President Cyril Ramaphosa announced on Thursday that government had lifted the threshold for companies to produce their own electricity without a licence to 100MW.
“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 [National Energy Regulator of SA] licensing threshold for embedded generation projects from 1MW to 100MW,” said Ramaphosa in a surprise announcement.
According to the president, the intervention reflects government’s determination to take the necessary action to achieve energy security and reduce the impact of load shedding on businesses and households across the country.
He said the decision showed government’s commitment and intention to tackle this economic crisis head-on by implementing major economic reforms that would transform our economy.
Eskom was on stage 3 load shedding on Thursday, dropping 3 000MW of demand from the grid to avoid it being overloaded.
The power utility announced that stage 3 load shedding would be implemented from 8am until 10pm on Thursday. This was after stage 4 load shedding – which allows for up to 4 000MW to be shed from the grid – had been implemented earlier on Wednesday.
Reports state that Eskom was forced to implement stage 4 load shedding at short notice on Wednesday despite having cut the level of planned maintenance at its power stations to just 1 273MW – an unprecedented low.
Ramaphosa said there was no doubt that the prospect of a continued energy shortfall and further load shedding presented 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,” he said.
Exempting generation projects up to 100MW in size from the Nersa licensing requirement, whether or not they are connected to the grid, will remove a significant obstacle to investment in embedded generation projects, Ramaphosa said.
He added that generators would also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities.
“However, generation projects will still need to obtain a grid connection permit to ensure that they meet all of the requirements for grid compliance. This will ensure that we are able to bring online as much new capacity as possible without compromising the integrity or stability of our energy system.”
On Tuesday, Stats SA reported that the country’ electricity supply remained a major constraint to economic growth.
Joe de Beer, deputy director-general for economics statistics at Stats SA, said load shedding and a decline in the supply of water contributed to the contraction in the electricity, gas and water supply industry.
Ramaphosa said it was for these reasons that bold and urgent action was required to confront the country’s energy challenge.
“Incremental measures will not be sufficient to meet the scale of this challenge. For this reason, we are today announcing a significant new step in further reforming our electricity sector towards achieving a stable and secure supply of energy,” he said.
He added that this reform was expected to unlock significant investment in new generation capacity in the short and medium term, enabling companies to build their own generation facilities to supply their energy needs.
“This in turn will increase the available supply of energy and reduce the burden on Eskom, allowing it to proceed with its intensive maintenance programme and reduce its reliance on expensive gas and diesel turbines,” he said.