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. In a bid to remove some administrative bottlenecks and to accelerate the adoption of private electricity generation projects in the C&I sector as well as by large energy users in general, 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. In August 2021, the licensing threshold was raised to 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 in December of last year.
The move to remove licensing requirements has been a major catalyst for private sector investment into the electricity sector. Since the licensing requirements were removed in December of last year, there has been a marked increase in the number of registrations as well as in the size of the generation plants being registered. In the first three months of this year, over 2,400 MW of projects have been registered by private firms seeking to generate their own power to augment what they are currently getting from the grid. A look at the latest figures released by Nersa, South Africa’s energy regulator, shows just swiftly South African businesses have responded to these changes.
There has been an exponential growth in the number of registrations of new generation projects by private companies. 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. In 2022, generation projects totaling 1,646 MW were registered, and this growth started just after the licensing threshold was increased. 2023 has been even better. We are only four months in to 2023 and already about 2,400 MW of projects were registered in Q1! 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. These private generation projects are mostly solar and wind projects.
There are now just under 1,000 projects registered. Registered projects that are over 100 MW each are now totaling almost 3,000 MW, out of the total registered private generation capacity of close to 4,500 MW. When all these projects are completed, they will go along way in reducing the pressure these consumers are facing daily in terms of load-shedding. More firms are also starting to add battery storage to their sites as well as incorporating battery storage in the planning of new generation projects. Looks like 2023 will be big year for investment in electricity generation by private firms in South Africa.
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