Mineral resources & energy minister Gwede Mantashe says his department surveyed 10,000 people to determine the level at which he should set the licensing threshold for self-generation of electricity, which is why he set it at the 10MW level.
The threshold at which a firm must obtain a licence from the National Energy Regulator of SA (Nersa) to generate its own electricity has been highly controversial.
Organised business and the Minerals Council SA as well as Eskom CEO André de Ruyter recommended that the threshold be set at 50MW.
A 10MW power plant would not be sufficient for a mine or a farm that would require at least 40MW of power. Bigger enterprises are more likely than smaller ones to go the embedded route because of the expense involved.
Licences are difficult and onerous to obtain. However, self-generation is by far the quickest way to bring additional megawatts onto the grid and could alleviate the country’s energy constraints.
It was estimated in a study by Meridian Economics in January that lifting the threshold to 50MW would unleash 5,000MW of pent-up self-generation projects.
But Mantashe and the department of mineral resources & energy have stood firm against the lobby groups and last month gazetted regulations for comment to raise the threshold to 10MW.
This was despite President Cyril Ramaphosa’s statement in his state of the nation speech that the government would raise the licensing threshold in the hope of gaining 5,000MW of embedded power.
Mantashe, who has made no secret of his annoyance with the lobby, said in his budget vote speech in parliament that his decision is backed by research.
“There has been a lot of noise about this, but our research and our survey of 10,000 people showed overwhelming support for our move. The majority in the market say they are not ready for the 50MW.
“The issue of debating between 10MW and 50MW is an academic debate. The reality is the market is not ready for this 50MW,” he said, departing from his prepared remarks.
Mantashe said, however, that he is pleased that the mining industry has shown interest in embedded generation. Gold Fields recently received a licence from Nersa after a four-year process to build a 40MW renewable energy power plant.
“We are inviting all mining houses to come forward to unlock this. Many people say it took Gold Fields four years to get a licence but we spoke to Gold Fields a year ago and now it has a licence.
“Other mining houses must come forward and we will accelerate the process,” he said.
Mantashe recapped the initiatives he has so far announced to bring more energy onto the grid outside of Eskom. These include the connection of 1,200MW of renewable energy projects procured under the department’s bid window four, with another 1,000MW to come by December; and 2,600MW of renewable energy projects that have already been called for from the market as part of bid window five.
In addition, 1,995MW is expected to come from the risk mitigation round of independent power producers announced recently.
However, this tender is facing a court challenge.
In the coming year, the government will call for more bids from renewable energy producers for battery storage, for coal and for gas.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.