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Amendment to the Electricity Regulation Act
National Energy Regulator of South Africa (NERSA) Head of Communication, Charles Hlebela, talks to SOUTH AFRICAN BUSINESS INTEGRATOR about government’s decision to allow private entities to increase from 1 to 100 megawatts.
With the increased electricity generation threshold for private energy producers from 1 to 100 megawatts, what is the expected uptake on this by private entities?
NERSA cannot speculate on the uptake. However, it’s expected that the increased threshold will result in increased applications for registration. It should be noted, however, that the increased threshold is a signal of the deregulation of the electricity market in South Africa. Investments in
electricity generation are exposed to the same market vagaries as any other commodity and all the typical market forces, such as demand for small-scale power and competitive pricing will determine how the uptake may develop over time.
What was the rationale for this decision?
The amendment to Schedule 2 of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), to exempt generation facilities up to 100MW from the licensing requirement is aimed at achieving energy security and reducing the impact of loadshedding on businesses and households across the country. The exemption includes generation projects connected to the grid, as well as those not connected to the grid. However, the generation facilities are still required to apply to NERSA for registration to ensure that they meet all the requirements.
What is the impact for businesses and the general public with reference to energy costs and tariffs?
Increasing electricity tariffs negatively impact both businesses and the general public. As correctly indicated in the IRP 2019, as wholesale and retail electricity tariffs rise, it is expected that more electricity users will look for alternatives like rooftop PV systems (residential) or utility scale PV generation (mines and other big industrial users) and migrate away from the electricity grid. However, as mentioned above, with incremental
deregulation, the impact of market forces will be more conspicuous, informing consumer choice over time.
How does the increased threshold enable job creation and the establishment and growth of SMMEs?
It is expected that investment in new energy generation facilities and emerging technologies will enable job creation; however, many of the macroeconomic benefits are more dependent on industrial policy than energy regulation, such as the promotion and incentivising of local manufacture of the inputs to the electricity sector and a competitive investment climate to attract investors.
How does NERSA envision the energy mix from private producers?
NERSA implements government policy. The current Integrated Resource Plan (IRP 2019) states that South Africa continues to pursue a diversified energy mix that reduces reliance on a single or a few primary energy sources. The IRP 2019 further indicates that the extent of decommissioning of the existing coal fleet due to end of design life could provide space for a completely different energy mix relative to the current mix.
What are the opportunities for private producers based on South Africa’s location and availability of natural resources?
The DMRE has hailed the amendment to Schedule 2 of the Electricity Regulation Act as a positive way forward by the energy sector and industry across the board. It is envisaged that this step will unlock significant investment in new generation capacity in the short-to-medium term, and make significant inroads towards achieving national energy security, as well as reduce the impact of loadshedding across the country.
