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Move to becoming a ‘market’ based energy sector welcomed

And is expected to bring more security to energy supply.
Image: Waldo Swiegers/Bloomberg

The surprise move by President Cyril Ramaphosa to increase the generation threshold for companies to produce electricity without a licence from one megawatt (MW) to 100MW has drawn widespread praise.

The announcement to raise the cap as set out in Schedule 2 of the Electricity Regulation Act by Ramaphosa, in a hastily called media briefing, was welcomed by business and independent power producers (IPPs) in particular.

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“This amendment will go a long way to unlocking embedded generation to enable security of supply, investment, and growth,” says Business Unity South Africa (Busa) CEO Cas Coovadia.

Aside from offering further energy security, Coovadia says it will also go some way to creating jobs.

“Busa believes that upwards of 16 000 direct jobs can be created based on a 50MW threshold. Job creation is likely to be significantly higher based on 100MW. We are confident that the economies of scale unlocked by 100MW will likely enable further investment, job creation and development of local industrial capacity.”

The South African Wind Energy Association (Sawea) also welcomed the move, saying the initial cap of 10MW was way too small.

“When the amended regulation was issued for public comments, we made strong submissions that the allotted 10MW threshold would be too small a shift to open up this highly regulated sector to the substantial investment that is required,” Sawea CEO Ntombifuthi Ntuli says.

“We further submitted that the threshold for licence exemptions should be increased to between 50MW and 100MW,” she adds

Ntuli says the higher cap will be particularly useful for energy-intensive sectors in the economy, like the mining sector. “It has been reported that large companies, mines and farms are believed to have 5 000MW in pent-up projects, which could be released if licensing requirements were lifted.”

Market shift

Professor Raymond Parsons from NWU Business School notes that this move by Ramaphosa opens the way for a more market-driven approach to dealing with the energy crisis.

“The latest steps to encourage private sector investment in embedded generation are imperative to reduce the continued high cost of load shedding to the SA economy and remove the serious ceiling which it has for years placed on the country’s economic performance.

“While this intervention today will not offer immediate relief to load shedding it helps to lay a solid foundation for future power security.”

This market-driven approach can also be seen in the changes to the regulations; companies producing electricity under threshold are free to sell to third parties.

This is a shift from the current program notes Keith Webb, senior investment banker for Infrastructure sector solutions at RMB

“Based on our assessment of the market for private generation outside of formal programmes where Eskom is designated as the buyer, like the Renewable Energy Independent Power Producer Procurement Program (REIPPP), we believe that there is significant potential for delivery of large quantities of electricity via this private generation alternative, which could occur between a willing buyer and a willing seller.”

Webb says the new cap means electricity can be delivered quickly and will go a long way towards diversifying the country’s electricity supply across many providers.

The move to a more market based energy sector means, however, both the government, Nersa and Eskom have to ensure the new participants are treated fairly.

“There should also be a transparent process for obtaining grid access through a wheeling agreement with Eskom or a municipal distribution network”Webb says.

Wheeling is the transportation of electric energy from a generator, across the electrical grid to an electrical load outside the grid boundaries.

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This will be a good experiment to see if renewable energy can replace coal. It will be very interesting to see what happens when the wind don’t blow and the sun goes down.

The CSIR study by Dr Tobias Bischof-Niemz has proven how gas can fill the shortfall in base load generation to compensate for the cyclically of wind and solar. Seen across a larger geographic area wind generation is remarkably constant. The wind always blows somewhere.

Renewables generate power at leas than half the cost of coal generation. The free market will solve our electricity disaster in 18 months if the communists in government abandoned their dispicable monopoly.

The country is held at ransom by the ANC to fund plundering BEE coal and transport contracts. The BEE parasite is killing its host.

The idea is to end the rolling blackouts, rather than completely replace coal. The power outages do more damage to the ANC than anything else, hence the scramble to now finally slap a band-aid on it.

Of course, it won’t help the Eskom problem which seems to be chronic and unfixable but at least we won’t have to rely on state-run entity that runs its generators on DIESEL most of the time these days anyway.

We will also still be at the mercy of NERSA who have to approve all these new power sources apparently. So I wouldn’t expect any solutions any time soon.

Best news the last decade!!!

Solar and wind will help, not replace coal.

Problem here is it is 6 years too late and even this new proposal will be tied up in red tape.

6 years ago was when the last IPP projects were given the go ahead, thanks to the evil Zupta lot.

Can you imagine the Guptas facilitating atomic energy builds as they did locomotive purchases.

Did they ask Gwede ‘Living Fossil’ Mantashe what he thought? After all, he did consult 10,000 people before making his decision to keep us all in the dark for the next 20 years.

The ANC are complete and utter idiots, if that wasn’t apparent already. This should’ve been done a decade ago, they don’t deserve any plaudits for this extremely delayed reaction to a chronic problem we’ve had for 13 YEARS now.

He was either nudged by CR or Uncle Gwede learnt how business works whilst going his MBA

If Gwede got an MBA, then the qualification is not worth the paper it is printed on.

An MBA is arguably the most senior qualification for free market entrepreneurs, and as such, it is essentially capitalist. How does any reputable institution reward such a qualification to a staunch communist who is responsible for the destruction of the economy and the suppression of entrepreneurship?

End of comments.

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