Electricity act licence exemptions finally being implemented

power generation
16 Nov 2017

The Department of Energy has paved the way to enable smaller scale renewable energy projects to generate power not only for own use, but also for the benefit of industries such as the farming sector.

In an era characterised by the significant impacts of climate change, renewable energy sources, such as solar photovoltaic (PV) installations, can contribute to reducing carbon emissions and help to decarbonise the global energy mix. According to BP’s Energy Outlook (2017), renewables in power generation are estimated to be the fastest growing fuel source (7.6% p.a.) over their outlook to 2035.

The large-scale roll out of solar installations have helped to reduce the cost of solar technologies and improved cost-competitiveness in recent years. In addition to the clear environmental benefits, the use of independent solar energy can contribute to cost savings for the user as well contribute to developing a domestic solar industry value chain.

For these reasons, the use of solar power holds specific potential in the farming industry. Farmers can install their own PV infrastructure to reduce their carbon footprint whilst also saving on electricity costs.

Until recently, most independent power generation projects were required to be registered with and hold a license from the National Energy Regulator of South Africa (Nersa). In a practical sense, the registration and licensing of all independent power generation projects, specifically smaller scale projects, place an undue administrative burden on the regulator whilst imposing an administrative and financial burden on the project owner. Until now, this requirement has hindered farmers with PV installations from connecting to the grid.

The Draft Licensing and Registration Exemption Notice, initially published on 2 December 2016 in terms of the Electricity Regulation Act, 2006 (the Draft Exemptions), propose an exemption from the licensing requirement for specific activities, for example, embedded generation if the installed capacity does not exceed 1MW.In terms of the Draft Exemptions smaller scale projects (up to 1 MW) will be allowed to proceed unencumbered from the requirement for licensing.

It is therefore not surprising that farmers, in anticipation of the Draft Exemptions entering effect, and upon a taking a calculated risk, have begun investing in constructing solar photovoltaic (PV) on their properties. According to energy consulting firm, Sonfin, the investment in solar projects by their farmer clients amounts to approximately R200 to R350 million to date.

According to Nedbank, over the past three years, they have provided approximately R50 million in finance for renewable energy projects in agriculture. Approximately 20% (R10 million) was for projects that were affected by the delay in finalising the licensing exemptions. Holding and other costs associated with not being able to lawfully connect to the electricity grid due to the delay in the entry into effect of the Draft Exemptions caused significant financial losses to the industry.

The good news is that on 10 November 2017, the Department of Energy published the Licensing Exemption and Registration Notice in the Government Gazette (No. 41237). Agri SA welcomes the publication of the Exemption Notice. The exemptions from the licensing requirements in terms of the ERA will assist farmers with existing PV installations to connect to the Eskom grid without having to apply for licensing. In addition, the exemptions will encourage further investment from farmers to diversify their energy supply through embedded generation.

See also: A brighter future for South Africa powered by liquefied natural gas

(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.)

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