Currently, under South Africa’s Electricity Regulation Act (ERA), people seeking to generate electricity must obtain a license from the National Energy Regulator of South Africa (NERSA), unless they are eligible one of the license requirement exemptions listed in Schedule 2 of the PLAR.
Generators operating an integrated generation facility with a capacity not exceeding 1 MW in circumstances in which electricity is supplied to a customer or to related customers through on-site generation or transmission, are eligible to a license exemption, provided that the various connection and transmission approvals have been obtained.
Earlier this year, the Department of Mineral Resources and Energy (DMRE) consulted on the proposed changes to Schedule 2. According to its plans, the license exemption threshold for integrated production facilities would have been extended. from 1 MW to 10 MW. However, Ramaphosa has now confirmed that the exemption threshold will be extended to 100 MW instead.
Dempster said: “This reform should unblock the delays we have seen in developing larger scale integrated production projects. We have seen substantial growth in the commercial and industrial (C&I) solar market in South Africa for small-scale generation facilities with a capacity of up to 1 MW given the current exemption in Schedule 2 and the Increasing the capacity threshold for the exemption from 1 MW to 100 MW will encourage the same growth in the market for larger scale on-board generation projects. “
“Independent Power Producers (IPPs) are likely to have more confidence in investing in larger-scale C&I projects, as the risk of not obtaining a production license after the investment of a large upstream development is largely eliminated, ”she said.
Dempster said this development would be particularly welcomed in the South African mining sector where companies have pursued larger-scale IPP projects since 2016. She said obtaining a production license from NERSA has been a hindrance. to the development of such projects and an obstacle to investment.
said Dempster. “Given the electricity supply challenges South Africa has faced since 2008, there has been a growing demand for self-generation solutions, and commentators have called for the regulatory framework to be changed to allow producers to electricity to more easily produce electricity for their own use. . While the government took action last year to remove the requirement that integrated generation facilities used for self-generation with a capacity greater than 1 MW must comply with Africa’s national electricity plan South, known as Integrated Resource Plan, IPP projects still face challenges in progressing project development due to the time taken to obtain production authorization due to other requirements. which still need to be completed under the CRE.
Dempster said that in some cases, obtaining a production license can take more than 200 days after signing a power purchase agreement. South Africa currently suffers from an energy deficit and experiences intermittent power outages, and President Cyril Ramaphosa has recognized that the ability to rapidly bring new sources of energy into use is vital for South Africa’s economic recovery and growth.
Although a production license will not be required, the activity will still need to be registered with NERSA.
“There are currently no guidelines or rules governing the registration process and these will need to be put in place by NERSA to facilitate the development of an enabling regulatory environment,” said Dempster.
Ramaphosa said the final version of the Schedule 2 amendment will be released by the Ministry of Mineral Resources and Energy within the next 60 days.