Mineral resources & energy minister Gwede Mantashe has come under renewed pressure to further loosen licensing requirements for “distributed”, or self-generated, electricity. This comes as organised business and Eskom CEO André de Ruyter added their voices to the call for reform this week.
The ANC, at its lekgotla last month, also upped the pressure, with President Cyril Ramaphosa announcing that the meeting had decided, among other measures, “to enable more embedded generation by firms”.
Mantashe, who in October lightened regulation slightly after pressure, has been resistant to further change. At issue is the amendment of schedule 2 of the Electricity Regulation Act, which requires that every self-generation, or distributed generation, operation over 1MW that connects to the national grid apply for a licence from the National Energy Regulator of SA (Nersa). Before October, self-generators also had to apply to Mantashe for a deviation from the Integrated Resource Plan. This has now been waived.
But the lobby to exempt small projects — up to 50MW — from the licensing requirement has refused to be quiet. Self-generation is widely regarded as the fastest way to bring new generation capacity onto the grid, with recent research by Meridian Economics finding that 5,000MW could be unlocked if the threshold was raised to 50MW.
Self-generation will allow mines, farms and other commercial operations to insulate themselves against electricity outages, which come at exorbitant costs to businesses. Eskom expects an energy gap for at least the next three years. The licensing process through Nersa is said to be onerous and time-consuming.
Speaking at a webinar hosted by ENSafrica on Tuesday, De Ruyter said self-generation of energy is a critical lever for business to withstand SA’s energy predicament. It is a great opportunity to resolve the crisis and he strongly supported raising the licensing cap for self-generation projects to 50MW.
On Wednesday, Business Unity SA (Busa) applauded De Ruyter’s call, saying that amending schedule 2 “was an immediate measure to enable investment in capacity that will greatly relieve the pressure on Eskom and the concomitant impact of load-shedding on the economy”.
The intervention would also boost economic recovery and should be implemented at the same time as the new energy procurement programmes announced by the government last year, said Busa vice-president Martin Kingston.
Mantashe, who is on bereavement leave after the loss of his sister Tozama Mantashe, was not available to comment. But energy department deputy director-general Jacob Mbele said the government had engaged extensively in the past with the industry on this matter but still had concerns about deregulation.
The connection of self-generation projects to the grid — which most firms would require for a ready supply of backup power should their plant fail or not perform due to weather conditions — had implications for grid stability, said Mbele. The licensing process also ensured that applicants had a high level of readiness, with completed environmental impact studies and so on, before application.
“Licences come with conditions and can be revoked while without it, people can vanish into thin air,” he said.
Busa and other proponents of liberalisation argue that self-generators must abide by technical requirements contained in the Grid Code as these ensure the stability and protection of the distribution grid.
“This happens independently of the Nersa licensing process as part of the Grid Code compliance. The same holds true for any other authorisations, such as environmental impact assessments as and when required. In our view, the current licensing process serves no rational purpose,” Kingston said.
Mbele said that while the department had reservations, it had heard the outcry and was willing to engage with industry.
“We will have an engagement with the minister when he is back and say there is this growing call and I’m sure he will listen. We will also engage with the regulator,” said Mbele.
Addressing parliament’s portfolio committee on public enterprises on matters concerning Eskom on Wednesday, public enterprises minister Pravin Gordhan said he expected “a significant announcement regarding embedded (self-) generation in the coming weeks”.
The proposal to expand self-generation is also contained in Ramaphosa’s economic and recovery programme, as well as Eskom’s social pact, signed between partners in Nedlac.
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