THE amendment to schedule 2 of South Africa’s Electricity Regulation Act, which was recently gazetted, raises the threshold for self- or distributed-generation power plants from 1 to 100MW.
The change will allow private companies to construct power plants with generation capacities of up to 100 MW for commercial use, as well as embedded generation plants (which are connected to the national power grid), without requiring a power generation license from the regulator, NERSA, although various other connection and trading approvals may still be required.
Jan Fourie, General Manager at renewable energy firm Scatec says: “The amendments will now allow privately generated power to be transmitted across the national grid to company facilities in a willing-buyer willing-seller model, known as ‘wheeling’. This will also facilitate power transmission from sites with good wind and solar resource to businesses whose locations are not conducive to cost competitive renewable energy production. Larger plants could potentially sell energy to several separate customers based on their electricity needs. Independently produced power therefore builds companies’ resilience by guarding against load shedding and allowing them to predict their operating costs and thereby plan more effectively,” Fourie says.
This model is a common practice globally, but while SA’s grid code allows for it, wheeling has so far only happened on a small scale, for example at the Bio2Watt biomass plant which supplies power to BMW’s Rosslyn plant.
“Unlike in other markets abroad, where an IPP’s excess capacity can be sold back into the national grid, here the onus to find a power purchaser will rest with the IPPs,” Fourie clarifies.
He explains that the threshold increase will also stimulate an entirely new market for power trading in which actors will position themselves as brokers, linking private generators with customers, as we’ve seen happening in places like Europe.
“Energy firms like Scatec are eager to study the exact phrasing of these new amendments to the Act before making any assumptions,” he says.
“The skills and knowledge we’ve acquired through working with Eskom, in the REIPPP program, are directly applicable to this new world of private generation, and over the years we’ve gained a deep understanding of the country’s geography, social context, as well as its regulatory and land-permitting systems,” says Fourie.
Whether power is used for government programmes like the REIPPPP, or via a wheeling arrangement for industrial, corporate, or mining clients has little impact on the IPP’s operation.
“We are able to wheel energy to our customers from a variety of solar- and wind- power sites which we’re continuously developing for REIPPPP, and for general commercial use. Alternatively, where clients want to build ‘behind the meter’ power projects on their own land, we are able to assist with NEMA (National Environmental Management Act) compliance and related environmental planning legislation, thereby alleviating the load of complex administration, allowing organisations to focus on their core business,” says Fourie.
He notes that the increased threshold will result in jobs and skills and in investment into renewable energy in the country, allowing large utility-scale plants to be developed for private-sector use.
“These will tend to be ‘bricks-and-mortar investments, which is great for SA as they’ll bring in wealth in the form of infrastructure which remains in the country,” he concludes.
