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A step forward for energy security in South Africa

By Jamie MacDonald and Kgomotso Mokaba

On 10 June 2021, the President of South Africa, Cyril Ramaphosa, announced amendments to schedule 2 of the Electricity Regulation Act (ERA) in terms of which, amongst other things, embedded generation projects with a capacity of up to 100 MW will become exempt from being required to be licensed with the National Energy Regulator of South Africa (NERSA). This is irrespective of whether they are connected to the grid or not.

The current licencing exemption is afforded to embedded generation projects with a capacity of up to 1 MW (meaning that embedded generation projects with a capacity above 1 MW are required to apply for a generation licence with NERSA).

In the context of existing (and historical) load shedding, mostly during the winter months, which has resulted in operational disruptions and loss of revenue for many businesses, this announcement has been well received and praised by many in and outside of South Africa as a positive step in attaining energy security through the promotion of investment in embedded energy generation projects in South Africa.

This announcement also illustrates an apparent shift in policy direction, and may come as a very welcome surprise to many - as the Minister of the Department of Mineral Resources and Energy (DMRE), Gwede Mantashe, had on 23 April 2021 released for public comment, an amendment to the ERA, proposing an increase in the licensing exemption threshold for embedded power generation plants to 10 MW. This was despite calls for an increase to 50 MW.

Another notable amendment to schedule 2 of the ERA includes generators being permitted to wheel electricity through the transmission grid, subject to the conclusion of connection agreements with the relevant municipalities and Eskom and the payment of wheeling charges. Municipalities will have the discretion to approve grid connection applications in their networks (based on an assessment of the impact on their grid). Generators will still be required to undertake an Environmental Impact Assessment and perform or comply with all the other requirements contemplated in existing legislation. They will also continue to require a grid connection permit (for purposes of grid compliance) and their registration must be approved by NERSA.

President Ramaphosa stated that the final version of the amendments to schedule 2 of the ERA will be published by the DMRE within 60 days of his announcement.

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