South Africa: Surprising announcement on threshold values ​​for self-generation

In the letter

South Africa received positive news on June 10, 2021 that the threshold for licenses for electricity projects for self-generation will be raised to 100 MW. This is a welcome and long-awaited development in a country plagued by power supply challenges that have had a significant impact on the private sector and are helping to stifle much-needed economic growth in South Africa.

The announcement by South African President Cyril Ramaphosa on June 10, 2021 that the threshold for the approval of self-generated electricity projects will be raised for projects with a capacity of up to 100 MW is positive news for South Africa.

The draft to amend Annex 2 of the Electricity Regulation Act (ERA) was published for comment in April 2021. It contained a self-generation threshold of 10 MW, which did not allow power plants with an output between 1 MW – 10 MW to obtain a generation license, but to register with the National Energy Regulator of South Africa (NERSA). President Ramaphosa’s announcement calls for a revision of the draft amendments to raise this threshold to 100 MW.

This change is to be welcomed in the current context where energy savings have had a significant impact on the private sector and are helping to stifle much-needed economic growth in the country. Several measures, including the promotion of self-generation opportunities, as well as a possible industrial restructuring, implementing Eskom’s restructuring and changing policies and regulations to keep up with technological advances, urgently need to be considered in order to address the problems of the Country address power supply challenges. Consumers also need to be able to consider a wider range of supply options to ensure stability of supply, take ESG considerations into account, and ensure greater security and transparency about tariff histories.

President Ramaphosa announced in October 2020 that as part of his recovery plan for the country, the current legal framework would be revised to facilitate new generation projects and accelerate applications for self-consumption generation projects. The President’s latest announcement on June 10 is a step in the right direction. It is hoped that the necessary regulatory changes can be announced shortly to build on the momentum created by this announcement.

It is generally recognized that South Africa must drive the necessary energy transition and the increased use of renewable energies and that the country urgently needs a reliable and secure energy supply. The announcement brings South Africa in line with the global energy transition towards a decarbonized and decentralized energy system. However, there is an urgent need for political clarity regarding the right of license-free producers to sell their surplus electricity to energy distributors.

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