The National Energy Regulator of SA (Nersa) announced on Friday that mineral resources and energy minister Gwede Mantashe has taken steps to make the licensing process less onerous for entities that want to generate their own electricity.
Previously all projects that applied for a licence had to obtain ministerial approval for a deviation from the Integrated Resource Plan (IRP) for their projects as part of the process. Mantashe eliminated this step in a directive to Nersa in February, which the regulator has only just announced. This cuts out a step in the process and should speed up applications, the processing of which has been painfully slow.
All self-generation projects over 1MW must apply for a licence.
Self-generation by mines, industry and farms is the fastest way to add capacity to SA’s constrained grid. It has been estimated that there are up to 2,000MW of pent up supply that could be constructed in less than two years, which could make a significant difference to easing the power constraint. With each load-shedding stage, Eskom drops 1,000MW of demand from the grid.
Nersa said that the exemption applies to generation facilities that are connected to the grid where the facility supplies electricity to a single customer and does not “wheel” (that is, use the national grid to distribute electricity); and facilities where wheeling occurs to related customers.
It excludes generation facilities that supply municipalities or provinces, “which will be addressed separately”.
UCT Graduate School of Business professor Anton Eberhard said that while the exemption notice is a sign of progress, there is much more that could be done to free the electricity market.
“This is positive as the IRP allocations for the next few years had been taken up by ministerial determinations for IPP Office procurements selling to Eskom. This now gives leeway for Nersa to consider licence applications by other generators. But they will still be subject to onerous, lengthy, bureaucratic application processes,” he said.
Nersa has only issued five new generation licences totaling 25MW since 2016.
Eberhard has long advocated for the government to amend electricity regulations to exempt projects up to 40MW from licensing entirely. “The government and Nersa need to step back so that a huge pipeline of investment in small generation can be liberated,” he said.
The exemption excludes municipalities that must first apply to Mantashe for permission — a point of contention between him and the City of Cape Town, which wants the flexibility to make its own decisions.
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