Nersa fast-tracks solar power licenses to ease strain on Eskom’s tottering power grid

Nersa (the National Energy Regulator of SA) has approved two 100MW solar power projects in the North West Province under new regulations which allow for faster and simpler license approvals.

This comes at a time when the Eskom power grid is under unprecedented strain, with almost half of its installed capacity often out of action, and the spectre of a total blackout now being openly discussed in Parliament and by energy experts.

The two solar projects are to be developed and operated by the SOLA Group and its partners for Tronox Mineral Sands. SOLA’s largest shareholder and equity partner in the projects is African Rainbow Energy.

Schedule 2 under the Electricity Regulation Act was amended last year to increase the threshold for ‘embedded generation’ from the current 1MW to 100MW without the need for a license. The purpose was to unlock investment in new generation capacity and advance the goal of national energy security.

Read: Companies can produce up to 100MW of power – Ramaphosa

African Rainbow Energy CEO Brian Dames says the company is committed to investing R3 billion in the economy. “These projects are starting to realise this commitment as well as African Rainbow Energy’s commitment to use new technology to provide large-scale clean power solutions for the economy.”

This will pave the way for more large-scale private projects seeking approvals to contribute to new generation capacity, says Dom Wills, CEO of SOLA Group.

Rudi Dicks, head of project management at the office of the Presidency, says raising the licensing threshold for new generation projects has unlocked a massive pipeline of investment.  “To fast track these projects we have established a joint task team between government and industry which meets weekly to remove many of the constraints. All of this is important to help alleviate the shortage in electricity supply,” says Dicks in a statement.

The 100MW private generation facility without the need for a license is an excellent opportunity for the industry to generate its own power or possibly acquire electricity from Independent Power Producers without waiting ages for a generation license, with the additional costs that come with that, says Des Muller, energy expert and director at NuEnergy Developments.

A so-called ‘wheeling framework’ allowed by Eskom makes it possible to locate these new power plants in more ideal environments and wheel the power to the consumer in another part of the country, if there is available capacity on the grid. “I am not sure if Eskom’s wheeling agreement and costs have been finalised, but one could expect it will significantly raise the cost of the electricity for the consumer, as we’re seeing in Europe, adds Muller.

Load shedding likely to continue for a decade

“Those interested in this power generation opportunity probably want to secure their power supplies against load shedding, which is likely to continue for another decade. Renewables provide clean but unreliable and intermittent power, which may not satisfy the needs of the interested electricity consumer, although clean power would be a benefit for some. Battery storage will also significantly raise the tariff, as will using Eskom only as backup power,” says Muller.

Read: Load shedding all but a certainty until these things happen …

The 100MW embedded generation facility is also open to other technologies such as gas turbines. These are sometimes quicker to build and can be delivered on modular mobile skids. They can also provide more reliable power and, when harmonised with renewables, can provide a more valuable and cleaner power supply for our industry. The same applies to small modular reactors (SMR), when they are commercially available later this decade and licensing requirements are better understood, adds Muller.

These new power projects may not have the luxury of a sovereign guarantee, which has been a feature of previous IPP projects selling power to Eskom. “The bankability of the power plant will depend on the guarantees provided by customers over a 20-year period, which may be unviable for most private companies or mines. This could also assist municipalities in achieving electricity independence, but most are bankrupt or unable to put up the long-term guarantees required by the lenders or sponsors. Achieving financial close on these projects could therefore be a challenge,” says Muller.

Large scale bilateral energy trading is the first step in South Africa’s plan to ultimately open up the grid to allow a more flexible electricity trading, says SOLA in a statement. Draft legislation has been released which signals the intent to have a consolidated central purchasing agency allowing electricity traders to sell energy using the grid as a conduit.