President Cyril Ramaphosa finally took the bull by the horns and announced arguably his most decisive decision since coming into office on Thursday, sparked by the power generation crisis at Eskom.
The second week of rolling blackouts (or load shedding) in the country amid the coldest period yet this year, seems to have forced Ramaphosa’s hand.
Whether it is the winter weather load shedding, which has riled South Africans and distressed businesses already trying to deal with Covid-19; or perhaps undisclosed bigger problems around electricity generation at Eskom, that led to the president’s decision is anyone’s guess.
Ramaphosa’s surprise announcement of a ten-fold increase in the threshold exemption of renewable energy power generation projects from licensing requirements, has been widely hailed by business, renewable energy bodies and even opposition parties.
The originally mooted new threshold was meant to be 10 megawatts. However, the president said on Thursday that the country would now exempt independent power generation projects of up to 100 megawatts from licensing requirements with the National Energy Regulator of South Africa (Nersa).
Such generation projects will, however, still need to secure a grid connection permit.
The further easing of licensing requirements is nevertheless a major reform move aimed at boosting South Africa’s private-sector or independent electricity generation capacity.
It will also give Eskom some headroom to address its generation woes and to rollout much-needed and more extensive maintenance of its ageing fleet of largely coal-fired power stations.
“This reform is expected to unlock significant investment in new generation capacity in the short and medium term, enabling companies to build their own generation facilities to supply their energy needs,” Ramaphosa said in announcing the planned amendment.
He said that the amendment would be published within 60 days.
“We welcome the announcement by President Ramaphosa to increase the ceiling for embedded generation from 10 megawatts to 100 megawatts and to exempt licensing under Nersa for such projects,” Business Unity South Africa (Busa) CEO Cas Coovadia told Moneyweb in reaction to the news.
“Busa has been calling for the increase in the ceiling from 10 megawatts to 50 megawatts in order to enable serious economic activity. We are absolutely supportive of the president, in fact, going further and increasing the ceiling to 100 megawatts,” he added.
“This is the sort of decisive action we have calling for from the president,” Coovadia said.
“We applaud him and support him in taking this significant step, which will go a long way towards building confidence in our country and in our economy. It will also go some way in generating positive economic activity.”
In a separate media statement welcoming the move, Busa also called on government to fast-track the amendment within 30 days instead of 60 days.
“While this change is well received, Busa believes every day of delay and load shedding adds to our economic pressures and urges government to publish this amendment within 30-days of this announcement to expedite projects in this space,” it said.
The South African Wind Energy Association (SAWEA) also commended Ramaphosa’s announcement.
It said that it “views this as another indication the country is well on its way to a decentralised and decarbonised renewable energy generation power system”. The organisation has also been calling for a higher threshold.
SAWEA also highlighted reports that large companies, mines and farms have up to 5 000 megawatts in “pent-up projects” that “could be released if licensing requirements were lifted”.
The Durban Chamber of Commerce and Industry, South Africa’s largest metropolitan business chamber, also welcomed the move.
“President Ramaphosa’s economic recovery address on Thursday has put a glimmer of hope in the business world and in our entire economic outlook… We applaud his efforts on tackling South Africa’s energy crisis,” said Durban Chamber president Nigel Ward, who is executive vice president for manufacturing of Toyota South Africa.
“As organised business, we believe energy security is critical to economic prosperity.
“Eskom is a critical state infrastructure that cannot be allowed to fail or left to operate in disarray and fall into mismanagement, therefore improving the performance of the existing fleet of power stations, reducing debt levels, and completing its restructuring process is non-negotiable and a step in the right direction,” he added
“We support the President’s commitment to the amending of Schedule 2 of the Electricity Regulation Act to increase the Nersa licensing threshold for embedded generation projects from 10 megawatts to 100 megawatts,” said Ward.
“This amendment will diversify our energy supply, reduce red tape, and create more opportunities for energy generation. We are optimistic that the announcement will increase investment in the South African economy, thus promoting a positive economic outlook, which will yield greater financial investment results.”