Resolving SA's energy challenge
10 June 2021
In an effort to resolve the country’s energy supply shortfall and reduce the risk of load shedding, President Cyril Ramaphosa has announced an intervention intended to achieve energy security.
“Following an extensive public consultation process and a significant amount of technical work undertaken by the Department of Mineral Resources and Energy, we will be amending Schedule 2 of the Electricity Regulation Act to increase the National Energy Regulator of South Africa (NERSA) licensing threshold for embedded generation projects from 1 MW to 100 MW,” the President said.
Addressing the nation on Thursday on government’s effort to achieve a swift and lasting economic recovery, the President said amending the regulation reflects government’s determination to take the necessary action to achieve energy security and reduce the impact of load shedding on businesses and households across the country.
“It is evidence of our intention to tackle this economic crisis head-on, by implementing major economic reforms that will transform our economy. It also demonstrates our commitment as government to listen carefully to experts, to engage closely with our social partners, and to take on board new ideas to address our longstanding challenges,” President Ramaphosa said.
The President said the measure will be crucial in developing a response to the energy crisis that is ambitious enough, bold enough and urgent enough.
“The amended regulations will exempt generation projects up to 100 MW in size from the NERSA licensing requirement, whether or not they are connected to the grid. This will remove a significant obstacle to investment in embedded generation projects.
“Generators will also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities,” the President said.
However, generation projects will still need to obtain a grid connection permit to ensure that they meet all of the requirements for grid compliance.
“This will ensure that we are able to bring online as much new capacity as possible without compromising the integrity or stability of our energy system. Generation projects will also need to have their registration approved by the regulator to verify that they have met these requirements and to receive authorisation to operate,” President Ramaphosa said.
He said municipalities will have discretion to approve grid connection applications in their networks, based on an assessment of the impact on their grid.
“They will also have to undertake an Environmental Impact Assessment and all other requirements of existing legislation. This will ensure that while we enable as much new generation capacity as possible to come online, we also ensure the orderly development of the energy system.
“This reform is expected to unlock significant investment in new generation capacity in the short and medium term, enabling companies to build their own generation facilities to supply their energy needs.
“This in turn will increase the available supply of energy and reduce the burden on Eskom, allowing Eskom to proceed with its intensive maintenance programme and reduce its reliance on expensive gas and diesel turbines,” the President said.
The Department of Mineral Resources and Energy will publish the final version of the amendment to Schedule 2 within the next 60 days or sooner.
“We are faced with the significant challenge of achieving a swift and lasting economic recovery, following many years of economic decline.
“This government has the task of building a new economy in the wake of a global pandemic, and of placing our country on a strong footing for the next decade and beyond,” the President said.
He said government’s ability to address the energy crisis swiftly and comprehensively will determine the pace of the country’s economic recovery.
“Resolving the energy supply shortfall and reducing the risk of load shedding is our single most important objective in reviving economic growth,” the President said.
He noted progress that has been made in the past few weeks and months to address the energy challenge under the leadership of the Minister of Mineral Resources and Energy.
“This includes the announcement of 11 successful bidders for the Risk Mitigation Power Procurement Programme and the opening of Bid Window 5 of the renewable energy programme to procure 2 600 MW of new generation capacity from wind and solar PV projects.
Eskom working hard to improve performance
“Eskom is working hard to improve the performance of its existing fleet of power stations, reduce its debt burden and complete its restructuring process,” President Ramaphosa said.
While these steps are positive and necessary, the President acknowledged that they are not enough to address the immediate and significant energy shortfall that threatens economic recovery.
“We know that to confront the energy challenge will require bold and urgent action now. Incremental measures will not be sufficient to meet the scale of this challenge.
“We also know that in responding to any crisis, we must remain agile and willing to adapt our interventions to match the circumstances that we face,” the President said.