It is possible for 10 GW of new power generation capacity to be built in the next seven years, now that the amended Schedule 2 of the Electricity Regulation Act has paved the way for easier distributed generation, says Business Leadership South Africa (BLSA) CEO Busi Mavuso.

The amendment has the potential to spur major new investment in electricity generation, since companies can now go ahead with building their own generation plants of up to 100 MW without first obtaining a licence from the National Energy Regulator of South Africa (Nersa).

These companies still need to register with Nersa though, except for plants created purely as a back-up supply in the event of disruption.

It is still unclear what this registration will require, but Mavuso hopes it will be a simple process.

She explains that the amended Schedule 2 also, for the first time, allows for wheeling across the grid – meaning that companies can generate power in one place and use the electricity in another.

“That is particularly important for renewable energy generation. Where the sun shines and wind blows may not be where the electricity is needed.”

The amendment also allows for companies to buy electricity from third parties.

However, Mavuso points out that these activities all require companies to deal with Eskom as the transmission operator and says much will depend on how simple and cost-effective the State-owned power utility can be in offering this service.

Municipalities will also need to play a role where their infrastructure is used for power delivery.

“The amended schedule is not perfect. There are several ambiguities that need clarification.

"The schedule seems to allow for wheeling from one producer to many end-users, but the language is unclear on this.

“It also appears to exclude municipalities as resellers of electricity – which may make it difficult for municipalities to buy power directly from private producers,” Mavuso points out.

She adds that the amendment also does not specify how energy storage will be treated when producers create battery capacity to store energy produced and she welcomes further amendments to the schedule to clarify these issues.

BLSA is of the view that the ball is now in the regulator and Eskom’s court. The organisation deems it important that these entities use the regulatory space to enable widespread distributed generation and sales across the grid.

Mavuso believes the amendments to electricity regulations are a clear success of Operation Vulindlela – the project set up between the National Treasury and the Presidency to drive structural reforms.

Some of Vulindlela’s other priorities are the divisionalisation of Eskom, the auction of additional spectrum to improve digital broadband access, bulk water infrastructure, speeding up water-use licensing processes, the corporatisation of the Transnet National Ports Authority, third-party access to rail infrastructure and visa reforms.

Mavuso says if all these were achieved, the business operating environment in South Africa would improve significantly and make South Africa an easier place to do business.