The chairperson of the South African Independent Power Producer Association (SAIPPA) believes that the quickest and cheapest way to reduce, or eliminate, South Africa’s growth-sapping risk of load-shedding would be for Mineral Resources and Energy Minister Gwede Mantashe to issue a Ministerial determination catering for private-to-private electricity supply agreements.
Through Section 34 of the Energy Regulation Act (ERA), the Minister, in consultation with the National Energy Regulator of South Africa (Nersa), is empowered to determine that new generation capacity is needed to ensure the continued uninterrupted supply of electricity.
SAIPPA chairperson Thomas Garner, who is also business development executive at Earth & Wire, which is aiming to become an independent utility, says such a determination is in line with existing policy and would provide much-needed clarity for the licensing or registration of new facilities by Nersa.
Garner is not opposed to the calls for an amendment to Schedule 2 of the ERA lifting the licence-exemption threshold from its current level of 1 MW, but does not believe that that change alone will unlock the investment needed to close what is estimated by Eskom to be a 5 000-MW supply deficit.
In a draft amendment published for comment on April 23, Mantashe proposes simply lifting the exemption to 10 MW.
There are growing calls from large consumers and independent power producers to increase the cap to 50 MW, as well as to amend Schedule 2 to allow for the wheeling and sale of the electricity produced to non-related end customers.
Speaking during a RES4Africa Foundation webinar on Wednesday, Garner argued that the current legislation allowed the Minister to shape electricity policy through determinations.
“Therefore, the Minister could quite easily issue a determination allowing the private sector to buy between 500 MW and 1 000 MW a year, which would fit with the Integrated Resource Plan (IRP), and would allow for the issuance of generation licences.”
He argued that the reason it currently took up to three years to secure a licence was not because of a lack of Nersa capacity to adjudicate.
Rather, it was related to the fact that it could take “two years simply to get a licence into the regulator’s inbox”, as projects either need to be governed by a determination that is aligned with the IRP, or they require exemption from the IRP.
In its current form the Schedule 2 amendment fails to address this problem and could, thus, result in sustained “uncertainty”.
“And capital doesn’t flow in an uncertain world,” Garner averred.
Once a determination allowing the private sector to procure electricity from IPPs was in place, Garner believed it would be relatively straightforward for projects that had secured the necessary environmental and technical authorisations to be licensed.
Separately, however, much attention is still being given to reforming Schedule 2 of the ERA, with business, in particular, indicating that the proposed amendment fell short of what was required to stimulate the investment needed to address South Africa’s electricity deficit.
Minerals Council South Africa CEO Roger Baxter told participants to the Energy and Mines Africa Virtual Summit on Wednesday that policy certainty and regulatory clarity on self-generation were required to enable the private sector and municipalities to ensure reliable and affordable energy supply.
Speaking as the Gold Fields board confirmed its approval of a 40-MW solar plant at the South Deep mine that had taken years to receive its licence, Baxter said that there were currently 17 projects, with a combined capacity of 2.4 GW, under development in the mining industry, 12 of which were renewable-energy projects.
These projects faced “red tape” that was difficult to unravel, owing to an absence of a documented process for the licensing of generation plants.
Baxter argued that Nersa should publish a flow chart outlining the process, while smaller plants should undergo “licensing lite” that took no longer than 120 days.
In many cases, the economic size of a plant could also not be aligned with the life-of-mine, making projects uneconomical unless they were also enabled to wheel and sell excess electricity to the grid.
“Selling of self-generated electricity to other parties should, thus, be clarified,” he said.
Projects also faced various other authorisation bottlenecks, while wheeling agreements were “long and drawn out and the charges sometimes lead to the project being uneconomical”.
Besides increasing the licence-exemption cap to 50 MW, the Minerals Council also believed that a “one-stop shop” mechanism should be established by the Department of Mineral Resources and Energy to accelerate much-needed investment.
Earlier, Business Leadership South Africa CEO Busi Mavuso also argued that the proposed amendment raising the licence exemption threshold for private distributed-generation plants from 1 MW to 10 MW, failed to “go far enough”.
She argued that by increasing the cap to 50 MW companies would be enabled to set up utility-scale generating capacity, some of which could be used to contribute electricity into the grid and help relieve the country’s ongoing electricity supply insecurity.
“However, the DMRE is resisting these calls with its 10 MW proposal. This is short-sighted and prolongs energy insecurity for so many companies,” Mavuso argued.