June 10, 2021

Africa

SOUTH AFRICA: Belated move on own-generation as fresh power shortages hit

BY Anne Frühauf

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In an attempt to respond to South Africa’s chronic and once again worsening electricity shortages, President Cyril Ramaphosa on 10 June announced the lifting of the limit on self-generation that does not require a license from 1MW to 100MW. The announcement is a step in the right direction but could have come months, if not years, earlier. Regardless, power utility Eskom is about to hit another wall of generation shortages during the winter months.

Today, the president announced the government’s intention to publish amendments to Schedule 2 of the Electricity Regulation Act that will allow energy regulator NERSA to increase the self-generation threshold to 100MW within 60 days. As so often, the government’s hand has been forced by the severity of fresh power shortages and the threat these pose to South Africa’s fragile economic recovery. Since April, 15 days of load-shedding have already been reported, the majority since the start of June. The worst power cuts are still to come as winter bites (June-August).

Today’s move will be welcome but could have come much sooner. Minister of Mineral Resources and Energy Gwede Mantashe seems at best reluctant to embrace South Africa’s energy reforms and transition. For one, he had been adamant that the threshold be limited to 10MW. Ramaphosa, for his part, has squandered valuable time because of his propensity to navigate crucial decisions through his own subordinates’ interests. Despite growing criticism of the minister and allegations of corruption involving his department, it still seems unlikely that Mantashe will be reassigned in the next cabinet reshuffle.

On the upside, the new limit for own-generation exceeds the threshold of 50MW for which business had lobbied, and it is hoped that self-generation projects planned by companies ranging from mines to agribusinesses could unlock some 5,000MW in power generation over the medium-term. The previous 1MW threshold has seen many such projects held up by licensing requirements and long processing delays. Ramaphosa’s plan envisages generation for own use but also the ability to “wheel” electricity across the grid. This will still be subject to connection agreements with Eskom or relevant municipalities, as well as grid connection permits.

Progress towards a liberalization and a dismantling of South Africa’s vertically integrated power sector will depend on Eskom’s gradual restructuring, but also on companies being able to sell back to the grid or to third parties. Mantashe has previously seemed reluctant to endorse such plans, underlining the extent to which even Ramaphosa’s close allies are failing to lead on the reform front.

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