SOUTH AFRICA: HOW THE LAW NEEDS TO CHANGE TO LIFT SELF-GENERATED POWER TO 100MW
Changing the law to allow private businesses to self-generate up to 100MW of electricity with minimal regulatory red tape should be a relatively straightforward process. Less clear at this point is whether restrictions on the sale of excess electricity to Eskom or municipalities will also be relaxed, says Claire Tucker, head of Public Law and Regulatory at leading African law firm Bowmans.
Tucker says the President, in announcing that the registration threshold for self-generation facilities is to be raised from 1MW to 100MW, indicated that Schedule 2 of the Electricity Regulation Act will be amended within two months to allow for this. Click here to read the announcement.
‘A consultation process had already commenced (before the President’s announcement) regarding amendments to raise the licensing threshold to 10MW. This means the amendment process should be fairly straightforward and is likely to include consultation with the public on draft wording,’ says Tucker, adding that Schedule 2 will be amended by the Minister of Minerals and Energy gazetting the change.
As it stands, Schedule 2 of the Electricity Regulation Act only exempts self-generation facilities up to 1MW from the obligation to obtain a licence but requires them to ‘register’ the facility with the National Electricity Regulator of South Africa (NERSA).
‘Registration is guaranteed provided the facility meets the Grid Code requirements and has an arrangement with the relevant grid provider regarding the connection of the facility,’ Tucker says.
It is expected that this will also be the case for private businesses generating up to 100MW once section 2 is amended.
‘It is understood that the exemption will apply to both self-generation facilities located on site of the load and facilities located elsewhere which use the grid to ‘wheel’ power to the facility,” she says.
However, the amendment does not automatically mean that private facilities can sell to Eskom or to municipal grid providers.
‘The change facilitates private sales of electricity from an independent power producer (IPP) to a private customer. Sales to Eskom or a municipal grid would have to follow a procurement process within Eskom or the municipality,’ says Tucker. ‘Previously, the Minister had indicated that sales to Eskom or the municipality would still require a licence. It remains to be seen whether this requirement will be dropped, allowing freer trading in electricity between the private sector and the national and municipal grid.’