South Africa is facing challenging economic growth conditions exacerbated by a significant energy crisis. This challenge presents an opportunity to remove existing limitations on embedded energy generation while stimulating a new job market - essentially opening up the energy economy. Regulators will need to act soon to make this possible.  

This is according to Manie de Waal, CEO of Energy Partners Solar, commenting on the recent statement made by President Cyril Ramaphosa that government has been given the go-ahead to draw up legislation allowing businesses to generate their own electricity.

“Renewable energy generation in the form of solar energy has never been more affordable or accessible to the commercial and industrial sectors. However, the regulatory red tape and complicated registration and licensing processes associated with embedded generation are making it nearly impossible for businesses to go this route. While we welcome the President’s statement, it needs to be followed by decisive and quick action to remove the barriers to private generation.”

De Waal explains that the existing legislation only allows private organisations to generate their own electricity with a total installed capacity of under 1 Mega Volt Ampere (MVA). “Installations over 1MVA are technically allowed if they are awarded a generation license by NERSA – however, we know from experience that these are almost never granted.”

In De Waal’s opinion, this limitation placed upon systems larger than 1MVA is quite arbitrary, with no clear reason or evidence to back it up. “In fact, we have seen grid-tied PV systems much larger than 1MVA (commissioned before the introduction of the licensing requirements in 2018) run smoothly, without causing any disruptions to either the client or the national grid.”

While it seems that the government is also coming around to this way of thinking, De Waal says that deregulation would need to happen quickly in order to realistically meet the country’s current energy supply shortfall. The cost of grid-tied electricity is already placing significant financial strain on businesses, and Eskom has received permission to raise tariffs by 8.1% and 5.22% (respectively) over the next two years. 

“It is also important to note that the state-owned utility is lobbying the regulator for even higher increases, while having already begun planning for the possible implementation of Stage 8 load shedding,” he adds. 

The inevitably higher energy costs and unreliability of supply that will arise as result of these developments has the potential to drive many large businesses into financial ruin in the coming years, De Waal warns. 

He adds that allowing the private sector to source, design, build and maintain privately owned power generation capacity to make up for the existing supply shortfall, will also stimulate economic growth through the increased demand for material, labour, design and funding. “Studies of the European market show that around 28 jobs are created each year for every 1MW of solar power that is installed. By all indications, South Africa should see the same results.”

In closing, De Waal reiterates that Eskom’s fleet of power generation facilities is aging and the amount of power that the utility can supply to the country seems to be diminishing with each passing year. “Recently, Eskom’s chief operating officer said that the utility could only reliably supply South Africa with around 25 000MW of power. This leaves a shortfall of approximately 13 000MW.

Fortunately, we believe that if regulations are appropriately amended, the private sector will be more than capable of making up for that deficit through privately owned solar generation systems,” he concludes.