Government’s decision to increase the threshold for embedded private power generation could unlock investments of up R100 billion over the next five to seven years and add 15,000MW of capacity to South Africa’s strained electricity grid.
This is according to experts who spoke to Sunday newspaper Rapport about President Cyril Ramaphosa’s surprise announcement on Thursday that private companies and individuals will now be allowed to build generating projects of up to 100MW in capacity without a licence from the National Energy Regulator of South Africa.
The president said while measures taken by Eskom to maintain its ageing infrastructure and increase electricity availability in the county were positive and necessary, they were not enough to address the immediate and significant energy shortfall in the country.
“Incremental measures will not be sufficient to meet the scale of this challenge,” Ramaphosa said.
“This intervention reflects our determination to take the necessary action to achieve energy security and to reduce the impact of load-shedding on businesses and households across the country.”
Ramaphosa said this would also remove a significant obstacle to investment in embedded generation projects.
“Generators will also be allowed to wheel electricity through the transmission grid, subject to wheeling charges and connection agreements with Eskom and relevant municipalities.”
An amendment to the Energy Regulation Act giving effect to the new threshold will be gazetted in the next 60 days, Ramaphosa stated.
Intellidex’s capital market investments head Peter Attard Montalto estimated that the investments could add a further 15,000MW of generating capacity.
To put this into perspective, Eskom currently has around 45,000MW of generating capacity.
The additional capacity would be roughly equivalent to the total supply which has been unavailable in recent days due to breakdowns of generating units and planned maintenance.
Eskom’s most recent load-shedding update on Friday showed the utility had 13,625MW of capacity unavailable due to breakdowns, while, 1611MW was offline for planned maintenance.
North-West University political analyst Piet Croucamp told Rapport the decision was made after a number of businesses and groups had met with the president at the Union Buildings over the past few weeks.
The CEO of Minerals Council SA, Roger Baxter, told City Press that the mining industry had 1,670MW of projects that were waiting for permission to be built.
Within the next three to four years, the mining industry could bring 869MW of solar power and up to 800MW of conventional power into production, Baxter stated.
Baxter said that Ramaphosa’s announcement was a game-changer.
If the private sector can add around 5,000MW to the power the mining industry aims to self-generate, Baxter said that this will change the electricity outlook in South Africa and raise the potential growth rate.
Independent power producers (IPPs) have gradually been adding electricity to South Africa’s grid over the last few years.
More recently, their contribution has increased as a result of government’s renewable energy independent power producers programme (REIMPPP), which is aimed at revamping South Africa’s energy mix in a move away from its big dependency on coal-based power.
According to Eskom’s online data portal, the majority of its 5,350MW renewable generation from wind and solar is produced by IPPs.
Around 2,500MW of wind generation capacity is currently installed, while private photovoltaic (PV) solar and CSP plants provide a combined capacity of around 2,700MW.
Due to the inherent inefficiencies of their technologies and power sources, however, these plants typically only produce around 25-40% of their capacity on average.
“Not a game-changer”
Ramaphosa’s announcement was not met with universal praise.
Duma Gqubule, founding director at the Centre for Economic Development and Transformation, was critical of the move and told the City Press that increasing the embedded electricity generation thresholds will only benefit a few large companies.
“Eskom will lose its blue-chip clients, those in the mining and industrial sectors, which will increase the power utility’s losses to about R10 billion a year, leading to bigger bailouts by the state,” Gqubule was quoted as saying.
“Ramaphosa provides a Band-Aid solution that does not solve the country’s problems.”
According to Gqubule, it was not clear how allowing the unlicensed private generation of up to 100MW will benefit consumers, who will still be served by Eskom for the next 5–10 years.
The article previously stated that businesses and groups, including African Rainbow Capital’s Patrice Motsepe, met with the president at the Union Buildings.
MyBroadband was alerted that no such meeting was held between Dr Patrice Motsepe and President Cyril Ramaphosa.
We retract the statement that Dr Motsepe met with President Cyril Ramaphosa in this regard.