increase confidence and attract investment and enable economic growth,” it said in a statement.

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2021-06-11T07:00:00.0000000Z

2021-06-11T07:00:00.0000000Z

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