Proposed new energy initiatives for South Africa – Is this the answer to loathsome loadshedding?

04 Aug 2022

On 25 July 2022, President Cyril Ramaphosa addressed the South African energy crisis by announcing that the government will be introducing new initiatives with the aim of, inter alia (i) accelerating the procurement of new generation capacity from renewables, gas, and battery storage in order to combat the current shortfall, with the objective of the immediate reduction of load shedding, (ii) largely increasing private investment in generation capacity with a view to creating new capacity for the long term and permanently putting an end to loadshedding.

This comes against the backdrop of the President’s announcement last year, that Schedule Two of the Electricity Regulation Act would be amended to allow for private generators to develop up to 100 megawatts (“MW”) of power without requiring a licence from the National Energy Regulator of South Africa (NERSA). With the previous threshold for private generation without a NERSA licence being 1MW.

The proposed regulations will completely remove the licensing threshold for embedded generation and broaden reforms to establish a competitive electricity market which will enable private sector investment, and furthermore enable businesses and households to invest in rooftop solar power.

According to the President, the Department of Energy has been posed with time delay challenges in receiving the necessary approvals, which in turn has resulted in hindrances in the execution of projects and ultimately impacted on the ability to add capacity to the grid.

Another identified obstacle has been ensuring compliance with the extensive requirements and regulatory red tape contained in the existing regulations and the governing legislative framework, which have provided regulatory and legal hindrances in an attempt to generate capacity.

At present, the Northern and Western Cape provinces possess some of the country’s best solar resources, and Eskom has further identified land in Mpumalanga to accelerate the development of renewable energy operations, meaning we’re likely to see much more renewably sourced energy coming onto the grid.

Bid window 6 tender under the Renewable Energy Independent Power Producer Programme (REIPPP) has been expanded to 5,200 MW, which is a positive trajectory and shift from the country’s dependence on coal towards the use of alternative energy resources.

Eskom intends to construct solar and battery storage projects at Komati, Majuba, Lethabo and several other power stations, which should result in an additional 500MW and to purchase surplus capacity from existing independent renewable power producers.

It is expected that the legislative process relating to the Electricity Regulation Amendment Bill will be expedited in order to negate the existing and impeding legislative and regulatory requirements, to accelerate any delays in receiving the necessary approvals for solar projects and thereby opening up the electricity sector.

This will optimistically result in the transformation of the energy sector, the diversification of energy sources, the sustainability of energy supply and, expectantly, end loadshedding and its devastating effects on businesses and households.

A National Energy Crisis Committee has been established in order to ensure that the measures are implemented in an effective manner. Eversheds Sutherland will be monitoring these initiatives and the Electricity Regulation Amendment Bill and will keep clients abreast of any developments.

See also:

• Ramaphosa outlines measures to tackle load shedding
• Legislative leniency toward private power production but at what cost?
• Electricity act licence exemptions finally being implemented
• Loadshedding likely to trigger business insurance litigation

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)