Mantashe raises power licence threshold – but it’s not nearly enough

South Africa plans to lift the licensing threshold for small-scale power generation projects to 10MW from 1MW, a boost to firms anxious to curb their reliance on the ailing Eskom, but industry experts had hoped for more.

The economy regularly suffers electricity outages because of faults at Eskom’s creaking coal-fired power stations. But onerous regulations have prevented many companies, such as miners, from setting up their own generation facilities.

According to a notice published in the Government Gazette on Friday, “embedded generation” projects of up to 10MW will be exempt from requiring a licence but will need to register with energy regulator Nersa.

The notice was signed by mineral resources & energy minister Gwede Mantashe and invited the public to comment on the proposed change.

President Cyril Ramaphosa promised that the licensing threshold would be raised during this year’s state of the nation address, as part of reforms aimed at ending the country’s power crisis. At the time, he said easing licensing requirements could unlock up to 5GW of additional capacity.

Some power analysts said Friday’s proposed change was not enough.

Not enough

Anton Eberhard, a University of Cape Town professor, said the president’s Economic Advisory Council had recommended the threshold be lifted to 50MW. He said the notice did not cater for projects that want to wheel electricity across the transmission grid.

“The minister appears to have grudgingly made a minor step forward but has failed to recognise deep innovations in distributed energy resources and how the regulatory system needs to adapt,” Eberhard said. “South African electricity consumers are losing out and economic growth is being constrained through this short-sightedness.”

In February, miner Gold Fields won approval for a 40MW solar plant, four years after it first submitted a licence application. At the time, its CEO said the approval sent a positive message to investors, but analysts said more needed to be done to reform the electricity supply industry.  — Reported by Alexander Winning, (c) 2021 Reuters