Now that the licence exemption threshold for self-generation has been extended to 100 MW, it encourages the development of a robust embedded energy sector, says law firm Cliffe Dekker Hofmeyr (CDH).

CDH says the risks to South Africa’s energy security, in addition to the economic impacts of Covid-19, have intensified the business sector’s long-standing call for increased private power generation capacity.  

With President Cyril Ramaphosa having announced the increase in the embedded licensing-exemption threshold on June 10, it opened up the possibility for businesses to wheel electricity through the transmission grid.

However, the law firm explains that while load-shedding and the associated capacity constraints generally take centre stage in the energy security dialogue, the objections and challenges to the environmental permitting of energy projects is starting to come to the fore as such challenges have a bearing on project development and investor appetite in the energy sector.

It remains to be seen whether the benefits of the increased threshold will eventuate considering that environmental permitting challenges remain.

Alternative technologies to coal-fired energy facilities, such as gas and renewable technologies, are not immune to environmental challenges, with increasing objections and appeals lodged in respect of the environmental permits granted for liquid petroleum gas and liquefied natural gas, solar and wind projects that have been or are to be bid on in future rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

In respect of renewables, this is of particular concern in light of the release of the REIPPPP Bid Window 5 request for proposals in April, with bids due to be submitted by August 16.

Considering the long lead times and extensive costs associated with environmental permitting application and amendment processes, the legal challenges have the capacity to compromise the projects in their entirety, as they may impact on their ability to meet bid requirements, private sector requests for proposals or reach financial close.

Amid a power supply crisis the increase in the exemption threshold is welcomed as a means to encourage more embedded generation developments, but it is a "single piece of a larger integrated regulatory puzzle", with environmental considerations and associated permitting being a material part of the puzzle necessary to see the benefits of the exemption threshold being realised, the law firm asserts.

CDH points out that embedded generation projects will still be bound to environmental authorisation and water-use licence approval processes and timelines.

From a water perspective, the Department of Water and Sanitation is in the process of considering amendments to the prescribed licensing requirements which will reduce the water use licence application timeline from 300 days to 90 days.

The department has also committed to appoint additional officials to fast-track these applications.

Although there are environmental regulatory framework developments happening to facilitate renewable energy generation, the need to appreciate the risk of challenges and learnings from these remain to ensure robust assessment and public participation processes are carried out, CDH concludes.