South African Companies Now Allowed To Generate Up To 100 MW Without Applying For Generation License!

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South Africa’s President Cyril Ramaphosa has just announced that the threshold for companies to produce their own electricity without a licence will now be increased from the current 1 MW to 100 MW. Generation projects will still need to obtain a grid connection permit to ensure that they meet all of the requirements for grid compliance.

In a surprise but very welcome move, the new threshold, which had previously been set at 10 MW in the Draft Schedule 2 to the Electricity Act, will catalyze private sector investment into the electricity sector. This move will go a long way in relieving pressure on Eskom and the government and is the quickest route to plugging the country’s massive deficit in the electricity generation sector. South Africa’s current installed generation capacity is about 50 GW, made up of mostly old coal plants. Just yesterday, Eskom, the national utility company, announced it was implementing Stage 4 load-shedding to manage the generation shortfall on the day. Eskom’s load-shedding program is structured in “Stages” where Eskom sheds a certain quantum of load from the grid to stabilize the grid. So, depending on the severity of the crisis, load-shedding is implemented in stages from Stage 1 to Stage 8, where Stage 1 sheds 1000 MW of load from the grid and in a Stage 8 scenario, Eskom takes out 8,000 MW of load from the grid. Load-shedding is implemented over 2-hour or 4-hour blocks on a rotational basis depending on the severity of the crises. Stage 8, however means most consumers will experience a blackout for about 12 hours. As of yesterday, breakdowns at Eskom’s plants in total were adding up to a massive 15,087 MW! A further 1,273 MW was out of service for planned maintenance.

The process of obtaining a generation license for PV plants above 1 MW for the commercial and industrial segment had been a long and complicated one, slowing town the adoption of solar by large energy consumers. The new threshold removes this burden and opens up a huge segment in the solar industry. Large factories such as large cement factories, data centers, mines, shopping malls, and universities can now build their own power plants to compliment what they currently get from the grid.

“As a country, however, our challenges predate the pandemic. We have experienced low economic growth and high levels of unemployment for many years, due to the structural constraints that hold our economy back. There is no doubt that the prospect of a continued energy shortfall and further load shedding presents a massive risk to our economy. That is why we have identified the achievement of energy security as one of the priority interventions in our Economic Reconstruction and Recovery Plan. Our ability to address the energy crisis swiftly and comprehensively will determine the pace of our economic recovery. Resolving the energy supply shortfall and reducing the risk of load shedding is our single most important objective in reviving economic growth,” said President Ramaphosa.

“Following an extensive public consultation process and a significant amount of technical work undertaken by the Department of Mineral Resources and Energy, we will be amending Schedule 2 of the Electricity Regulation Act to increase the NERSA licensing threshold for embedded generation projects from 1 MW to 100 MW. This intervention reflects our determination to take the necessary action to achieve energy security and reduce the impact of load shedding on businesses and households across the country. It is evidence of our intention to tackle this economic crisis head-on, by implementing major economic reforms that will transform our economy. It also demonstrates our commitment as government to listen carefully to experts, to engage closely with our social partners, and to take on board new ideas to address our longstanding challenges.”

Distributed power plants, especially solar plants, can be built very quickly to help meet some of South Africa’s daytime demand. It’s about to get really exciting in this space in South Africa!


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