Mantashe publishes long-awaited amendments to the Electricity Regulation Act

12th August 2021

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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Mineral Resources and Energy Minister Gwede Mantashe, in an August 12 Government Gazette, published the eagerly awaited amendments to Schedule 2 of the Electricity Regulation Act (ERA) to enable distributed generation plants of up to 100 MW to proceed without first obtaining a generation licence.

To address the prevailing electricity deficit situation and reduce the impact of intermittent power supply to businesses and the economy, President Cyril Ramaphosa in June instructed Mantashe to gazette, within 60 days, an amendment to permit private electricity generators to build and commission plants of up to 100 MW without a generating licence.

Load-shedding and electricity deficits in South Africa have had a detrimental effect on many industrial businesses, resulting in downtime and lost production as a result of the rolling blackouts.

The South African Photovoltaic Industry Association (SAPVIA) has welcomed the publication of the Gazette, with COO Nivesh Govender saying Ramaphosa and Mantashe have "recognised and responded with boldness to ensure we act with appropriate haste and use the opportunity to rebuild our economy".

He commented in a statement that, at first glance, the notice includes several positive changes in line with Industry’s call for regulatory reform.

"The increase of the licence exemption threshold from 1 MW to 100 MW will impact many intensive energy users looking to generate their own electricity from alternate technologies.

"[Also,] for the first time, we see wheeling being specifically mentioned and considered as its own principle," he pointed out.

The South African Wind Energy Association (SAWEA) said in a separate statement that the licencing exemption provides a “sure indication” that the government is serious about driving investment in the energy generation sector, to support economic growth and diversify the generation sources away from just a single risk entity.

SAWEA CEO Ntombifuthi Ntuli said the announcement means the industry can now easily enter into power purchase agreements with private entities, especially intensive energy users (IEUs) and deliver projects quickly, which will stimulate economic recovery.

Also positive, is that the schedule has removed reference to the "single customer” and focused on “an end-user customer”, which could allow for interpretation from a singular to multiple customer, Govender said.

Lastly, third-party generation has been recognised with regard to a legal entity that may be an embedded generator who may contract with a distributor and then apply wheeling.

"On the other hand, as with previous versions of the ERA Schedule 2, the amendments have missed providing comprehensive definitions, creating unnecessary ambiguity and raised more questions of clarity around self-generation, the application of wheeling and trading, as well as how including energy storage to generation projects will impact the requirements.

“Is this perhaps a missed opportunity to implement a fresh Schedule 2 that would last in perpetuity, rather than requiring revision biannually as was the case in recent years,” Govender asked.

Ntuli echoed this, saying that, as with any legislation, there are elements left open for interpretation and that will require clarity. SAWEA intends to continue engaging the Department of Mineral Resources and Energy in this regard.

SAPVIA said it would conduct a thorough analysis of the published amendments against the various expert inputs provided before it publishes the industry view on the regulatory changes and the associated benefits they will or should bring to the economy.

“We would like to request that the honourable Minister and his team work with the National Energy Regulator of South Africa (Nersa), distributors, business and industry to ensure the policy directive is clear, and processes are well defined.

“While some bureaucracy is expected, it is vital that, together, we create an enabling environment that encourages more participation in the sector to achieve the desired outcome of energy security through mechanisms such as wheeling, multiple private power purchase agreements and trading, thereby creating a liberated energy system.”

“These changes will, in fact, impact several generation technologies with the capability of distributed generation, many private sector commercial and industrial businesses who so desperately need access to a constant supply of energy, foster much-needed investment into the energy infrastructure and alleviate the continuously building pressure on our national utility Eskom,” said Govender.

AMENDMENT DETAILS
The Gazette states that power generation plants of up to 100 MW, with a point of connection, would not need to apply for a licence if it is operated to supply electricity to an end-use customer and there is no wheeling of that electricity; if it is operated to supply electricity to an end-use customer by wheeling and the generator has entered into a connection agreement with the holder of the transmission or distribution licence in respect of the power system over which the electricity is to be wheeled; or if it does not export or import any electricity onto or from the transmission or distribution power system.

Registration with the Nersa is, however, required.

Further, the Gazette also stipulates that certain electricity generation activities for plants up to 100 MW are exempt from requiring a licence or registration with Nersa.

That includes facilities that are designed and used for the sole purpose of providing standby or back-up electricity in the event of, and for a duration of no longer than, an electricity supply interruption.

It also includes the operation of any generation facility that does not have a point of connection.

Also exempted from requiring a licence or registration is any self-generation facility with a capacity of no more than 100 kW, which complies with the Distribution Code and has a connection to the grid.

In this scenario, the facility would be exempted from requiring a licence or registration on account of the distributor prescribing the conditions relating to the continued use of the connection to the grid. Also, Nersa has prescribed the manner in which the distributor shall keep a register of each such facility.

As per the Gazette, other self-generation activities that are exempt from licensing, but which require registration with Nersa, are those of demonstrator facilities with or without energy storage, regardless of whether these are connected to the grid.

Such facilities would also not be permitted to operate for longer than 36 months.

Further, this also includes existing generation facilities, with or without energy storage, which immediately prior to the date of commencement of the amendment, were exempt from the requirement to apply for and hold a licence under the Act.

These plants must be registered with Nersa within six months of commencement of the amended schedule subject to the generation facility having complied with the Distribution Code and being connected to the grid.

In terms of trading electricity, such activities would also require registration with Nersa in circumstances in which the price charged by the reseller to customers does not exceed the tariff that would have been charged to such customers for the electricity if it had been bought from the holder of a distribution licence for the area in which the electricity is supplied to the customer.

Ntuli added that large companies, mines and farms are believed to have as much as 5 000 MW of energy in pent-up projects, which could be released if licensing requirements are lifted.

SAWEA also noted that independent power producers earlier reported that several mining houses and other IEUs have reached out to the industry enquiring about projects that are ready for procurement.

SAWEA sees this as a “clear intention” to procure clean energy from the wind sector.

Lifting the threshold will enable IEUs, which make up a significant portion of the South African gross domestic product, to establish new generation capacity that will, in turn, stimulate the economy, as well as free up the electricity availability factor, SAWEA enthused.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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