South Africa has removed some of the stringent requirements for companies to generate power for their own consumption. Before the amendment to Schedule 2 of the Electricity Act, anyone planning to produce their own electricity had to apply for a license if the power plant was larger than 1 MW. It was quite a process to go through all the steps up until the license was granted. It was initially proposed that this threshold be lifted to 10 MW. However, when the actual draft was published, the threshold was set at 100 MW. Generation projects will still need to obtain a grid connection permit to ensure that they meet all of the requirements for grid compliance. As South Africa’s electricity crisis kept getting worse, this 100 MW threshold was also waived last year.
South Africa’s current installed generation capacity is about 50 GW, but the country is currently experiencing its worst ever period of electricity rationing, known as load-shedding. The move to remove licensing requirements was seen as a major catalyst for private sector investment into the electricity sector. This move will go a long way in relieving pressure on Eskom (the national electric utility company), and is one of the quickest routes to plugging the country’s massive deficit in the electricity generation sector.
It looks like South African businesses have responded swiftly to these changes as the latest figures from Nersa, South Africa’s energy regulator, show that there has been an exponential growth in the number of registrations of new generation projects by private companies in South Africa. To show just how much impact the new policy has had, in 2020, when the threshold was still 1 MW, about 53 MW of projects were registered throughout the whole year, according to data from Nersa. In 2021, about 135 MW of projects were registered.
2022 is where it starts to get interesting after the license threshold requirements were waived, coupled with 2022 being the worst year on record in terms of electricity rationing in South Africa. In 2022, generation projects totaling 1,646 MW were registered!
2023 has been even better. We are only in the 3rd month of 2023, but already the rush to register generation projects in just the first 2 months has already seen projects totaling 1,073 MW, according to data from Nersa. 1 GW in just two months! These projects will of course still be in various stages of development at the moment, but they will definitely add some much needed generation capacity to complement what these companies are getting from the national utility company.
Looks like 2023 will be big year for investment in electricity generation by private firms in South Africa.
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