The South African Wind Energy Association (SAWEA) has welcomed President Cyril Ramaphosa’s announcement that the licensing-exemption threshold for companies to produce their own electricity will be increased from 1 MW to 100 MW.
SAWEA says it views this as another indication the country is well on its way to a decentralised, and decarbonised, renewable energy generation power system.
"It is the industry’s understanding that the Department of Mineral Resources and Energy (DMRE) is looking to encourage substantial investment in the energy generation sector, in order to support economic growth and diversify the generation sources away from just a single risk entity.
“When the amended regulation was issued for public comments, we made strong submissions that the allotted 10 MW threshold would be too small a shift to open up this highly regulated sector to the substantial investment that is required.
"We further submitted that the threshold for licence exemptions should be increased to between 50 MW and 100 MW,” SAWEA CEO Ntombifuthi Ntuli points out.
She adds that the President's announcement means that the industry can now easily enter into power purchase agreements with private entities, especially energy-intensive users, and deliver projects quickly.
“Renewable energy project developers have a number of projects that have gone through all development phase permitting requirements and are shovel ready, so we can confidently say that there is sufficient capacity in the industry to meet demand from intensive energy users,” she says, referring to South Africa’s intensive energy users (IEUs), which include mining and industrial enterprises, that are estimated to collectively consume about 40% of South Africa’s electrical energy.
Independent power producers (IPPs), have reported that several mining houses and other IEUs have reached out to the industry enquiring about projects that are ready for procurement.
The association says it sees this as “a clear intention” to procure clean energy from the sector.
By lifting the threshold, it will allow IEUs to establish new generation capacity that will, in turn, stimulate the economy, as well as free up the electricity availability factor (EAF).
South Africa has been plagued with power shortages for a long time owing to demand exceeding available supply capacity. This is despite government’s efforts to implement a number of programmes to try and close the capacity gap, which include the announcement of preferred bidders for the Risk Mitigation Independent Power Producer Procurement Programme and issuing of the Renewable Energy Independent Power Producer Procurement Programme Bid Window 5 request for proposals, as well as announcing future procurement plans.
“Eskom’s EAF has been below recommended levels for a very long time, as demonstrated by the protracted load-shedding that our country has been experiencing for well over a decade now. This indicates an urgent need to procure new generation capacity and by lifting the threshold for self-generation to 100 MW, without licencing, we are not only freeing up capacity, but are taking one step further towards a decentralised energy system,” says Ntuli.
She concluded that the energy transition that the country is going through is multi-faceted and informed by a number of drivers including decarbonisation, decentralisation and democratisation.
“While decarbonisation has to do with shifting from carbon intensive energy to more clean and green energy technologies, decentralization means moving away from a centralised single vertically integrated utility to more decentralised generation, through utility-scale IPP projects and small scale embedded generation projects. This means that energy will be produced closer to where it will be used, rather than at a large plant elsewhere and sent through the national grid.”